New York Attorney Malpractice Blog

New York Attorney Malpractice Blog

No Legal Malpractice in the Unauthorized Practice of Law

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

Spiegel v Ahearn  2018 NY Slip Op 32472(U)  October 1, 2018  Supreme Court, New York County
Docket Number: 101251/2016  Judge: Melissa A. Crane is a very unusual case.

“Between 2006 and 2012, plaintiff pro se Michael Spiegel and defendants Thomas Ahearn, Liridona Kastrat, Kristopher Kennington, and David Ortiz were employed by the Hotel Edison (“Hotel”), located on West 47th Street in Manhattan (see Spiegel’s verified complaint, dated August 8, 2016 [complaint], ii 8). The defendants later sued the Hotel and its managers, claiming that the Hotel and its managers engaged in wrongful conduct with respect to their employment and termination. Spiegel brings this action to recover damages from the defendants for allegedly breaching the contract they entered with him in connection with the prosecution of the defendants’ claims, versus the Hotel (id ii 31 et seq.). ”

“Spiegel asserts three causes of action in his complaint, for breach of contract, quantum meruit, and “Debt Owed,” each alleged to arise from the “Legal Agreement” he entered with Ahearn, Kastrat, Kennington, and Ortiz, dated October 31, 2012 (Legal Agreement) (exhibit 1 to the Deubert affirmation).

In the Legal Agreement, Spiegel promised to help Defendants and Ahearn and Ortiz in the civil lawsuit they were contemplating against the Hotel: “Spiegel agree[d], for his part, to secure a lawyer for this action, to give full and complete aid in counsel for the preparation and planning of this lawsuit, up to and including trial and any appeal, and to also front any money paid to the lawyer as
an advance or other purpose, plus to front any money to be paid as ‘out of pocket expenses … Spiegel also agree[ d] to give testimony at the trial, as necessary and appropriate” (id. at 1 ).

For their part, Defendants promised to cooperate with Spiegel in the prospective lawsuit, and to provide testimony in a lawsuit Spiegel planned to bring on his own behalf against the Hotel (id.). 3 Among other things, Defendants also agreed that they would pay Spiegel 25% of any money they received from the Hotel in the lawsuit, through settlement or an award after trial, after deduction of attorneys’ fees and “fronted expenses” (id. at 1-2). With Spiegel’s assistance, shortly after their execution of the Legal Agreement, Defendants, along with Ahearn and Ortiz hired Neil Frank, Esq. of Frank & Associates, P.C. to represent them in their suit against the Hotel. In their retainer agreement with Frank’s law firm,  dated November 5, 2012, Defendants and Ahearn and Ortiz agreed to pay the firm $500 each as an initial intake fee, plus 35% of any negotiated settlement, plus disbursements paid on their behalf (Deubert affirmation exhibit 9, at 1 ). If the suit went to trial, the law firm would be paid any fees and expenses the court awarded (id.).

Spiegel admits that, although he is not an attorney, he is a businessman with extensive experience in civil litigation (see Defendants’ Rule 19-A Statement of Material Facts [SMF], 2-3; transcript of Michael Spiegel deposition, dated September 5, 2017 [Tr.], 36:19 to 42:5). Spiegel’s experience includes his own lawsuit against the Hotel, several grievance arbitration proceedings concerning his termination by the Hotel, several proceedings before New York State’s Department of Labor concerning his claim for unemployment benefits arising from his termination by the Hotel, a complaint with the Occupational Safety and Health Administration concerning conditions at the Hotel, and a complaint with the New York Division of Licensing Services concerning security guards at the Hotel (SMF ~~ 3, 7-11). Spiegel states that he has helped at least three other former Hotel employees bring lawsuits against the Hotel and has a financial interest in the outcome of one such suit (id. ~~ 4-5; Tr. 19:23-22:25). ”

“Defendants allege that the Legal Agreement is unenforceable because it calls for Spiegel’s unauthorized practice of law, in violation of Judiciary Law Section 478, that states, in pertinent part:
It shall be unlawful for any natural person to practice or appear as an attorney-at-law or as an attorney and counselor-at-law for a person other than himself or herself in a court of record in this state, or to furnish attorneys or counsel or an attorney and counsel to render legal services, or to hold himself or herself out to the public as being entitled to practice law as aforesaid, or in any other manner, ..
without having first been duly and regularly licensed and admitted to practice law
in the courts of record of this state, and without having taken the constitutional
oath.

This statute is intended “to protect our citizens against the dangers of legal representation and advice given by persons not trained, examined and licensed for such work, whether they be laymen or lawyers from other jurisdictions” (Spivak v Sachs, 16 NY2d 163, 168 [1965]). A contract violating Section 4 78 is illegal “and under our settled rules [New York courts] refuse to aid in it but leave the parties where they are” (Spivak, 16 NY2d at 168, citing McConnell v Commonwealth Pictures Corp., 7 NY2d 465 [1960]; see also El Gamayel v Seaman, 72 NY2d 701, 705 [1988] [“As a matter of public policy, a contract to provide services in violation of [Judiciary Law§ 478] is unenforceable in our state courts”]). ”

“Here, Defendants make their prima facie showing that Spiegel’s “aid in counsel” was the rendering of unauthorized legal advice in violation of New York’s Judiciary Law Section 478. Spiegel fails to raise any bona fide issue to defeat Defendants’ motion or to support his own cross motion. Accordingly, the court grants Defendants’ motion for summary judgment, and denies Spiegel’s cross motion for summary judgment, with respect to his first cause of action for breach of contract. ”

 

Duplication but no Duplicity in this Professional Malpractice Case

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

The development of an apartment building in Manhattan is a mega-big thing.  Not only does it cost a lot, but there are a large number of difficult rules. W 106 Dev. LLC v Pilla  2018 NY Slip Op 32596(U)  October 10, 2018  Supreme Court, New York County  Docket Number: 654801/2016
Judge: Debra A. James  makes it clear that even pros can make mistakes.  However, there remains a difference in whether the wrong is addressed through tort or contract analysis.

“Plaintiff W 108 Development LLC (West 108), a real estate development corporation, is the owner of a building complex (the property} located at 324-326 West 108th Street in the County,
City and State of New York. In this .action, plaintiff alleges that defendants did not
carry out its obligations to develop the· property during the West 108 project.  In its complaint, West 108 first states that, on February 25,201s, it “engaged defendants, as architect . , to complete five separate phases of architectural work” as part of its development project. These comprised: 1) pre-design; 2) schematic design; 3) design development; 4) construction document; and 5} construction administration. Defendants note that there was never a formally executed’ contract.”

“West 108’S second cause of action asserts a claim of “professional malpractice” against both defendants. New York law treats architectural malpractice as a species of “‘professional negligence [which] requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury.'” 143 Bergen St., LLC v Ruderman, 144 AD3d 1002, 1003 (2d Dept 2016), quoting Kung v Zheng, 73 AD3d 862, 863 (2d Dept 2010). Here~ the
complaint alleges that defendants committed four negligent departures from architectural standards, including misunderstanding and misapplication of: 1) the “Sliver Law” (New
York City Zoning Resolution§ 23-692); 2) the portion of the Zoning Resolution that governs parking in this neighborhood where the property is situated; 3) the Americans with Disabilities Act and 4) the portion of the New York City Building Code that governs egress requirements for renovated buildings. The complaint also alleges that these departures were the proximate cause of the financial injuries that West 108 consequently suffered. Id. As a result, the ‘court finds that the complaint
satisfies the legal pleading requirements for this cause of action. Defendants, nevertheless, raise two arguments for its dismissal. ”

” Defendants next argue that West 108’ s architectural malpractice claim should be dismissed against.both defendants because the claim is duplicative of West 108’s breach of contract claim. They cite the general rule, promulgated long ago by the Court of Appeals in Clark-Fitzpatrick, Inc. v Long Is. R.R. Co. (70 NY2d 382, 389 [1987]), that “a simple breach of contract is not ‘to be considered a tort unless a legal duty independent of the contract itself has been violated.” West 108
responds by citing the portion of CPLR 3014, which provide that “(c]auses of action or defenses may be stated alternatively or hypothetically,” and arguing that New York courts routinely interpret the statute as permitting an exception, at the pleading stage of litigation, to the general rule that tort based claims should be dismissed when they are duplicitive of the breach of contract claims. West 108’s statement of the law is correct. See .e.g. Citi Mgt. Group, Ltd. v Higbridge House
Ogden, LLC, 45 AD3d 487, 487 (1st Dept.2007). Furthermore, the instant complaint does contain t,he allegation that defendants committed professional malpractice, which certainly constitutes
the violation of a duty separate from a contractual obligation. ”

” However, a review of the complaint shows that as to such tort claim plaintiff seeks “only a benefit of the bargain recovery, viz, economic loss under the contract”, 17. Vista Fee Associates v Teachers Ins.  and Annuity Ass’ n of America, (259 AD2d 75, 83 [1st Dept. 1999]) as opposed to damages for personal injury or property loss. Therefore, the court accepts defendants’ second dismissal argument, and finds that their motion should be granted with respect to West 108’s
architectural malpractice claim.”

Professional Malpractice v. Negligent Misrepresentation

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

In Sutton Animal Hosp. PLLC v D&D Dev., Inc.  2018 NY Slip Op 32425(U)  September 24, 2018  Supreme Court, New York County  Docket Number: 652781/2016  Judge Debra A. James discusses the difference between negligence of a professional to one in privity and to one only in quasi-privity.  The difference is enormous.

“Moving defendants are correct that “‘recovery will not be granted to a third person for pecuniary  loss arising from the negligent representations of a professional with whom he or she has no contractual relationship'” (Key International Manufacturing, Inc. v Morse/Diesel, Inc., 142 AD2d  448, 452 [2d Dept. 19 88] ) . ”

“The first and sixth causes of action (captioned “counts”) of the first amended complaint are entitled  Professional Malpractice” and allege, inter alia, that the architects/engineers:
“failed to meet the standard of care required of all
professional architects/engineers”, “misrepresent[ed] …
architectural/engineering skills”; “fail[ed] to comply with
and uphold professional standards”; “required to exercise.
the ordinary and reasonable skill and knowledge required of
all individuals license[sic] to engage in work as a
professional architect/engineer”; “was bound to exercise
reasonable care in designing and supervising the work it
was contracted to perform”‘ “professional negligence in its
preparation of Construction Plans”; “fail[ed] to exercise
the required care, diligence, skill and learning required
of all professional architects/engineers”.

As plaintiff seeks pecuniary loss only for such deviations from professional standards and does not allege any injury to real or personal property, such allegations state no cognizable claim against the moving defendants.

However, the complaint also alleges that the architect defendants “produced drawings” that were not code compliant and that the engineer defendant incorporated defective mechanical
plans in the Construction Project plans. In addition, the opposing affidavit of plaintiff’s expert states that the architects and engineers misrepresented that they were the Special Inspection Agency on their submissions to the New York City Department of Buildings. Such allegations sound in negligent misrepresentation and are analogous to the inaccurate findings that the Court of Appeals found to be actionable in Ossining Union Free School Dist. v Anderson LaRocca Anderson,
(73 NY2d 417 [1989]). Plaintiff shall be granted leave to amend its pleadings to specify the misrepresentation(s) that were the subject of the drawings and/or mechanical plans that were
transmitted to it, and upon which it reasonably relied to its detriment in the construction of its veterinary hospital.”

“The first amended complaint and opposing affidavit clearly set forth that plaintiff had a relationship with each of them that was the “functional equivalent of contractual privity” as defined in Ossining Union, as such claims meet the three-fold criteria for potential liability of the moving defendants articulated in Ossining Union, to wit, that ” ( 1) [defendants possessed] awareness that the [drawing/plans] were to be used for a particular purpose; (2) [that there was] reliance by a known party or parties in furtherance of that purpose; ·and that there was (3) some conduct
by the defendants linking them to the party or parties and evincing defendants’ understanding of their reliance” (73 NY2d at425). “

No Summary Judgment Here – For Either Side

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

Millian v Hafif & Assoc., PLLC   2018 NY Slip Op 51421(U)  Decided on October 9, 2018  Supreme Court, New York County  St. George, J. is the story of a condo purchase gone wrong.  Many of the construction legal malpractice cases arise from water damages, as does this one.

“In this legal malpractice case, plaintiffs allege that defendants were negligent in their due diligence work in connection with plaintiffs’ purchase of a condominium unit in Manhattan. The closing took place in May 2012. More specifically, they state that defendants did not inform them of the HVAC problems in the building which directly impacted their unit or of the fact that the ongoing assessments in the building would end before they purchased the unit. Plaintiffs claim, inter alia, that they incurred damages repairing the HVAC, that they lost income they would have obtained had they been able to rent the unit, and that they had to pay the unexpected assessments. They claim that they relied on defendants’ representations as to the unit and the building, and that they would not have purchased the unit if defendants had performed their due diligence and notified them of these problems.

Currently, defendants move for summary judgment. They point out that a claim for legal malpractice must show negligence, proximate cause, and actual damages, and they assert that plaintiffs cannot satisfy this standard. They state their due diligence complied with the prevailing [*2]standards and they reviewed the building’s October 4, 2011 board minutes, financial statements for the fiscal year ending May 31, 2010, and a March 26, 2012 letter from the building’s management company stating the assessments would continue in April and May of 2012. They note that their due diligence report, which they provided to plaintiffs prior to the execution of the contract of sale, noted that there had been a leak in the unit and incorporated the management company’s comments about the April and May assessments. They state that they could not have obtained copies of the April 4, 2012 board meeting minutes because they “would certainly not have been available to the Defendants while they were performing the due diligence at issue” (Defendants’ Mem of Law, p 5). Thus, there is no negligence, they claim.”

“After careful consideration, the Court denies the motion and declines to award summary [*4]judgment on the issue of liability to plaintiffs. As noted, a prima facie case for legal malpractice requires proof that the attorneys did not provide services which satisfied the legal community’s standards (see Ss Marks LLC v Morrison Cohen LLP, 133 AD3d 441, 441 [1st Dept 2015], lv denied, 27 NY3d 901 [2016]). Although litigation often turns on the issue of causation, courts must also consider the community standards. Here, neither party addresses this concern. Instead, defendants state, without support, that they adhered to the applicable standard and plaintiffs, without support, state there was a deviation. Without such evidence, it is impossible to reach a conclusion as a matter of law. In addition, the parties present conflicting versions of the facts. For example, they dispute whether Ms. Martel provided incorrect or insufficient information in response to Ms. Kristina Millian’s questions, whether information about the assessments and the HVAC problems would have been ascertainable through ordinary care, and whether the answers to these questions, as were available at this time, would have made a difference to plaintiffs. In light of this, there are questions of fact best reserved for the factfinder.

The Court additionally concludes that plaintiffs have submitted evidence, such as the verified bill of particulars dated September 16, 2016 and the annexed documents, and the HVAC repair estimate, to raise an issue of fact as to damages. As such, a question of fact for the jury remains to determine which of these damages can be substantiated and are recoverable, as the parties have not provided a definitive resolution of these questions. The Court rejects defendants’ position — for which they provide no support — that because the value of the unit increased, plaintiffs can mitigate their damages. Among other things, 1) the value of the unit is not related to either party’s conduct, 2) mitigation should not require plaintiffs to sell their unit, and 3) plaintiffs still incurred expenses repairing the HVAC and still had to provide rent abatements and separate heating and air conditioning units while the HVAC repairs were ongoing. The Court has considered all the parties’ arguments and they do not alter the conclusion that neither party has established a right to judgment at this time. Therefore, it is

ORDERED that the motion is denied.”

A Rare Split the Baby Decision

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

It is our experience that Courts more often dismiss an entire legal malpractice case rather then dissect the various claims and keep some while jettisoning the balance. Here, in Sehgal v DiRaimondo  2018 NY Slip Op 06619  Decided on October 4, 2018  the Appellate Division, First Department does just that.

“Plaintiff, a lawful permanent resident of the United States since 1998, pled guilty in 2014 to certain violations of federal election laws and was sentenced to one year probation. He alleges that he separately sought advice from defendants, who are specialists in immigration law, concerning the immigration consequences of his plea. Defendants provided a legal memorandum in which they advised plaintiff that it was unlikely he would be deported as a result of his plea and that, if he were placed in removal proceedings, he could seek a waiver from inadmissibility. Plaintiff alleges that, in reliance on the advice, he pleaded guilty and later traveled abroad. Upon his return to the United States, plaintiff was detained, placed in removal proceedings, and incarcerated for approximately four months.

Defendants moved to dismiss pursuant to CPLR 3211(a)(1) and (7), arguing that plaintiff’s guilty plea bars the malpractice claim and that actions taken by the attorney who represented plaintiff after he was detained may have been an intervening cause of plaintiff’s prolonged detention. The motion court granted defendants’ motion on the basis that plaintiff had terminated defendants’ services before he pleaded guilty and retained other counsel, thus severing the chain of causation. Neither the allegations in the complaint (CPLR 3211[a][7]), nor the documentary evidence submitted by defendants in support of the motion (CPLR 3211[a][1]), support the motion court’s conclusion that subsequent counsel, who was not retained until after plaintiff had already been detained, caused plaintiff’s harm.

We affirm dismissal of part of the malpractice claim on alternative grounds. Plaintiff’s claim that he pleaded guilty to criminal charges in reliance on defendants’ negligent legal advice concerning the immigration consequences of the plea is barred by his guilty plea and lack of any claim of innocence (Carmel v Lunney, 70 NY2d 169, 173 [1987]; Yong Wang Park v Wolff & Samson, P.C., 56 AD3d 351[1st Dept 2008], lv denied 12 NY3d 704 [2009]).

However, the policy underlying the rule established in Carmel v Lunney, supra, does not require dismissal of the entirety of plaintiff’s legal malpractice claim, because the remainder of his claim that defendants failed to advise him of the potential immigration consequences of traveling outside the United States as a result of entering a guilty plea does not dispute the validity of his conviction (see generally Carmel v Lunney, supra; see also Bass & Ullman v Chanes, 185 AD2d 750 [1st Dept 1992]). Further, plaintiff’s allegations that he relied on defendants’ faulty legal advice concerning the immigration consequences of his guilty plea in deciding to travel abroad after he pled guilty, resulting in his being detained and subjected to removal proceedings, state a valid cause of action for legal malpractice. Defendants’ other [*2]arguments present disputed factual issues concerning the standard of care and proximate cause that are not properly resolved on a motion to dismiss the complaint (see Urias v Daniel P. Buttafuoco & Assoc., PLLC, 120 AD3d 1339, 1343 [2d Dept 2014]).

No Privity and No Near Privity Either

By Andrew Lavoott Bluestone on Posted in Uncategorized

Yesterday, we discussed privity in a real estate setting in 71 Park Ave. S., LLC v Fox Rothschild LLP  2018 NY Slip Op 32451(U)  October 1, 2018  Supreme Court, New York County  Docket Number: 158900/2017.  Judge Saliann Scarpulla determined that one of the two plaintiffs lacked privity because it was formed after the representation was commenced, and the retainer agreement specifically ruled out representation of any related entities.  While the second plaintiff in the action has a well pled claim against the law firm, today we discuss the concept of “near privity.”  This comes up frequently in opinion letter settings where non-clients might seek to rely upon an opinion letter.

“Plaintiffs also argue that their malpractice claim should be sustained because they plead facts sufficient to establish a relationship approaching near privity. To sustain a claim for legal malpractice based on near privity, a plaintiff must allege that the professional was “aware that its services will be used for a specific purpose, the plaintiff must rely upon those services, and the professional must engage in some conduct evincing some understanding of the plaintiffs reliance.” Allianz Underwriters Ins. Co. v. Landmark Ins. Co., 13 A.D.3d 172, 175 (1st Dept 2004). Here, Plaintiffs fail to allege sufficient facts to show near privity. First, the documentary evidence contradicts Plaintiffs’ argument that 71 Park was in near privity with Fox. As stated above, the Engagement Letter disclaimer stated that Fox agreed to represent only NP, not 71 Park. Second, the Land Opinion letter, which 71 Park alleges that it relied upon to its detriment, was addressed to Savitar and stated that it could “only be relied upon by the entities to which it is addressed … and may not be relied upon by any other person or entity …. ” Lastly, the complaint is devoid of any allegations that 71 Park requested legal advice from Fox, that Fox agreed to perform a specific task for 71 Park, or that there was any direct contact between Fox and 71 Park after the latter entity was formed. In fact, Fox continued to address its invoices to NP as per the Engagement Letter through
2016. Thus, Fox and 71 Park did not have a relationship of near privity. See Wei Cheng Chang, 288 A.D.2d at 380-381.

The documents executed by the parties preclude a finding of an attorney-client relationship between Fox and 71 Park. Based upon this documentary evidence, I dismiss Plaintiffs’ cause of action for legal malpractice and do not address the remaining arguments in support of dismissal. ”

 

Privity and Near Privity in a Real Estate Setting

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

It was a $22 Million real estate purchase, and it was built on faulty foundations.  In 71 Park Ave. S., LLC v Fox Rothschild LLP  2018 NY Slip Op 32451(U)  October 1, 2018  Supreme Court, New York County  Docket Number: 158900/2017  Judge Saliann Scarpulla determines that one of the entities has no privity (and therefore no case) while the other can (for now) state a cause of action.

“In 2014, NP, a real estate development company, identified two adjacent parcels of land – 71 4th Avenue and 82 East 10th Street – for a potential new development (the “Project”). NP intended to purchase the two parcels, combine them into one lot known as 80 East 10th Street (the “Property”),  and construct a 10-story, 34,300 gross square foot mixed-use building (the “Building”) on the Property.

As the Property was located within a C6-2A zoning district, the proposed Building was subject to certain restrictions regarding the maximum allowable floor area ratio (“FAR”). 1 The maximum allowable FAR varies on whether Inclusionary Housing is included.2 The FAR for the proposed Building, without the Inclusionary Housing bonus, was 5.95. NP states that the maximum permissible FAR for the Building was an important factor in gauging the economic feasibility of the Project, which included the purchase price for the Property.

In June 2014, NP retained SBLM to determine whether the proposed Building design conformed with the requirements set forth in New York City Zoning Resolution § 35-30. SBLM’s principal, George Fanous, allegedly confirmed that the FAR, without Inclusionary Housing, was 6.02.

NP also retained Fox as its legal counsel. On September 5, 2014, NP, through Stewart Osborne (“Osborne”) as its agent, executed an engagement letter (the “Engagement Letter”) with Fox wherein Fox agreed to provide “counsel on zoning matters for 71 4th Avenue … and 82 East 10th Street.” The Engagement Letter specifically identifies “Nava Partners LLC” as Fox’s client and in a section entitled, “Identity of Client,” further states that:

[ t ]he Firm’s only client in the Engagement is the party [Nava Partners LLC]
identified as Client in the first paragraph of this Letter. The Engagement is
not an agreement to represent any of Client’s affiliates, subsidiaries, parents
or related individuals, officers, directors, partners, members, shareholders,
employees, independent contractors or agents (collectively, “Affiliates”)
unless the Firm has specifically agreed to do so in writing. Client agrees
that the Firm’s representation of Client in the Engagement does not give
rise to an attorney-client relationship between the Firm and any of Client’s
Affiliates. ”

“In June 2015, SBLM filed a new building application with the Department of Buildings (“DOB”). The application proposed a Building with a total of25,567 square feet and a 6.02 FAR. DOB rejected the application because the proposed Building’s FAR exceeded the permissible 5.4 FAR for a mixed-use building without an Inclusionary Housing component.

Plaintiffs allege that the fair market value of the Property, using the correct 5.4 FAR, was $14.5 million, significantly less than the purchase price of $22.5 million. Plaintiffs further allege that they grossly overpaid on the purchase price, and that they were forced to pay more than $2 million in development rights to ensure that the Building was compliant with New York City Zoning Resolution§ 35-30. ”

“Here, the documentary evidence plainly and expressly refutes Plaintiffs’ claim of an attorney-client relationship between Fox and 71 Park. NP is the sole client identified in the Engagement Letter, and that letter clearly and unambiguously states that Fox does not represent any of NP’s affiliates, subsidiaries or agents. The Engagement Letter, and the attached Standard Terms, specifically disclaim the creation of an attorney-client relationship between Fox and NP’s affiliates arising out of Fox’s representation. And, contrary to Plaintiffs’ assertion, it was not umeasonable for Fox to narrowly define “client” in the Engagement Letter.

Additionally, the fact that NP allegedly informed Fox of its intention to form a single-purpose entity does not mean that Fox agreed to represent that single-purpose entity, given the Engagement Letter’s limitation on who was the “client.” 5 Notably, the “unilateral belief of a plaintiff alone does not confer upon him or her the status of a client.” Wei Cheng Chang v. Pi, 288 A.D.2d 378, 380 (2d Dept. 2001). Further, despite that the Engagement Letter provided a mechanism by which Fox’s representation could extend to an NP affiliate – i.e., an agreement to such representation by Fox in writing – NP never requested written approval of representation for 71 Park following that entity’s formation. “

Narrow Exception to Privity? Yes. Continuous Representation? No.

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

It is the rare legal malpractice case that falls into the privity exception.  As a matter of social policy and definitely to limit legal malpractice cases, Courts impose a very strict privity requirement.  No attorney-client relationship, no legal malpractice case, with a small exception for fraud or malice. Webster v Sherman  2018 NY Slip Op 06590  Decided on October 3, 2018  Appellate Division, Second Department does fall into this small crack.  However, even so, plaintiff was not afforded any continuous representation tolling.

“This action arises out of a 1995 agreement between the plaintiff and the defendant Rochelle Sherman (hereinafter Rochelle) pursuant to which Rochelle agreed to transfer half of her shares in Garden Care Center, Inc. (hereinafter Garden Care), to the plaintiff. Garden Care operated a nursing home, so governmental approval for the transfer of ownership was required. In connection with the proposed transfer, the plaintiff and Rochelle entered into an escrow agreement on or about April 1, 2003, in which the defendant, Tenzer and Lunin, LLP (hereinafter T & L), was appointed to act as the escrow agent.

Conditional approval of the transfer of Rochelle’s shares to the plaintiff was granted by the New York State Public Health Council in a letter dated November 19, 2003. T & L was instructed that to complete the requirements for certification approval, it had to contact the regional office of the New York State Office of Health Systems Management within 30 days of receipt of the letter. In a follow-up letter to T & L dated December 5, 2005, the New York State Department of Health (hereinafter DOH) noted that the regional office had not been contacted and that the project would be considered abandoned unless T & L provided to the DOH documentation that the regional office was contacted within 30 days from the date of the follow-up letter. By letter dated January 11, 2006, T & L informed the DOH that the closing of the transfer had not taken place because the consent of the other shareholders of Garden Care, as well as the consent of Garden Care’s lender, had not been obtained. In March 2006, the DOH notified T & L that it considered the transfer application abandoned.”

“With respect to the cause of action alleging legal malpractice, although the Supreme Court properly determined that there was no attorney-client relationship between the plaintiff and T & L (see Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD3d 790, 792; Lombardi v Lombardi, 127 AD3d 1038, 1042; Terio v Spodek, 63 AD3d 719, 721), the second amended complaint set forth a cause of action which fell “within the narrow exception of fraud, collusion, malicious acts or other special circumstances under which a cause of action alleging attorney malpractice may be asserted absent a showing of privity” (Mr. San, LLC v Zucker & Kwestel, LLP, 112 AD3d 796, 797 [internal quotation marks omitted]; see Ginsburg Dev. Cos., LLC v Carbone, 85 AD3d 1110, 1112).”

“The statute of limitations for a cause of action alleging legal malpractice is three years [*3]from the accrual of the cause of action (see CPLR 214[6]; Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d 1085, 1086; Farage v Ehrenberg, 124 AD3d 159, 163). “Accrual is measured from the commission of the alleged malpractice, when all facts necessary to the cause of action have occurred and the aggrieved party can obtain relief in court . . . regardless of when the operative facts are discovered by the plaintiff” (Farage v Ehrenberg, 124 AD3d at 164 [internal citations omitted]; see McCoy v Feinman, 99 NY2d 295, 301; Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d at 1086).

However, legal malpractice claims which would otherwise be barred by the statute of limitations are timely if the doctrine of continuous representation applies (see Glamm v Allen, 57 NY2d 87, 91-94; Alizio v Ruskin Moscou Faltischek, P.C., 126 AD3d 733, 735; Farage v Ehrenberg, 124 AD3d at 164), in which case the three-year statute of limitations is tolled for the period following the alleged malpractice “until the attorney’s continuing representation of the client on a particular matter is completed” (Farage v Ehrenberg, 124 AD3d at 164; see Zorn v Gilbert, 8 NY3d 933, 934; Glamm v Allen, 57 NY2d at 93). For the doctrine of continuous representation to apply, there must be clear indicia of “an ongoing, continuous, developing, and dependent relationship between the client and the attorney” (Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d 1037, 1038 [internal quotation marks omitted]; see Farage v Ehrenberg, 124 AD3d at 164).

Here, T & L met its prima facie burden by establishing that the last date of the alleged malpractice occurred on January 11, 2006, and the action against it was not commenced until February 6, 2013 (see 3rd & 6th, LLC v Berg, 149 AD3d 794, 795; Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d at 1038). In opposition, the plaintiff failed to raise a triable issue of fact as to whether continuous representation tolled the statute of limitations (see 3rd & 6th, LLC v Berg, 149 AD3d at 795-796; Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d at 1087).”

A Tangled Accountant Malpractice Timeline

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

Golub v Shalik, Morris & Co., LLP  2018 NY Slip Op 32358(U)  September 21, 2018  Supreme Court, New York County  Docket Number: 158055/2017  Judge: Barbara Jaffe presents a difficult analysis of the statute of limitations. When it commences and whether continuing representation tolls the statute are the cornerstones of this opinion.

“On August 16, 2012, ARG transferred his 50 percent interest in a property in Southampton, New York, as a gift to The Aaron Richard Golub 2012 Qualified Personal Residence Trust (QPRT). As of August 27, 2012, the property as a whole was appraised at $9 million. In reporting the value of the gift as one-half the appraised value, defendants erred as the 50 percent interest was “hon-controlling” and not easily sold. Defendants also failed to observe that the correct value of the gift should have been the remainder interest after the expiration of the QPRT, not the gross value of the non-controlling interest. These errors resulted in the gift being “overreported” and the expenditure of too much of AR G’s lifetime gift tax exemption.

Defendants also incorrectly prepared and filed the 2012 Form 709 by reporting that the recipient was plaintiff Darrow Golub (DG) instead of the QPRT. As a result, the gift was also “under-reported” by $13,000 due to defendants’ erroneous application of the annual gift tax exclusion to the gift which does not qualify for it. The basis of the gift was also incorrectly reported as $4.5 million, which will result in an inaccurately high figure for purposes of calculating capital gain or loss.”

“Apart from ARG’s self-serving and unsupported allegations, plaintiffs offer no clear indicia of an ongoing, continuous, developing, and dependent relationship between the parties such that absent other circumstances, defendants’ representation was continuous with respect to the QPRT. WFS’s website, containing a general description of services rendered does not constitute an agreement between the parties, and the assurance of the SM partner that he would continue to provide the same accounting services performed by Frushtick is not sufficiently
specific to satisfy the legal requirements for proving continuous representation as to the
underlying malpractice relating to the QPRT. That defendants offer no affidavit is of no moment
as it is plaintiffs’ burden to demonstrate continuous representation. (See Davis v Cohen &
Gresser LLP, 160 AD3d 484 [l51 Dept2018] [plaintiff bears burden of showing that statute of
limitations has been tolled or does not apply]).

However, as it is undisputed that a 2014 Form 709 was required for the QPRT to achieve its purpose and that the errors in the 2012 Form 709 were not discovered until 2016, it was reasonably expected that until the termination of their services, defendants would follow through with the filing of a 2014 Form 709. This reasonable expectation reflects both a mutual understanding of the need for further representation with respect to the QPRT and plaintiffs’ reliance upon a continuous course of services related thereto. That defendants failed to file the 2014 Form 709, that they were not asked to do so, or that the alleged errors in the 2012 Form 709 precluded the filing of a 2014 Form 709 does not disprove the mutual understanding absent any offer of proof from defendants and given Harris’s assertion that the duty to file a 2014 Form 709 is implicit in the filing of the 2012 Form 709. Thus, plaintiffs satisfy their burden of demonstrating a factual issue as to whether defendants continuously represented them with respect to the QPRT. To accept defendants’ argument that they are shielded from liability by their own negligence would be inequitable at this stage of the proceedings. (Cf Deitz vKelleher & Flink, 232 AD2d 943 [3d Dept 1996] [defendant cannot use own negligence to shield itself from malpractice]). “

Litigation Costs and Damages in Legal Malpractice

By Andrew Lavoott Bluestone on Posted in Legal Malpractice Cases

Jonns v Fischbarg  2018 NY Slip Op 32353(U)  September 18, 2018  Supreme Court, New York  County  Docket Number: 150729/2017 Judge: Kathryn E. Freed which we discussed yesterday for its lesson on the statute of limitations is also worthwhile to read for how litigation costs can be part of legal malpractice damages.  In short, those damages can include litigation expenses incurred in an attempt to avoid, minimize or reduce the damage caused by the attorney’s wrongful conduct.

“To prevail on a claim for legal malpractice, a plaintiff must establish three elements: (1) that the attorney failed to exercise the degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community, (2) that such negligent failure was a proximate cause of the loss in question, and (3) that the plaintiff sustained actual and ascertainable damages. (See Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423, 424 [1st Dept 2007].)

The plaintiffs burden of proof in a legal malpractice action is a heavy one. (See Lindenman v Kreitzer, 7 AD3d 30, 34 [1st Dept 2004].) In regard to the element of proximate causation, an “attorney’s conduct or inaction is the proximate cause of a plaintiffs damages if but for the attorney’s negligence the plaintiff would have succeeded on the merits of the underlying action, or would not have sustained actual and ascertainable damages.” (Gallet, Dreyer & Berkey. LLP v Basile, 141AD3d405, 405 [1st Dept 2016].) A plaintiffs damages in connection with such a claim may include “litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney’s wrongful conduct.” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [2007] (quotations omitted).) But mere “speculation of a loss resulting from an attorney’s alleged omissions … is insufficient to sustain a claim for legal malpractice.” (Gallet, _Dreyer & Berkey, LLP, 141 AD3d at 405-06 (quotations omitted).)”

“Here, Fischbarg argues that the purchase agreement that he drafted obligated Dorsia to assign the lease for the business premises to Jonns and to transfer the Charles Restaurant’s liquor license to Jonns. (Docs. 6 at 8, 23 at 2.) He argues that, because it was Dorsia’s responsibility to fulfill those obligations, Jonns’ complaint fails to state a legal malpractice cause of action against him. (Id. at 8-10.) Viewing the pleadings in a light favorable to plaintiff and affording him the benefit of every inference, which this Court must do on a motion to dismiss (see Leon, 84 NY2d at 87-88), this Court finds that the amended complaint sets forth sufficient factual allegations that Fischbarg did not use the reasonable degree of care, skill, and diligence commonly exercised by one in the legal community. Specifically, Jonns alleges in his amended complaint that Fischbarg failed to properly act as his attorney by, inter alia, allowing Jonns to sign the purchase agreement in his personal capacity, representing the investors and Dorsia during the business transactions, and by failing to file the necessary papers and applications for a liquor license with the SLA. (Doc. 21 at 9.) The amended complaint therefore alleges the first element of a professional malpractice claim. ”

“Because the underlying Dorsia action is still pending, Jonns cannot conclusively establish that he would have prevailed in that action but for Fischbarg’s negligence. However, Jonns claims in the amended complaint that he has suffered damages as a result of Fischbarg’s failure to draft the purchase agreement as being between Dorsia and an LLC because this caused Jonns to have to defend himself in the Dorsia action. (See Rudo([, 8 NY3d at 443 (litigation expenses to mitigate an
attorney’s negligence satisfy the element of actual damages in legal malpractice actions).)
Contrary to Fischbarg’s assertion, Jonns’ litigation costs in the Dorsia action are not speculative.
(Doc. 29 at 8-9.) Proximate causation is sufficiently alleged since Jonns would not have incurred
those litigation costs if he did not sign the purchase agreement in his personal capacity, i.e., if
Fischbarg had drafted the purchase agreement as being between Dorsia and an LLC, such as
Crazy Asylum. Therefore, this Court finds that Jonns’ amended complaint adequately alleges the
elements of proximate causation and actual damages. ”

 

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