No privity, no malpractice. That’s the basic lesson of 97 2nd LLC v Goldberg Weprin Finkel Goldstein LLP 2019 NY Slip Op 30021(U) January 4, 2019 Supreme Court, New York County
Docket Number: 154593/2018 Judge: Arlene P. Bluth. In this case where a nice piece of property went back and forth between developers, the attorneys obtained dismissal of the legal malpractice claims.
“This action arises out of an ownership dispute over plaintiff, a company that used to own property located at 97 Second Avenue in Manhattan. Initially plaintiffs sole member was Raphael Toledano. The complaint alleges that Toledano received financing in April 2015 from Letko Funding LLC (“Letko”) for another one of his businesses (“West 16”) and that these funds were secured by Toledano’s membership interest in plaintiff. In other words, Toledano’s interest in plaintiff was collateral for Letko’s loan.
In April 2017, West 16 defaulted and Letko conducted an auction sale of Toledano’s membership interest in plaintiff. Letko successfully acquired Toledano’s interest at the sale and assigned the bid to another entity (“22 Columbus”). After other transactions, 22 Columbus eventually appointed Michael K. Shah as sole manager of plaintiff on June 20, 2017.
On that same day, 22 Columbus executed a deed on behalf of plaintiff transferring ownership of the property to DS 97 2nd Avenue Property Owner LLC (“DS 97″), an affiliate of Shah, the owner of22 Columbus. Allegedly, Toledano then called Shah and directed 22 Columbus to sell the premises to him. On July I 0, 2017, DS 97 filed an order to show cause to restrain Toledano from interfering with the property.
In August 2017, defendant (a law firm) filed a Chapter 11 bankruptcy petition at Toledano’s direction on behalf of plaintiff. Plaintiff (controlled by Shah in this action) claims that it never gave defendant permission to file the claim or appear on its behalf in bankruptcy court. Plaintiff contends that its sole member, at the time of the filing of the bankruptcy petition, was 22 Columbus and 22 Columbus never retained defendant. Plaintiff contends.that defendant knew that it did not have authority to bring the bankruptcy case and brought the case anyway. The bankruptcy case was later dismissed after Shah intervened and filed a motion to dismiss. Plaintiff brings causes of action based on Judiciary Law § 487, malicious prosecution, professional negligence, malpractice, conversion and identity theft as well as slander of title based on the bankruptcy case.”
“”New York courts impose a strict privity requirement to claims of legal malpractice; an attorney is not liable to a third party for negligence in performing services on behalf of his client. Thus, absent an attorney-client relationship, a cause of action for legal malpractice cannot be stated” (Federal Ins. Co. v North American Specialty Ins. Co., 47 AD3d 52, 59, 847 NYS2d 7 [!st Dept 2007]).
These causes of action are severed and dismissed because there was no privily between plaintiff (now controlled by Shah) and defendant. It is undisputed that Toledano hired defendant to bring the bankruptcy proceeding and that defendant cited to the June 19 letter agreement with Lefkowitz as the basis for Toledano’s ownership interest in plaintiff. Toledano’s position was that the auction sale by Lefkowitz was improper and hired defendant to bring a bankruptcy case that to help him regain his interest.
While Shah vehemently disagrees with the decision to bring the bankruptcy case, that does not state a cause of action· for professional negligence or legal malpractice because he did not retain defendant. Shah intervened in the bankruptcy case through his own counsel, moved to dismiss and eventually won dismissal. An adversary cannot claim legal malpractice and, unlike the cases cited by plaintiff, defendant did not commit fraud or collusion or a malicious act.”