Here’s a much longer article on the Kronish Lieb Weiner & Hellman legal malpractice case from Supreme Court, New York County, by Anthony Lin.

Savvy Clients’ Damages Ruled Not Firm’s Fault
Anthony Lin
New York Law Journal

A Manhattan judge has thrown out a legal malpractice suit by a group of brokers who claimed Kronish Lieb Weiner & Hellman provided them with faulty advice leading to a violation of a rule of the National Association of Securities Dealers and subsequent penalties and fines.

Even if the law firm had negligently advised the plaintiffs, Supreme Court Justice Jane Solomon said, the latter were “sophisticated professionals” already aware of the NASD rule in question. Therefore, the firm’s actions were not the proximate cause of the plaintiffs’ injuries, she wrote in Smookler v. Kronish Lieb, 604165/02.

Francis A. Smookler, Mark Pelletieri and Anthony Galeotafiore were brokers with First Allied Securities when they retained Kronish Lieb in 2001 to represent them in the creation of their own broker-dealer firm, to be called Canterbury Securities Holdings Inc.

Kronish Lieb was specifically charged with drafting a private placement memorandum to raise money for the new venture. The law firm also advised its clients to retain another, smaller firm, McCabe & Flynn, to handle regulatory matters, which the brokers did.

The trio’s employment agreements with FAS, which dated back to 1996, required them to inform the brokerage of any outside business activities as well as abide by all relevant exchange and government regulations.

Kronish Lieb lawyers allegedly told the brokers the transaction would “go a little smoother” if they resigned before the private offering closed but it would be fine if they chose not to quit. The brokers neither resigned nor informed FAS of their plans for Canterbury until after the private placement closed, raising $770,000.

The NASD began proceedings against the three brokers in 2002, charging they violated the association’s Rule 3040, which bars brokers at NASD member firms from participating in private securities transactions outside the scope of their employment without prior notice to their employer.

As part of their settlement with the NASD, the brokers refunded $250,000 to their investors, agreed to a 90-day suspension of their licenses and each paid a $5,000 fine. They later withdrew their application for a broker-dealer license for Canterbury.

In their malpractice claim against Kronish Lieb, they claimed $30 million in damages. The law firm counterclaimed for $19,000 in unpaid fees.

Justice Solomon said the terms by which Kronish Lieb was engaged clearly excluded regulatory matters, and she rejected the plaintiffs’ contention that they were entitled to rely on the law firm’s advice because of its reputation and expertise in the area of private offerings.

The judge said there was a “vast difference” between the regulatory and financial aspects of the Canterbury transaction. She noted that early depositions of the plaintiffs suggested they had not relied on Kronish Lieb for advice on the NASD rule.

In any case, she said, the plaintiffs were already obligated to observe the NASD rules as part of the terms of their employment by FAS. The judge agreed with Kronish Lieb’s contention that the proximate cause of their injuries was their own knowing violation of the NASD rule, rather than any conduct by the firm.

Solomon also rejected the plaintiffs’ argument that the case required a comparative analysis of the relevant knowledge of the attorney and the client to determine proximate cause. Even under such an analysis, she said, the brokers’ prior obligation to follow NASD rules and their knowledge of the particular rule at issue would likely outweigh the impact of any advice provided by Kronish Lieb.

The plaintiffs were represented by Stanley Zinner of White Plains’ Greene & Zinner. Kronish Lieb was represented by Max Gitter of Cleary Gottlieb Steen & Hamilton.

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Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.