Law firm’s decision not to sue potential defendant could not be basis for malpractice claim because law firm acted reasonably where liability and damages were uncertain

Hinshaw reports:

Achtman v. Kirby, McInerney & Squire. LLP, ___ F.3d ___, 2006 WL 2720643 (2nd Cir. Sept. 25, 2006)

The United States Court of Appeals for the Second Circuit has held that law firms which served as class counsel in a securities fraud action are not liable for legal malpractice for failing to assert claims against the auditor of the securities issuer where the liability of the accounting firm, i.e. the auditor, was doubtful and damages were uncertain.

In April 1996, several class action suits were filed against Bennett Funding Group (BFG) alleging securities fraud based on an elaborate Ponzi scheme involving sham contracts and fictitious financial statements. The suits were consolidated and two law firms, the Kirby law firm and the Bernstein law firm, were appointed co-lead counsel. The class consisted of over 20,000 investors in BFG securities. Arthur Andersen & Co., which had audited BFG’s misleading 1989 and 1990 financial statements, was not named as a defendant. Mahoney Cohen, which had succeeded Andersen as BFG’s auditor, was named a defendant. A $125 million settlement, which included $14 million from Mahoney Cohen, was reached. Some BFG investors, represented by different law firms, had since filed individual actions against Andersen and in some instances had reached settlement agreements. In 1999, the firms representing those individual defendants attempted to bring a class action suit against Andersen on behalf of the BFG investors, but the suit was time-barred

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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.