One may lose the right to bring a legal malpractice case based on earlier attorney fee dispute resolution. In this case , Margrabe v. Sexter & Warmflash, PC, 07-CV-2798, District Judge Kenneth M. Karas, SDNY, we see just how the process operates. Plaintiff retains attorneys to represent her in a shareholder derivative matter. Attorneys were successful in obtaining a significant amount of money for her, but from then on things went badly. Attorneys were terminated, fees were disputed, escrow accounts started, and a defamation action commenced over the termination letter. Eventually the attorneys smartly started an attorney fee dispute action under Judiciary Law 475, and were awarded fees. This was the end of the issue, although plaintiff did not yet know it.

From the Court: "Plaintiff claims that Defendants failed to exercise the degree of skill and knowledge commonly possessed by members of the legal profession in their representation of her in the Rusciano Lawsuit. (Compl. ¶27.)

In the R&R, Magistrate Judge Yanthis recommended that the Court grant Defendants’ Motion to Dismiss Plaintiff’s legal malpractice claim on res judicata and collateral estoppel grounds. (R&R 4-5.)

Although Plaintiff initially objected to Magistrate Judge Yanthis’s recommendation (Pl.’s Objections to R&R ("Pl.’s Obj.") 4), Plaintiff has since acknowledged to the Court that, based on the Court of Appeals’ denial of Plaintiff’s appeal, her legal malpractice claim "is barred under New York State law by the doctrine of res judicata." (Letter from William Greenberg, Esq. to the Court (Jan. 30, 2009).)

The Court agrees that, in New York, a judgment "fixing the value of a professional’s service necessarily decides that there was no malpractice." Lipani v. Collins, Collins & Dinardo, P.C., No. 90-CV-5278, 1992 WL 168267, at *3 (S.D.N.Y. June 25, 1992) (quoting Nat Kagan Meat & Poultry, Inc. v. Kolter, 416 N.Y.S.2d 646, 647 (App. Div. 1979)); accord Best v. Law Firm of Queller & Fischer, 718 N.Y.S.2d 397, 397 (App. Div. 2000) (holding that plaintiffs were "precluded from asserting a cause of action alleging malpractice" against the defendant law firm inasmuch as the New York Supreme Court had found that law firm was entitled to its agreed-upon legal fee).5 Here, it is undisputed that the Plaintiff’s legal malpractice claim is precluded by the state supreme court decision that Sexter & Warmflash was entitled to its reasonable legal fees. Accordingly, Plaintiff’s malpractice claim is dismissed as barred by the doctrines of res judicata and collateral estoppel."