Wo Yee Hing Realty, Corp. v Stern  2012 NY Slip Op 05792   Decided on July 31, 2012
Appellate Division, First Department   is an example of just how minutely the AD will examine an "underlying case" when deciding a case of legal malpractice.  Here, plaintiffs hired an attorney to do the closing on a commercial property, and a deep split of testimony takes place.  Plaintiff and Defendant agree that Defendant attorney did not have the requisite knowledge to handle a 1031 exchange, yet he held the closing.  There was no 1031 exchange, there could be no 1031 exchange after the checks were made out to plaintiffs yet there is no legal malpractice.  Plaintiffs paid capital gains tax of $ 5 Million +

"The parties’ claims as to the understanding that was reached regarding the corporation’s retention of defendant are diametrically opposed. According to plaintiff’s principals, defendant assured them that the anticipated sale could be structured as a "like-kind exchange" under Internal Revenue Code (26 USC) § 1031, which permits taxes on gains from the sale of real property to be deferred if the seller purchases another property of like kind, within certain parameters (see 26 USC § 1031[a]). Plaintiff asserts that defendant "held himself out as knowledgeable in [1031 exchanges] and able to effectuate the sale and transfer of real property" to enable it to take advantage of the capital gains tax deferral.

Defendant, however, asserts that he informed plaintiff’s principals that he "had no expertise or experience with structuring Section 1031 like-kind exchanges" and that responsibility for taking advantage of Section 1031 would fall to them, and that they assured him that they were familiar with 1031 exchanges and would take care of that aspect of the transaction. "

"Strong evidence that defendant acted negligently is presented by his admission that he told the Yungs that he was not qualified to handle a 1031 exchange, but nevertheless undertook the preparation of the contract of sale. "[A]n attorney is obligated to know the law relating to the matter for which he/she is representing a client and it is the attorney’s duty, if he has not knowledge of the statutes, to inform himself, for, like any artisan, by undertaking the work, he represents that he is capable of performing it in a skillful manner" (Fielding v Kupferman, 65 AD3d 437, 440 [2009] [internal quotations marks omitted]). Defendant’s failure to have the checks made payable to a qualified intermediary similarly constitutes evidence of his negligence, since that failure would preclude plaintiff from taking advantage of the like-kind exchange option (see 26 CFR 1.1031[k]-1[f]).

In seeking summary judgment dismissing the case, defendant contends that plaintiff cannot show that his negligence, if any, caused plaintiff’s alleged losses. He relies on the absence of evidence of a pending deal that plaintiff could have used to consummate a 1031 exchange. Plaintiff argues, citing Suppiah v Kalish (76 AD3d 829, 832 [2010]) that defendant was required to submit an expert affidavit establishing that even if he did commit malpractice, his actions were not the proximate cause of its losses. However, Suppiah concerned an allegation of attorney malpractice in an immigration matter that involved issues so "byzantine" that the issue of proximate cause could not be resolved without expert testimony (id. at 833). Here, by contrast, the mechanics of the governing legal framework are undisputed, and the issue of proximate cause turns on the discrete factual question of whether plaintiff took the requisite actions to identify and purchase a suitable replacement property in the required time frame. There is no need for expert testimony on the point.

The question is therefore whether plaintiff raised an issue of fact as to whether negligence on defendant’s part proximately caused its claimed losses. "

"Unlike the dissent, we do not think that defendant’s failure to have the checks made out to a qualified intermediary eliminates plaintiff’s burden to offer evidence showing that but for defendant’s negligence, it would have been able to complete a valid like-kind exchange. Although it is now clear that, as the dissent puts it, "the opportunity for a like-kind exchange was irretrievably lost once plaintiff received the proceeds of the sale," it is also clear that plaintiff had failed to satisfy all the other elements required for the successful completion of other such an exchange, and that the failure to meet those requirements is not attributable to defendant’s alleged negligence."


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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.