Violation of a disciplinary rule alone is insufficient to uphold a legal malpractice cause of action.  We see, in Schlam Stone & Dolan, LLP v Poch   2013 NY Slip Op 51176(U)   Decided on July 9, 2013   Supreme Court, New York County   Hagler, J. how a cause of action for legal malpractice founders on the inability to link the violation with ascertainable damages. 
 

"Arfa and Shpigel were members of various entities that owned and managed various properties in the Bronx, New York. They were the sole members and owners of Ocelot Capital Management LLC ("OCM"). (Exhibit "A" attached to the Affidavit of Howard R. Poch, sworn to on December 23, 2011, in Opposition to the Motion ["Poch Aff."].) OCM partnered with Eldan-Tech Inc. ("Eldan") to form Ocelot Portfolio Holdings LLC ("Ocelot Portfolio") to pursue real estate ventures. Eldan retained an eighty percent interest and OCM had a twenty percent interest in Ocelot Portfolio. However, OCM was the managing member of Ocelot Portfolio. (Id.) Ocelot Portfolio was sole member and owner of entities known as OCG I, LLC, ("OCG I") and OCG V, LLC ("OCG V"). OCG I owned 1268 Stratford Avenue, Bronx, New York, and OCG V owned 1524 Leland Avenue, Bronx, New York. (Exhibit "B" attached to the Poch Aff.) Ocelot Properties Management, Inc. ("OPM"), was the entity that managed the properties for OCG I and OCG V. Ocelot Capital Group, LLC ("OCG") owned OPM, which was controlled solely by Arfa and Shpigel. (Exhibit "C" attached to the Poch Aff.) "

"In late 2007, Shafir had discussions with Poch to retain him as OCM’s landlord-tenant counsel. (Exhibit "E" attached to the Poch Aff.) The negotiations continued in the beginning of 2008, when the parties finally agreed via e-mail to Poch’s retention at $5,500 per month to handle all of OCM’s landlord-tenant disputes. (Exhibit "G" attached to the Poch Aff.) However, no formal written retainer agreement was executed by the parties.

Poch then took over the old inventory of cases and started new ones. The custom and practice between the parties was that Poch communicated with Mendez and Aryeh on these cases. (Exhibits "H," "I," and "M" attached to the Poch Aff.) As part of his duties, Poch defended the various OCG entities in proceedings in Housing Court that the Department of Housing and Preservation and Development of the City of New York ("HPD") brought against them to repair certain violations in various buildings ("HP Proceedings"). Poch settled these HP Proceedings with consent orders requiring payment to HPD of civil penalties and fines by a date certain which would increase ten-fold if not timely paid. Poch advised Mendez and Aryeh of at least four defaults in payment and resulting increased penalties. (Exhibits "O" and "P" attached to the Poch Aff.) "

"In this case, plaintiffs mainly rely on the uncontroverted fact that Poch never communicated directly with Arfa and Shpigel before executing the Consent Orders in the HP Proceedings. In support thereof, plaintiffs offer the expert opinion of Bruce Green, Esq. ("Green"), who opines that Poch’s failure to communicate directly with Arfa and Shpigel violated the former Disciplinary Rule 6-101, which consequently resulted in a breach of his duty or negligence. Plaintiffs conclude that Poch’s failure to communicate itself constitutes legal malpractice. While Poch’s failure to communicate directly with Arfa and Shpigel may have been unwise in hindsight, or said conduct may have even been violative of a disciplinary rule, that alone is insufficient to give rise to an actionable cause of action. (Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193 [1st Dept 2003].)

Indirect communication may have been acceptable under these circumstances as defendants allege that there was a prior custom and practice wherein Arfa and Shpigel specifically delegated all communications with Poch to their designated agents, Shafir and Aryeh. It is noteworthy that Arfa and Shpigel’s designated agents forwarded the petitions, which included them as individual respondents, to Poch to seemingly defend the respondents in the HP Proceedings. It is common and customary in landlord-tenant practice, for the same attorney (i.e., Poch), to represent both the corporate respondents (e.g., OCG I and OCG V), and related individual respondents such as corporate officers or agents acting in their official duties (i.e., Arfa and Shpigel), in HP Proceedings. (Affidavit of Greg Calabro, Esq., dated December 23, 2011 ["Calabro Aff."] at ¶ 6). (See, also, Cooke v Laidlaw Adams & Peck, Inc., 126 AD2d 453 [1st Dept 1987].) At the very least, Arfa and [*5]Shpigel "ratified the authority of Poch to enter into the consent order[s] by receiving the benefit of its terms and failing to raise any objection for more than one year from the date of the order[s]." (Orders of the Appellate Term, First Department decided April 21, 2011, 2011 NY Slip Op 50707[U] and 2011 NY Slip Op 50708[U], attached as Exhibit "O" to the Hitchcock Aff.) As such, Poch may have been permitted to communicate through intermediaries rather than in a direct manner. "

"Plaintiffs also have failed to demonstrate the second element of proximate cause. They have failed to demonstrate by expert or any other testimony that "but for" the defendants’ alleged negligence Arfa and Shpigel would have obtained a favorable result or not sustained damages. On this limited record, it appears that entry of judgments against Arfa and Shpigel occurred as a result of OCG I and OCG V’s failure to correct hundreds of violations and pay negotiated civil penalties as promised in the Consent Orders. HPD obtained personal liability against Arfa and Shpigel for failure to correct housing violations because the term "owner" is broadly construed as any person who is directly or indirectly control of the subject building as defined in Multiple Dwelling Law § 4(44) and the Housing Maintenance Code Section 27-2004(45). Therefore, personal liability may attach to a corporate officer who is construed to be an agent irrespective if the officer is or is not involved with the operation of the subject building. This is a strong motivating factor to quickly correct violations or the officers may be exposed to personal liability notwithstanding the usual corporate protections. In other words, responsible officers can not turn a blind eye or hide behind a corporate shield, but they must timely correct violations that are deemed a danger to life, health or safety. (Dept. of Housing Preservation and Development of the City of New York v Livingston, 169 Misc 2d 660 [App Term 2d Dept 1996]; Dept. of Housing Preservation and Development of the City of New York v Chana Realty Corp., NYLJ, June 7, 1993 [App Term 1st Dept].) Moreover, plaintiffs do not address a glaring inconsistency in their argument in that, had Poch not appeared for Arfa and Shpigel in the HP Proceedings, a default judgment would nonetheless have been entered against them due to their failure to appear. (Calabro Aff., at ¶ 11.) "