Client has lost millions and goes to attorney.  Attorney arranges for a private investigator to work on the case.  So far so good?  The investigator’s contract called for payment of $ 350,000 plus 25% on success in locating assets.  Clients thought this too much.  Can a complaint for fraud adequately be stated on these facts?

In Moche v Srour  2013 NY Slip Op 32740(U)  October 26, 2013  Sup Ct, New York County
Docket Number: 157764/2012  Judge: Eileen A. Rakower tells us that the answer is yes.

"This action arises from the retention of a private investigator on Plaintiffs’ behalf by their attorney. In this action, plaintiffs Charles M. Moche and Ezra S. Moche (collectively, "Plaintiffs"), residents of New Jersey, contend they "were individuals who were victims of a real estate fraud scheme which caused them to lose millions of dollars." Plaintiffs allege that they thereafter "retained Deborah R. Srour, Esq. Srour and the law firm of Cox, Padmore Skolnick & Skarachy LLC to help regain the money they had lost." Plaintiffs further allege that Srour thereafter "took undue advantage of plaintiffs’ desperate situation because of their significant losses and entered into an agreement with defendant Patrol H.Y. Security (2007) Ltd. (Patrol) and Chaim Sharvit (Sharvit) purportedly obligating plaintiffs [sic] to pay Patrol $350,00 caused plaintiffs [sic] to give $225,000 to Patrol."
Plaintiffs allege, "Sharvit provided almost no services or work product to plaintiffs yet retained plaintiffs’ $225,000.00 and demanded the additional $125,000 purportedly due under Srour’s agreement." Plaintiffs further allege that "[u]pon information and belief, Sharvit shared those funds with Srour and/or Cox Padmore while Srour in fact during said period in question was purportedly representing plaintiff and had a fiduciary obligation to plaintiff."

"Here, accepting the allegations as true that Srour "at the time of entering into the agreement either acted as Patrol’s attorney and/or partner, and failed to disclose same to plaintiffs," "Sour also concealed that under the agreement … , Sharvit was not obligated to do anything," and "Upon information and belief, Sharvit shared those funds with Srour and/or Cox Padmore … ," Plaintiffs have stated claims for fraud and fraud in the inducement as against Srour and Cox Padmore.
 

The second cause of action of the Amended Complaint is for unjust enrichment. "[T]o prevail on a claim of unjust enrichment, "a party must show that (1) the other party was enriched, (2) at that party’s expense, and (3) that ‘it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered."’ (Cruz v. McAneney, 31 A.D.3d 54, 59 [2006]). "The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y. 2d 382, 399 [1987]. "[A] party is not precluded from proceeding on both breach of contract and quasi contract theories where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue." Curtis Props. Corp. v. Greif Cos., 236 A.D.2d 237, 239 (1st Dep’t 1997). A bona fide dispute exists where a defendant alleges unconscionability or fraud. (Id.). Here, accepting the allegations that Plaintiffs paid Sharvit and Patrol $225,000 for services that were not adequately invoiced or rendered, that Srour and Cox Padmore shared those funds, and the contract entered by Srour with Patrol and Sharvit on Plaintiffs’ behalf was unconscionable, Plaintiffs have stated a claim for unjust enrichment.

The third cause of action of the Amended Complaint is for breach of fiduciary duty. The elements of a cause of action for breach of fiduciary duty include (1) the existence of a fiduciary relationship; (2) misconduct; and (3) damages caused by the misconduct. (Armentano v. Paraco Gas Corp., 90 AD3d 683, 935 NYS2d 304 [2nd Dept 2011]). Based on the allegations that Srour, as Plaintiffs’ attorney, "prepared the agreement with Sharvit to the benefit of Sharvit and the detriment of plaintiffs" and thereafter shared in those funds that Plaintiffs paid to Sharvit without Plaintiffs’ knowledge," Plaintiffs have stated a claim for breach of fiduciary as against Srour and Cox Padmore. The fourth cause of action of the Amended Complaint is for legal malpractice
stemming from Plaintiffs’ recommendation of Patrol and Sharvit. In order to prevail against an attorney on a legal malpractice claim, a plaintiff must first prove that the  attorney was negligent, that such negligence was the proximate cause of the loss sustained, and that actual damages resulted therefrom (see Tydings v. Greenfield, Stein& Senior, 2007 NY Slip Op 6734, *2 [1st Dept. 2007]). An attorney does not, except by express agreement, guarantee results. Weinberg v. Needelman, 226 A.D. 3,4-5 [1st Dept 1929], aff’d, 252 N.Y. 622 [1930]. "[A]n attorney is not held to the rule of infallibility and is not liable for an honest mistake of judgment, where the proper course is open to reasonable doubt. Thus, ‘selection of one among several reasonable courses of action does not constitute malpractice."’ Bernstein v. Oppenheim & Co.,  P.C., 160 A.D.2d 428, 430 [151 Dept 1990]. Here, Plaintiffs’ legal malpractice claim is based on Srour’s recommendation which they followed in the retention of the private investigator. This allegation alone is insufficient to make out a legal malpractice claim."