What could be more Manhattanite than the combination of a Central Park South double apartment, a real estate legal proceeding, lots of money and legal malpractice?  Nothing that we can conjure.

Russo v Rozenholc  2015 NY Slip Op 06029  Decided on July 9, 2015  Appellate Division, First Department is about tenants who had a lovely setting on Central Park South, only to have it torn from under them.  What to do? Sue for their rights under the Rent Stabilization Law.  Here is the story.

“In May 2006, the nonparty building owner filed an application with the Department of Housing and Community Renewal (DHCR) seeking to demolish the building located at 220 Central Park South in Manhattan and evict the tenants. As a result, a group of rent-stabilized tenants formed a tenants’ association to rebuff the building owner’s efforts. One of those tenants was plaintiff’s decedent Ronald E. Pecunies (the decedent), who lived with his girlfriend Emel Dilek in apartment 16AB — a large unit created by converting two apartments into one.

The tenants retained defendants David Rozenholc and David Rozenholc and Associates (collectively, DR & A) to represent them in the DHCR proceeding and to negotiate with the building owner. In the retainer agreement, dated April 3, 2009, the tenants represented and warranted that they had “agreed to share equally in any settlement offer made by [the owner].” The retainer agreement also stated that each apartment represented a single share, but specifically stated, “it is further agreed that [decedent], who occupies combined apartment 16 AB[,] will receive two (2) shares and agrees to pay two (2) shares of any legal fees owed.”

In April 2009, DHCR issued an order permitting the building owner to evict the tenants. In February 2010, after unsuccessfully challenging the order, DR & A commenced an article 78 proceeding on behalf of the tenants, including decedent. However, decedent died on May 22, 2010, after the commencement of the article 78 proceeding but before any settlement could be reached with the building owner. On September 24, 2010, counsel for decedent’s estate wrote to DR & A, authorizing it to continue to represent the estate’s interest. According to the estate’s counsel, this authority came from plaintiff, who was the executor of decedent’s estate.

A dispute later apparently arose between plaintiff and Dilek as to Dilek’s rights with respect to the apartment. Plaintiff and Dilek each had counsel, both of whom remained in communication with DR & A. According to attorney Rozenholc, the building owner refused to offer any money to either Dilek or to the estate, taking the position that no one had any succession rights to the apartment under the Rent Stabilization Code.

The tenants and the building owner ultimately settled the article 78 proceeding for more than $33 million. At approximately the same time, plaintiff, Dilek, and the building owner, entered into an agreement, dated December 2, 2010 (the Dilek Buyout Agreement), in which the plaintiff recited that as executor of the estate, he had no claim to apartment 16AB after decedent died on May 22, 2010. Plaintiff also recited that Dilek had occupied apartment 16AB before decedent’s death “and succeeded to his tenancy.” The signatories to the Dilek Buyout Agreement agreed that in exchange for Dilek’s vacating apartment 16AB, the building owner would pay her a single share’s worth of the $33 million settlement — namely, $1,562,500 ($1,700,000 less $187,500 in counsel fees). The Dilek Buyout Agreement further stated that DR & A represented plaintiff and Dilek in connection with that agreement.”

“Turning now to the legal malpractice claim, we find that the motion court properly allowed the cause of action for legal malpractice to proceed. A viable claim for legal malpractice requires that a complaint allege ” the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and actual damages'” (O’Callaghan v Brunelle, 84 AD3d 581, 582 [1st Dept 2011], lv denied 18 NY3d 804 [2012], quoting Leder v Spiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008]). Here, the logic for the [*3]legal malpractice cause of action is similar to the logic in sustaining the breach of contract claim: whether decedent had rights under the Rent Stabilization Code is beside the point for purposes of the pleadings here. The relevant issue is not whether decedent had rights to the rent-stabilized apartment but whether decedent had rights to his two shares under the retainer agreement. Indeed, plaintiff does not argue that but for DR & A’s negligence, the estate would have prevailed in the article 78 proceeding; he argues that DR & A failed to tell him about the existence of the retainer agreement and to make sure that the estate received the settlement monies to which it was entitled under the settlement agreement.

The affidavits in support of the complaint assert, among other things, that had attorney Rozenholc informed plaintiff of the retainer agreement’s terms, plaintiff would not have agreed to any settlement that resulted in no money to the estate. The affidavits also state that “but for” attorney Rozenholc’s failure to properly advise the estate of its rights under the retainer, plaintiff “would not have consented to the settlement in its final form but rather would have insisted on payment of the two shares from the total proceeds.” These averments, in addition to the allegations of the complaint, are sufficient to state a claim for legal malpractice.”

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