O’Neil’s, a defunct restaurant, wanted to move on after the founder’s death.  They hired a law firm which had clients that wanted to take over the space.  The law firm represented both sides, and as one might expect, one side was unhappy with the outcome.  The long-running successful restaurant still owed $ 1.5 million in construction loans and rent.  The deal went sour, and the attorneys were sued, mostly unsuccessfully.

O’Neal v Muchnick Golieb & Golieb, P.C.   2016 NY Slip Op 30268(U)   February 11, 2016   Supreme Court,   New York County Docket Number: 154898/2013 Judge: Shlomo S. Hagler  “Plaintiff Cynthia O’Neal (“plaintiff’ or “O’Neal”), is the widow of Patrick O’Neal, who cofounded the O’Neals’ frn:nily of restaurants in 1964. They first operated The Ginger Man Restaurant at 51 West 64th Street, New York, New York, and afterwards, O’Neals (the “Restaurant”) at49 West 64th Street, New York, New York (the “Premises”), until it’s closing on June 28, 2010. Plaintiff James Enzel (“Enzel”) and Christine O’Neal (“Christine”) were the sole shareholders of The Good Service Company, Inc. (“Good Service” or the “Corporation”), which owned the Restaurant. Plaintiff was at all times a passive shareholder and took no active managerial role in either the Restaurant or the Corporation. Beginning at or about’ February 2008, Enzel, as president of Good Service, retained the Muchnick Firm to provide legal representation to the Corporation in various matters. Defendants represented Good Service in connection with trademark licensor, modifications to financing instruments, in negotiations with New York City for operation of an ~utdoor cafes, and in defending the Corporation in litigation in Supreme Court, New York County. Defendants were also retained to represent Good Service and its shareholders in connection with the closing of the Restaurant and the workoutofthe related debts, which consisted mainly of the outstanding lease payments and a restaurant construction loan. BR Guest Services (“BR”), whose principal Stephen P. Hanson (“Hanson”) was also a client of the Muchnick Firm, agreed to take over the lease of the Premises. Defendants drafted a number of documents in connection with the transfer of the lease from the Good Service to BR. First, they drafted an “Agreement to Release Collateral” which was executed on May 7, 2010, by TD Bank and allowed BR to obtain the space, fixtures and equipment at the Restaurant for a payment of $200,000.00, which reduced Good Service’s outstanding de.bt to TD Bank to $899,697.82. The debt emanated from a 2006 construction and operating loan from Commerce Bank, and Plaintiff was a guarantor of the loan. ”

“On July 30, 2010, BT64th Street, LLC (“BT 64”), the owner of the Premises, commenced an action against plaintiffs and Enzel to collect $878,149.42 in unpaid rent. O’Neal and Enzel retained the Muchnick Firm to defend them in the action, who in turn, arranged for the law firm of Borah, Goldstein, Altschuler, Nahins, Goidel, P.C. (“Borah Goldstein”) to represent them in this matter. Borah Goldstein filed a Notice of Appearance but did not iterpose an answer. On January 19, 2011, BT 64 filed a motion for summary judgment, which was not opposed. O’Neal claims that she was never served with the complaint, and therefore had a “good and meritorious defense” to the action, which was not allegedly raised by defendants. Instead, BT64 obtained a $995,066.03 judgment against plaintiffs. At a post judgment hearing on April 27,2011, the Muchnick Firm once again appeared on behalf of plaintiffs and entered into a so-ordered stipulation that day (“Stipulation”), which stated in part that “[ d]fendants shall not … sell, transfer or otherwise dispose of any of their assets until the judgment in this action is satisfied.” Amended Complaint iii! 67-68, attached as Exhibit “A” to the Motion. ”

“Plaintiff alleges that defendants committed malpractice by: (I) representing both sides during th~ assumption of lease; (2) by not opposing collection actions brought by Landlord BT64th Street and (3) Lender TD Bank; and (4) by advising her to transfer her assets out of her possession to avoid the enforcement of a judgment. Plaintiff alleges that defendants represented both sides of the assumption oflease and favored the other side and did not obtain the best possible price for the assumption oflease. She claims that the fair price for the assumption of lease should have included a discharge of the Restaurant’s outstanding rent and construction loan. She then suffered damages because she was a personal guarantor of the lease and the loan. Plaintiffs valuation of the lease is based on pure speculation and not supported by any facts. Furthermore, there is nothing in the record that shows any negligence by defendants during the assumption of lease process. Even if a conflict of interest existed, “[a] conflict of interest, even [in] violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action.” Schafrann v NV. Famka, Inc., 14 AD3d 363, 364 (!st Dept 2005). Even assuming arguendo that there was a deviation from the accepted standards, plaintiff must establish that the malpractice was the proximate cause of her damages. Her claim that a defunct restaurant, with assets consisting of its fixtures and lease, was worth enough to discharge debts amounting to approximately $1.8 million dollars is incredible and based upon mere speculation and unsupported by an appraisal or any other facts alleged in the four comers of the complaint. Even accepting everything in the complaint and opposition to the motion as true as required in a motion pursuant to CPLR § 3211, the complaint does not state a cause of action of legal malpractice in conjunction with defendants’ actions during the assumption oflease representation. Plaintiff further alleges that defendants committed malpractice in the collection action brought by the landlord to collect unpaid rent of the Corporation under the lease which she personally guaranteed. The landlord was granted summary judgment without any opposition. In addition, plaintiff claims that after the judgment, defendant advised her to transfer her assets out of her possession to avoid collection. Defendants argue that they neither represented plaintiff nor Good Service in the landlord action until after the judgment was entered. Defendants also deny ever having advised plaintiff to avoid the judgment by transferring her assets. At this juncture, the record is incomplete and further discovery. is needed to determine who represented plaintiff and Good Service during this proceeding. Plaintiff also claims that she was damaged as a result of defendants failure to oppose the summary judgment motion in the collection action brought by TD Bank to collect on a loan to Good Service which was guaranteed by plaintiff. However, plaintiff substituted her own attorney in place of defendants. Her new attorney was provided an opportunity to oppose the motion. Despite opposition from.plaintiff’s counsel, the motion was nevertheless granted after considering the merit of plaintiff’s position. Inasmuch as the motion was granted after plaintiff substituted defendants with new counsel, who actually submitted opposition to the motion, the fact the defendants allegedly did not initially oppose the motion cannot be the proximate cause for plaintiff’s damages, if any. “