The Appellate Division, First Department asks a question without an apparent answer:  Can an attorney be held liable of a voluntary assumption of a duty which is not reflected in a retainer agreement?  What happens if there is no actual retainer agreement?  For the moment there is no answer, but Genesis Merchant Partners, L.P. v Gilbride, Tusa, Last & Spellane, LLC
2018 NY Slip Op 00221  Decided on January 11, 2018 provides some illumination.

“At issue on this appeal is whether plaintiffs Genesis Merchant Partners, L.P. and Genesis Merchant Partners II, L.P. (collectively, Genesis) are entitled to summary judgment on liability in this legal malpractice action premised the failure of defendant Gilbride, Tusa, Last & Spellane, LLC, and defendant attorneys in that firm, Jonathan M. Wells, Kenneth M. Gammill, Jr., and Charles S. Tusa (collectively, Gilbride) to perfect security interests in life insurance policies. Because issues of fact exist, Supreme Court erred in granting Genesis summary judgment.”

“In May 2008, Genesis retained Gilbride to represent it in connection with the first of the loans, which Progressive repaid. Gilbride also represented Genesis in connection with three additional loans, issued on December 22, 2008, July 31, 2009, and February 3, 2011 (respectively, the second, third and fourth loans).

It is undisputed that Gilbride drafted the loan documents, including the Collateral Assignment of Contracts and the UCC-1 financing statements for each loan. Gilbride filed a UCC-1 financing statement on May 27, 2008, for the first loan, listing Progressive as the Debtor and Genesis as the Secured Party and broadly declaring a security interest in all of Progressive’s assets. The UCC-1 financing statements for the second, third and fourth loans, also filed by Gilbride, contained similar declarations. However, the UCC-1 financing statement for the fourth loan also listed, for the first time, the policy numbers of each insurer for seventeen life insurance policies pledged as additional collateral.”

“The crux of the factual dispute is whether Gilbride had a duty to perfect Genesis’s security interests in the collateral. Genesis alleges that Gilbride was retained to advise it on the loans, including drafting the loan documents and ensuring that Genesis’s security interests in the collateral were secured and perfected under applicable law. Gilbride maintains that it was retained only to draft the loan documents and that this limited representation was at the express instruction of Genesis.”

“Supreme Court granted Genesis summary judgment, rejecting Gilbride’s contention that perfecting the security interests was outside the scope of its representation. The court held — on a theory not raised by the parties in the briefing below — that even if Gilbride ultimately established that the scope of representation was limited at Genesis’s instructions, Gilbride “voluntarily assumed the obligation to perfect the security interests,” by filing the UCC-1 financing statements and billing Genesis for that work, and that Gilbride negligently discharged that duty. The court dismissed the counterclaims for unpaid attorneys’ fees, as Gilbride sought payment for the same work that constituted malpractice.”

“There is no engagement letter that defines the scope of Gilbride’s representation. Steven Sands, Senior Portfolio Manager of Genesis, states in an affidavit that “[Genesis] initially retained [Gilbride] to draft loan documents for a loan to [Progressive] that required collateral assignments of life insurance policies and other assets as collateral for the loan. This engagement included perfecting the collateral.”

“Turning next to whether Gilbride voluntarily assumed the duty to perfect the security [*3]interests, we note that the parties have not brought to our attention legal malpractice claims where an attorney voluntarily assumes a duty to act. The cases relied on by Supreme Court are distinguishable as they do not relate to a claim for legal malpractice arising from a dispute over the scope of the retainer (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 594 [2005] [assumption of duty by underwriter or issuer of securities]; Applewhite v AccuhealthInc., 21 NY3d 420, 430-431, 434 [2013] [assumption of special duty by a municipality in a negligence claim]; Palka v Servicemaster Mgt. Servs. Corp., 83 NY2d 579 [1994] [maintenance contractor for hospital assumed duty to noncontracting nurse for injuries she sustained when fan dismounted from wall]; Podesta v Assumable Homes Dev. II Corp., 137 AD3d 767 [2d Dept 2016] [assumption of duty by vendors of real property to record partial satisfaction of mortgage]; Nilazra, Inc. v Karakus, Inc., 136 AD3d 994 [2d Dept 2016] [third-party action for contribution and indemnification by attorney defendant against another attorney, who voluntarily assumed a duty to file a notification with the state in connection with the purchase of a business]).

Even assuming that the duty principles in the aforementioned cases can be applied to a legal malpractice claim, Gilbride’s filing of the UCC-1 financing statements and billing Genesis for that work does not establish that summary judgment is warranted on this record.”