A disciplinary violation, without more, cannot support a legal malpractice case. The lesson of Arga Capital, Inc. v Kreiner & Kreiner LLC February 23, 2018 Supreme Court, New York County
Docket Number: 651649/2014 Judge: Saliann Scarpulla is that a conflict of interest coupled with demonstrable negligence can definitely support a legal malpractice claim.
“Arga is a Delaware corporation authorized to do business in New York and Alexander Gildengers (“Gildengers”) is its founder and sole shareholder. In April 2011, Arga hired K&K to represent it in connection with the creation of OMG, an online mortgage broker and lender. Arga and K&K entered into a Retainer Agreement on April 15, 2011. After assisting Arga with setting up OMG, K&K continued to represent Arga and OMG on a variety of matters until July 11, 2013. According to Gildengers, in early 2013 OMG hoped to increase its growth substantially through a capital raise, merger, or other business combination. Gildengers avers that he discussed different business. options with Peter Kreiner (“P. Kreiner”) and received legal advice about possible transactions, including the transaction with Equity Loans LLC (“Equity”) that is the subject of this lawsuit.
In late June or early July 2013, Philip Mancuso (“Mancuso”), OMG’s Chief Executive Officer, commenced negotiations with Eddie Perez (“Perez”) of Equity for , “Equity to acquire the employees and operations of OMG (the ‘Transaction’).” Plaintiffs sought to wind down OMG’s call center business and reconstitute it within Equity. Pursuant to the Transaction, Equity was to assume OMG’s office space lease and hire certain of OMG’s employees.
In a conference call on July 3, 2013, Gildengers, Mancuso and Perez discussed the idea of moving OMG employees to Equity before the parties signed and delivered a contract memorializing the proposed Transaction. During the call, OMG and Equity reached a general, verbal agreement concerning the Transaction.
It is undisputed that as of July 3, 2013, K&K represented both OMG and Equity and helped to create the structure for the Transaction. Plaintiffs allege that they were aware of the concurrent representation but that K&K neither advised OMG that this would create a co.nflict of interest nor requested a conflict waiver.”
“K&K correctly states that violation of a disciplinary rule, without more, is not sufficient to support a legal malpractice claim. Fletcher v. Boies, Schiller & Flexner LLP, 140 A.D.3d 587, 587 (1st Dept. 2016). However, Plaintiffs here allege more than just a violation of New York Rule of Professional Conduct I. 7. Plaintiffs allege that because of the conflict, K&K negligently drafted the NDA and failed to give advice that an ordinary lawyer would give in the same circumstances, leading to OMG’s damages. ”
“The conflicting expert opinions of Hyland and Holdman raise issues of fact as to whether: 1) there was informed consent to the joint representation; 2) K&K met the applicable stand<i;rd of care and 3) the causal link between K&K’s work on the NDA and OMG’s damages. Accordingly, I deny K&K’s motion for summary judgment as to the legal malpractice claim. See Silva v. Worby, Groner, Edelman, LLP, 54 A.D.3d 634, 634 (1st Dept. 2008) (finding that lower court erred in granting summary judgment in legal malpractice action because the “conflicting deposition testimony and affidavits submitted by the parties present a material issue of fact. .. “)”