Legal malpractice is always an exercise in hindsight, since it is always a comparison of the actual outcome of attorney representation v. the hypothetical better outcome had the attorney not departed from good practice.  Nonetheless, Lisi v Lowenstein Sandler LLP  2017 NY Slip Op 32411(U)  November 16, 2017  Supreme Court, New York County  Docket Number: 160298/2016
Judge: Shirley Werner Kornreich is a good example of how the court treats a “hindsight” case.

“In May 2012, Lisi hired LS, a law firm with its principal office in New York City, to
negotiate the terms of his employment as a Senior Vice President with Avadel Pharmaceuticals
f/k/a as Flamel Technologies SA and Eclat Pharmaceuticals, LLC (Flamel). ” “On April 4, 2015, Lisi hired LS to negotiate the terms of his separation from Flamel. Lisi’s separation agreement, which was executed on April 7, 2015, accelerated the vesting of the 495,000 stock options granted to Lisi under his employment agreement and Flamel’s stock option plans, and extended the period in which Lisi could exercise his options.”

“Lisi’s malpractice claim nevertheless fails because his allegations are insufficient to show
that but for LS’s failure to give proper tax advice, his trading losses would have been avoided.
See Leder v Spiegel, 31 AD3d 266, 268 (I st Dept 2006) (“The failure to demonstrate proximate
cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent.”). Lisi does not (and cannot) allege that LS’s failure to advise him had any effect on
the nature of his tax liability-the exercise of his options was always going to be subject to
ordinary income tax. He does not allege that he would not have executed the separation
agreement had he been properly advised. Rather, Lisi’s theory of loss causation is that, absent
proper tax advice, he was unaware of the true amount of the tax liability incurred by the exercise
of his options, and was therefore unable to strategically manage his investment post-exercise in a
manner that minimized market risk and allowed him to realize “the optimal market value” of his
shares. AC iii! 68-71. He acknowledges that the exercise of his options exposed him to “market
fluctuations in the stock price of Flame!,” but asserts that, with proper advice, he would not have
been left vulnerable to such fluctuations because he “would have locked in his sales price for all
options exercised to allow and account for the fixed exercise price and tax basis,” and “would
have capitalized on the sale of the shares at a fixed and higher price.” iii! 74, 82-83.
Though vague, Lisi appears to allege that, properly advised, he would have: shorted more
Flame! stock, thereby eliminating market risk for a corresponding number of options by locking
in the price for those shares; only exercised options that he could hedge with a corresponding
short sale; and exercised his options and/or sold his shares at different, more opportune times.
Such speculative allegations of what Lisi might have done differently, made with the benefit of
hindsight, do not suffice to establish the causal link necessary to state a prima facia claim of legal
malpractice. See Heritage Partners, LLC v Stroock & Stroock & Lavan LLP, 133 AD3d 428,
429 (1st Dept 2015) (affirming dismissal of malpractice claim based on “allegations ‘couched in
terms of gross speculations on future events”‘), quoting Sherwood Group, Inc. v Dornbush,
Mensch, Mandelstam & Silverman, 191 AD2d 292, 294 (1st Dept 1993 ); Leff v Fulbright &
Jaworski, LLP, 78 AD3d 531, 533 (I st Dept 2010) (“[P]laintiff cannot recover damages that are  grossly speculative.”); Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423, 424-25
(1st Dept 2007) (“mere speculation” insufficient to demonstrate proximate cause).
Lisi’s suggestion that he would have eliminated market risk by engaging in more short
sales is belied by his allegation that, when he exercised his shares, he had already shorted Flame)
stock “to his utmost capacity.” AC~ 56; Dkt. 50 (Lisi Aff.) ~ 11. He alleges no facts to suggest
that additional short sales were possible, but nevertheless speculates that he might have pursued
such a strategy. Equally speculative is Lisi’s suggestion that he might not have exercised option
shares that he could not hedge with a corresponding short sale. Such a course of action makes
sense only with hindsight knowledge that Flamel’s stock price was about to collapse. By not
exercising, Lisi would have potentially allowed more than half of his options to expire at a point
in time when the value of the associated shares well exceeded his tax liabilities. The
suggestion that Lisi would have left millions of dollars on the table to avoid exposure to market
risk is simply not credible. Lisi knowingly assumed the very market risk that he now, with the
benefit of hindsight, claims that he would have sought to avoid when he exercised all his options,
and not just those that were hedged by a corresponding short sale. “

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Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

 

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.