Kaplan v Conway & Conway   September 4, 2018  Supreme Court, New York County  Docket Number: 158060/17  Judge: Frank P. Nervo runs into a familiar problem in legal malpractice settings.  Clients were the subject of an internal investigation at their brokerage and hired the attorneys.  Their claim is that the response to the investigation by the attorneys was negligent.  The familiar problem is that they cannot prove how the brokerage firm would have acted had the attorneys changed their strategy.

“The complaint alleges that plaintiffs, stock brokers then-employed by non party Morgan Stanley, retained defendants to assist them in connection with an investigation commenced by Morgan Stanley, allegedly at the behest of plaintiffs’ immediate superior, alleged to have been acting for unspecified retaliatory reasons. The complaint faults defendants for: (I) having advise plaintiffs to resign from their positions, before the investigation was formally concluded; (2) failing to press for formal closure of the investigation; (3) failing to advocate for an investigation of plaintiffs’ immediate superior; and (4) failing to deter Morgan Stanley from including what the complaint characterizes as false and defamatory statements on the Form U-5’s that Morgan Stanley filed with the Financial Industry Regulatory Authority (FINRA). The complaint alleges two causes of action. The first alleges that, had defendants acted competently, no investigation of plaintiffs would have been reported on their Form U-5’s, or, at least, “the U5’s would have been filed with more favorable language than the language which eventually ended up in the U-5’s.”

“This claim, that plaintiffs would not have suffered damages, had defendants secured “more favorable language,” is utterly vague, and the claim, that some other language, to which Morgan Stanley would have agreed, would have averted plaintiffs’ damages, is speculative, and, therefore, insufficient to support a claim of legal malpractice. See Brill & Meisel v Brown, 113 AD3d 435, 436 (1st Dept 2014). Moreover, Conway avers that he drafted alternative language (see Conway affirmation, exhibits 4-6), but that plaintiffs ignored it in the short time that was available for possible changes, because they, and their parents, were pressing him to prefer charges against Morgan Stanley’s attorney with the ethics committee of the New York State Bar Association. Conway also avers that he provided plaintiffs with language with which they could respond to Morgan Stanley’s allegations on the U-5’s, but that plaintiffs chose not to respond.

Plaintiffs’ contention, that defendants failed to take action against plaintiffs’ immediate superior, also fails. Even if the letter of engagement that plaintiffs signed, which refers to “represent[ation] … in a matter related to your employment interview and investigation by Morgan Stanley” (Conway affirmation, exhibit 8 at 1) could be read broadly enough to encompass action against plaintiff’s supervisor, the complaint does not suggest what such action might be. As between plaintiffs and their supervisor, all agents registered with FINRA, any legal action would have had to be an arbitration proceeding before a FINRA arbitrator. The letter of engagement explicitly “does not include any work in the courts, or FINRA arbitration” (id. At 2), and in any event, plaintiffs do not dispute that they discharged defendants before any proceeding could have been brought. “