Tatintsian v Pryor Cashman LLP  2018 NY Slip Op 33152(U) December 10, 2018 Supreme Court, New York County Docket Number: 152022/2017 is extremely complicated, but Judge David Benjamin Cohen unravels the facts and teases out a legal malpractice analysis.

“In this action, plaintiff Gary Tatintsian (Plaintiff) alleges that defendants Pryor Cashman LLP (Pryor Cashman), Eric Hellige (Hellige) and Eudora Partners LLC (Eudora, along with Pryor Cashman and Hellige, collectively, Defendants) participated in a scam perpetrated by Mikhail Vorotyntsev (MV) to “fleece” investors, including Plaintiff. The complaint asserts four causes of action: fraudulent inducement, aiding and abetting fraud, legal malpractice and unjust enrichment.”

“Pryor Cashman is a New York law firm, Hellige is a senior partner of Prior Cashman, and Eudora is a company in which Hellige is its member and manager (complaint, 7-9). In the spring of 2016, Plaintiff sought to invest in ShopLink Inc. (ShopLink), a startup software company in which MV is its chief executive officer and sole board member (id., 12-13). Plaintiff was led to believe that shopLink is a legitimate operating company, but it turned out to be a vehicle through which MV and his wife defrauded investors in order to fund their lavish life style (id.,  14-15). ”

“Prior to 2016, Pryor Cashman and Hellige had represented ShopLink and MV in a myriad of matters, including, among others, a $1.83 million convertible notes offering by ShopLink, and ShopLink and MV accrued substantial legal fees, owed and unpaid, over the years (id., 19). In
addition to the unpaid fees, in June 2012, Hellige caused Eudora to make a $20,000 loan to MV,
and in return for this personal loan, MV granted Eudora a 5% equity interest in ShopLink and
any corporate entities owned by MV, including Counter Capital LLC (Counter Capital), which
owned all of the 15 million initially issued and outstanding shares of ShopLink (id.,  20). ”

“In April 2016, Plaintiff executed the Subscription Agreement, pursuant to which he purchased 340,000 shares of ShopLink’s common stock for $1,098,200, and concurrently therewith, he signed ShopLink’s Stockholders’ Agreement and other documents (collectively, Subscription Documents), including a letter agreement which granted Plaintiff an option to purchase additional ShopLink stock (id., 24). The Subscription Documents were drafted by Hellige and Pryor Cashman (id., ~ 25). In August 2016, Plaintiff exercised the option and bought an additional 100,000 shares of ShopLink stock for $250,000, bringing his total investment to $1,348,200 (id.,  26). When Plaintiff invested in ShopLink, Defendants saw the transaction as leverage over MV and as cash flow which would enable them to obtain payment of their unpaid legal fees and loans, while Hellige could also enhance his equity interest in ShopLink and Counter Capital (id., 21). Defendants even held Plaintiffs investment transaction hostage, warning MV a few days before the closing that unless a payment agreement was reached, the investment funds would be returned to Plaintiff (id., 22). In response to the threat, MV and Defendants ultimately agreed that, upon closing of the transaction, Shop Link would pay Pryor Cashman $15,000 out of the investment proceeds; MV would repay, from the same proceeds, his $30,000 personal loan owed to Hellige in return for a release by Eudora; and MV would sign a $33,000 promissory note payable to Pryor Cashman (id., 23). The existence of this deal, in which Defendants were beneficiaries, was not disclosed to Plaintiff prior to his investment (id.) ”

“In order to plead a legal malpractice claim, the complaint must allege “the negligence of the attorney” and that the negligence is the “proximate cause of the loss sustained” by plaintiff
(O’Callaghan v Brunelle, 84 AD3d 581, 582 [1st Dept 2011][internal citations and quotation marks omitted]). Further, a legal malpractice claim cannot be stated if there is no attorney-client relationship between the parties (Waggoner v Caruso, 68 AD3d 1, 3 [1st Dept 2009], affd 14
NY3d 874 [2010]).

Plaintiff acknowledges that he is not a client of and is not in privity with Defendants, but asserts that he may recover for losses arising from Defendants’ legal malpractice if the complaint alleges “fraud, collusion, malicious acts or other special circumstances” (Plaintiffs opposition at 25, citing, inter alia, Estate of Schneider v Finmann, 15 NY3d 306, 308 [2010]). In such regard, the complaint alleges that Defendants “engaged in fraud, collusion, or malicious or tortious acts against Plaintiff,” and as a result, “Defendants are liable to Plaintiff for legal malpractice” (Complaint,  61-62).
However, Plaintiffs allegation of “collusion” in the complaint is conclusory because he fails to identify any collusive acts between Defendants and MV, and has neither alleged nor  specifically identified any “malicious acts” on the part of Defendants. In his opposition to the motion, Plaintiff merely alleges that because “Defendants committed fraud against him to benefit themselves … and implicitly … Defendants secretly colluded with [MV] to misappropriate Plaintiffs investment for Defendants’ and [MV’s] own enrichment” (Defendants’ opposition at 26-27), The foregoing allegations sound more like an unjust enrichment claim rather than a legal malpractice claim, because the conclusory allegation of “secret collusion” is not supported by any fact. Also, his fraud against Defendant has been dismissed, for the reasons stated above.

Accordingly, the legal malpractice claim should be dismissed (Benzemann v Citibank,
NA., 149 AD3d 586, 586 [1st Dept 2017] [absence of privity, along with conclusory allegation of
fraud and collusion, required dismissal of the legal malpractice claim]). “