There are four elements of legal malpractice. “Standing” is not really one of them, but continually lurks in the background. Your opponent’s lawyer departs from good practice? Too bad. You lack privity and you lack standing. Your company retains the lawyer and you, individually want to sue? Too bad. You lack privity and you lack standing.
Kaminski v Sirera 2019 NY Slip Op 01067 Decided on February 13, 2019 Appellate Division, Second Department is a prime example.
“In or about 2009 or 2010, the plaintiff acquired membership units in nonparty Melange Med Spa, LLC (hereinafter the LLC), from a prior member of the LLC. In 2016, the plaintiff commenced this action individually and derivatively on behalf of the LLC against, among others, the defendant Christina Sirera, a managing member of the LLC, seeking, inter alia, declaratory and injunctive relief, an accounting, and damages for waste and breach of fiduciary duty. The plaintiff asserted causes of action against the defendants Allyson Avila and Wilson, Elser, Moskowitz, Edelman & Dicker, LLP (hereinafter Wilson Elser), attorneys for the LLC, alleging legal malpractice, breach of contract, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.”
“”[M]embers of a limited liability company (LLC) may bring derivative suits on the LLC’s behalf” (Tzolis v Wolff, 10 NY3d 100, 102; see Jacobs v Cartalemi, 156 AD3d 605; Stack v Midwood Chayim Aruchim Dialysis Assoc., Inc., 54 AD3d 935; East Quogue Jet, LLC v East Quogue Members, LLC, 50 AD3d 1089). A “[m]ember” is a person who has been admitted as a member of a limited liability company in accordance with the terms and provisions of the Limited Liability Company Law and the limited liability company’s operating agreement, and who has a membership interest in the limited liability company with the rights, obligations, preferences, and limitations specified under the Limited Liability Company Law and the operating agreement (Limited Liability Company Law § 102[q]). A “[m]embership interest” means “a member’s aggregate rights in a limited liability company, including, without limitation: (i) the member’s right to a share of the profits and losses of the limited liability company; (ii) the member’s right to receive distributions from the limited liability company; and (iii) the member’s right to vote and participate in the management of the limited liability company” (Limited Liability Company Law § 102[r]).
Here, the plaintiff does not dispute that she failed to obtain the consent of the nonselling members to be admitted as a member of the LLC when she acquired her membership interest. Paragraph 8 of the LLC’s operating agreement provides that “[n]ew members may be admitted only upon the unanimous consent of the Members and upon compliance with the provisions of this agreement,” and paragraph 32(e) of the operating agreement provides that “[a] non-member purchaser of a member’s interest cannot exercise any rights of a Member unless, by unanimous vote, the non-selling Members consent to him becoming a Member” (see Limited Liability Company Law § 602). Therefore, contrary to the Supreme Court’s determination, the plaintiff, as a nonmember purchaser who had not been admitted as a member of the LLC, lacks standing to pursue derivative causes of action on behalf of the LLC (see Tzolis v Wolff, 10 NY3d at 102; MFB Realty LLC v Eichner, 161 AD3d 661; Cordts-Auth v Crunk, LLC, 815 F Supp 2d 778 [SD NY], affd 479 Fed Appx 375 [2d Cir]).”