Hudson Yards LLC v Segal  2019 NY Slip Op 30996(U)  April 5, 2019  Supreme Court, New York County Docket Number: 158606/2014 Judge: Andrea Masley describes the unraveling of the initial Hudson Yards real estate deal and the loss of $ 50M.  Even in NY these are big real estate numbers.  Legal Malpractice?  Supreme Court says it’s all too speculative.

“Hudson Yards LLC, an entity in which Singer served as managing member, purchased real estate in December 2005 and March 2006 (the premises). (NYSCEF Doc. No. 149at1f 15.) Hudson Yards LLC received a mortgage in the amount of $34,266,234 from Fortress Credit Corp (Fortress). (Id.) Singer guaranteed payment of the mortgage. (Id.; NYSCEF Doc. No. 153.) Hudson Yards LLC defaulted on  the payments and Fortress commenced a mortgage foreclosure action against Hudson Yards LLC and Singer, in his capacity as guarantor. (NYSCEF Doc. No. 149 at 16; NYSCEF Doc. No. 151.) On June 1, 2011, Fortress obtained a judgment of foreclosure and sale  (Id.) On September 7, 2011, Fortress purchased the premises at the sale with a winning bid of $2,500,000. (NYSCEF Doc. No. 162 at 6.) On December 4, 2013, this court (Kornreich, J) determined that the fair market value of the premises was $26,000,000, and subtracted that amount from the foreclosure judgment of
$47,779.544.36 pursuant to the Real Property Actions and Proceedings Law. (Id. at 32; NYSCEF Doc. No. 169 at 6.) The resulting deficiency judgment in the amount of $21,779,544.36 was issued against Singer, who subsequently commenced this action. (Id.; NYSCEF Doc. No. 169 at 6.) Here, Singer alleges that the defendants, his prior legal counsel in connection with the foreclosure action, committed malpractice resulting in the deficiency judgment now recast as damages inclusive of accruing interest.  (NYSCEF Doc. No. 149 at~ 37, 38.) Defendant DCS is an attorney and member of
defendant SSG. (NYSCEF Doc. No. 163 at~ 1.) Defendant OS is an attorney, the son of DCS, and an associate with SSG. (NYSCEF Doc. No. 210 at 15.) The gravamen of Singer’s malpractice claim is that defendants failed to exercise the ordinary, reasonable skill and knowledge commonly possessed by a member of the legal profession by failing to (1) memorialize an alleged agreement entered into by Singer and a Fortress employee, John Jergen, before the sale of the premises that would have prevented the deficiency judgment, (2) advise that this agreement, without memorialization, was
unenforceable, (3) advise Singer to persuade the other members of Hudson Yards LLC to seek bankruptcy protection for the LLC, (4) advise Singer to bid or persuade other individuals to bid during the sale of the premises, and (5) advise Singer to seek an adjournment of the sale. (NYSCEF Doc. No. 149 at 1f 36; NYSCEF Doc. No. 206 at 1, 2,8, 9.) ”

“Based on this record, even if DCS, SSG or DS negligently represented Singer in connection with the foreclosure action and deficiency judgment, Singer fails to establish any issues of fact as to proximate cause, mandating a dismissal. (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005].) “Contentions underlying a claim for legal malpractice which are ‘couched in terms of gross speculations on future events and point to the speculative nature of plaintiffs’ claim,” are insufficient as a matter of law to establish that defendants’ negligence, if any, was the proximate cause of  plaintiffs’ injuries.” (Phillips Smith Specialty Retail Group II, LP., v Parker Chapin Flattau & Klimp/, LLP, 265 AD2d 208, 210 [1st Dept 1999].) Here, Singer’s argument is if defendants advised him that
the agreement was unenforceable or memorialized the agreement, he would not have to pay the deficiency judgment because he would have (1) persuaded the other members of Hudson Yards LLC to seek bankruptcy protection, (2) sought and received an adjournment of the sale, and (3) advised Malekan, Schreiber and Westreich to purchase the premises. This argument is, quintessentially, couched in terms of gross speculation on future events because it assumes that the other members of Hudson Yards LLC would have agreed to seek bankruptcy protection or that bankruptcy protection would have relieved Singer of his obligations to pay the balance of a debt he personally guaranteed. It assumes that adjournment of the sale would have been granted and within that time, Fortress would have entered into an enforce.able agreement with Singer to forego the deficiency judgment. Lastly, it assumes that Malekan, Schreiber, Westreich, and Singer would have bid on the premises. (see generally Ladera Partners, LLC v. Goldberg, Scudieri & Lindenberg, P.C., 157 A.D.3d 467, 468 [1st Dept 2018] [“The legal malpractice cause of action is not properly supported by conclusory allegations and speculation that, but for defendants’ negligence, plaintiff would have been able to … outbid the other participants at the auction].) Simply stated, “the hypothetical course of events on which determination of damages would have to be based, involving the nature and timing of acts by plaintiff[] … other parties having interests … and the bankruptcy court, constitutes a chain of ‘gross speculation on future events.”‘ (Phillips-Smith Specialty Retail Group II, LP., v Parker Chapin Flattau & Klimp, LLP, 265 AD2d at 210.) “