Owner A performs work in a NYC building.  Owner B is damaged.  Owner B sues Owner A as well as the building.  Lots of attorney fees are generated.  Owner B then sues the attorneys for the Board for legal malpractice.  Standing?  No.  Derivative claim on behalf of the Board.  No.  Second chance? Yes.

“This action arises from certain work performed pursuant to a certain Alteration Agreement (the
Alteration Agreement), dated January 2004, by and between Sandra Nunnerly and the Board of
Directors for 36 East 69th Corp. (the Board). ”

“When Ms. Nunnerley performed the work contemplated by the Alteration Agreement, damage
was incurred by Virginia Witbeck. Ms. Witbeck brought a lawsuit (the Underlying Lawsuit)
captioned Virginia Witbeck v. Sandra Nunnerley et al., Index No. 115086/2005 as against Ms.
Nunnerley, 36 East 39th Corp (the Co-op), Alexander Wolfe and Company, Inc. and TDC
Construction Inc (id., if 17). The Underlying Lawsuit was settled for $15,000 and the attorneys’
fees incurred were allegedly in excess of $150,000 (id., if 25). Significantly, at no time has the
Co-op made a demand that Ms. Nunnerly reimburse the Board for its $150,000 legal bill. Nor
has Ms. Jarmuth requested that the Board make any such demand. Instead, Ms. Jarmuth
commenced this action individually and derivatively on behalf of the Co-op for legal
malpractice, breach of contract and tort for breach of ethics concerning the Defendants’
representation of the Co-op in the Underlying Lawsuit. ”

“To the extent the claim is asserted by Ms. Jarmuth individually against the Defendants, Ms.
Jarmuth has no standing as an unrelated third party (see Green v Fischbein, Olivieri, Rozenholc
& Badillo, 135 AD2d 415, 418 [1st Dept 1987] [holding that “[u]nder New York law an attorney
generally cannot be held liable to third parties for actions taken in furtherance of his role as
counsel unless it is shown that he ‘did something either tortious in character or beyond the scope
of his honorable employment.”‘]). To the extent that the claim against the Defendants is made
derivatively on behalf of the Co-op, Ms. Jarmuth has not complied with BCL § 626( c) which
requires that shareholder derivative actions “set forth with particularity the efforts of the plaintiff
to secure the initiation of such action by the board or the reasons for not making such effort.”
While Ms. Jarmuth has pled that she serviced a notice on members of the Board regarding “legal
malpractice by the Wagner Berkow attorneys with regard to advice given and the action taken as
it pertained to a certain litigation brought by Virginia Witbeck against Sandra Nunnerley 36 East
69111 Owners Corp. and TD Construction Inc.” (NYSCEF Doc. No 1, if 3), there is no evidence
that the Board made a demand for reimbursement from Ms. Nunnerley or that Ms. Jarmuth
demanded that the Board should do so, accordingly, Ms. Jarmuth’s first cause of action for legal
malpractice is dismissed without prejudice. For the avoidance of doubt, should Ms. armuth demand that the Board seek reimbursement from Ms. Nunnerley, and should the Board refuse to
seek reimbursement from Ms. Nunnerley, Ms. Jarmuth is not precluded from seeking alternative
derivative relief.”