When the law firm’s financial officer steals $ 4M+ from the escrow accounts, there are bound to be some unhappy people.  It is even worse when the law firm’s financial officer is the brother of the named partner.  In Galasso, Langione & Botter, LLP v Galasso,  2019 NY Slip Op 07769  Decided on October 30, 2019 the Appellate Division, Second Department upheld summary judgment decisions in favor of the defrauded party whose funds were stolen.

“Anthony Galasso (hereinafter Anthony) was the bookkeeper and office manager for the law firm Galasso, Langione & Botter, LLP (hereinafter the Firm), where his brother, Peter Galasso (hereinafter Peter), was a named partner. In 2002, the Firm began banking with Signature Bank (hereinafter Signature). According to Peter, the Firm intended to open two operating accounts and an IOLA account at Signature. Applications for those accounts were completed by Peter and his law partner James Langione and given to Anthony to submit to the bank. Instead, however, Anthony submitted forged account applications for three operating accounts, on which Anthony was listed as a signatory, and as well as an IOLA account. The applications requested that the Firm have access to Internet banking. A user-ID and password were mailed to the Firm’s street address and acquired by Anthony, who opened the mailing.

In 2004, Peter represented Stephen Baron in a matrimonial action commenced by Wendy Baron. The Barons entered into an escrow agreement with Peter, as the designated escrow agent, in which Peter agreed to hold proceeds in the sum of $4,840,862.34, derived from a sale of commercial property owned by Stephen Baron, pending further order of the matrimonial court. Anthony, in his capacity as office manager, deposited the funds at Signature into an escrow account entitled “Galasso Langione LLP as Escrow Agents for Stephen Baron” (hereinafter the Baron escrow account). Peter and Langione were the only authorized signatories on the account application completed by the Firm. However, Anthony altered the escrow account application to include himself as a signatory and to permit electronic funds transfers. Signature accepted the application.

Between June 23, 2004, and January 17, 2007, Anthony transferred approximately $4,501,571 from the Baron escrow account into other Firm accounts maintained at Signature through the use of Internet transfers. The funds transferred from the Baron escrow account were then disbursed to Peter and the Firm’s employees, without their knowledge, in order to replace funds that Anthony had previously removed from other accounts. Additionally, approximately $360,000 in funds transferred from the Baron escrow account was used to finance the purchase of the Firm’s office condominium by GC Lawcondo, LLC (hereinafter GC Lawcondo). To conceal this conduct, Anthony arranged for the Firm’s account statements, including for the Baron escrow account, to be sent to a post office box. He then fabricated false account statements for review by the Firm.”

“The Supreme Court should not have granted that branch of Signature’s motion which was for summary judgment dismissing the fifth cause of action asserted against it in Action No. 1, alleging negligent conduct with respect to the Baron escrow account. In light of the expert affidavits submitted by both Signature and the plaintiff in Action No. 1, there are triable issues of fact as to whether Signature was negligent in knowingly permitting Anthony—a nonattorney—to be a signatory on the Baron escrow account, and as to whether any such negligence was a proximate [*3]cause of the loss of funds deposited in the Baron escrow account (see generally Stucchio v Bikvan, 155 AD3d 666, 667). For the same reasons, we likewise agree with the court’s determination to deny that branch of the motion of the plaintiff in Action No. 1 which was for summary judgment on the fifth cause of action asserted against Signature (see generally id. at 667).”

“We agree with the Supreme Court’s determination to deny that branch of the motion of the moving defendants in Action No. 4 which was for summary judgment dismissing the second cause of action insofar as asserted against the law firm defendants, and to grant that branch of the Barons’ motion which was for summary judgment on that cause of action insofar as asserted against the law firm defendants. The Barons established their prima facie entitlement to judgment as a matter of law against the law firm defendants by adducing evidence that the law firm defendants were enriched at the Barons’ expense by Anthony’s transfer of funds from the Baron escrow account into the Firm’s accounts, and that it is against equity and good conscience to permit the law firm defendants to retain the funds (see Mobarak v Mowad, 117 AD3d 998, 1001). In opposition, the moving defendants failed to raise a triable issue of fact. Further, we agree with the court’s determination to deny that branch of the moving defendants’ motion which was for summary judgment dismissing this cause of action insofar as asserted against Botter because they failed to adduce evidence demonstrating, prima facie, that he was not enriched at the Barons’ expense.”

“We agree with the Supreme Court’s determination to deny that branch of the motion of the moving defendants in Action No. 4 which was for summary judgment dismissing the tenth cause of action, alleging breach of fiduciary duty, insofar as asserted against Peter. Contrary to the moving defendants’ contention, they failed to demonstrate, prima facie, that Peter’s alleged breach of his fiduciary duty to safeguard the funds in the Baron escrow account was not a proximate cause of the Barons’ loss of the funds (see Matter of Galasso, 19 NY3d at 694-695). In that respect, an intervening act, such as Anthony’s theft of the funds, “may not serve as a superseding cause, and [*4]relieve an actor of responsibility, where the risk of the intervening act occurring is the very same risk which renders the actor negligent” (Derdiarian v Felix Contr. Corp., 51 NY2d 308, 316; see Santaiti v Town of Ramapo, 162 AD3d 921, 927).

We agree with the Supreme Court’s determination to grant that branch of the Barons’ motion which was for summary judgment on the twelfth cause of action in Action No. 4, seeking to impose vicarious liability for Anthony’s misconduct, insofar as asserted against the law firm defendants and Peter. Under the doctrine of respondeat superior, an employer may be held vicariously liable for the torts committed by an employee who is acting within the scope of employment (see Riviello v Waldron, 47 NY2d 297, 302). “While such vicarious liability does not arise from acts that are committed for the employee’s personal motives unrelated to the furtherance of the employer’s business, those acts which the employer could reasonably have foreseen are within the scope of the employment and thus give rise to liability under the doctrine of respondeat superior, even where those acts constitute an intentional tort or a crime” (Holmes v Gary Goldberg & Co., Inc., 40 AD3d 1033, 1034 [citations omitted]; see Riviello v Waldron, 47 NY2d at 302-305). “[F]or an employee to be regarded as acting within the scope of his [or her] employment, the employer need not have foreseen the precise act or the exact manner of the injury as long as the general type of conduct may have been reasonably expected” (Riviello v Waldron, 47 NY2d at 304).

Here, contrary to the moving defendants’ contention, the Barons established, prima facie, that Anthony was acting within the scope of his employment by demonstrating that Anthony’s theft of the Barons’ funds was foreseeable (see Holmes v Gary Goldberg & Co., Inc., 40 AD3d at 1035; Hatton v Quad Realty Corp., 100 AD2d 609, 610). In opposition, the moving defendants failed to raise a triable issue of fact. For the same reasons, we agree with the Supreme Court’s determination to deny that branch of the moving defendants’ motion which was for summary judgment dismissing the twelfth cause of action insofar as asserted against the law firm defendants and Peter. We also agree with the court’s determination to deny that branch of the moving defendants’ motion which was for summary judgment dismissing this cause of action insofar as asserted against Botter, because they failed to adduce evidence establishing, prima facie, that he did not directly supervise Anthony (see Partnership Law § 26[c]).”