This multi-million dollar fraud led to convictions and a claim against Katten Muchin. Nevertheless, too much time has gone by and Katten is off the hook. Wimbledon Financing Master Fund, Ltd. v Hallac 2019 NY Slip Op 33281(U) November 4, 2019 Supreme Court, New York County
Docket Number: 652769/2018 Judge: Saliann Scarpulla discusses two interesting issues: continuous representation and whether concealing malpractice is a separate claim for fraud.
“This action is one of several stemming from a massive fraud involving
Wimbledon’s investment advisor, Weston Capital Asset Management, LLC (“Weston”), and its related affiliates, which resulted in guilty pleas by defendant Albert Hallac (“Hallac”), Weston’s founder and president, and Keith Wellner (“Wellner”), Weston’s general counsel. In addition, Hallac’s and Wellner’s co-conspirators – David Bergstein (“Bergstein”), Gary Hirst (“Hirst”) and Jason Galanis (“Galanis”) – have been convicted or pleaded guilty for their roles in the schemes. ”
“The statute of limitations for claims of legal malpractice is three years. CPLR 214(6); see also Duane Morris LLP v. Astor Holdings Inc., 61 A.D.3d418, 420 (1st Dept. 2009). A legal malpractice cause of action accrues “when the malpractice is committed, not when the client learns of it.” Palmeri v. Willkie Farr & Gallagher LLP, 156 A.D.3d 564, 567 (1st Dept. 2017) (citation omitted); see also DeStaso v. Condon Resnick, LLP,
90 A.D.3d 809, 812 (2d Dept. 2011).
Notably, the New York legislature amended CPLR 214 (6) in 1996 to “make clear that ‘where the underlying complaint is one which essentially claims that there was failure to utilize reasonable care or where acts of omission or negligence are alleged or claimed, the statute of limitations shall be three years if the case comes within the purview of CPLR Section 214 ( 6), regardless of whether the theory is based in tort or in a breach of contract.”‘ In re R.M Kliment & Frances Hals band, Architects (McKinsey & Co., Inc.), 3 N.Y.3d 538, 541-542 (2004) (citation omitted). Further, CPLR 214 (6) “was enacted to prevent plaintiffs from circumventing the three-year statute of limitations for professional malpractice claims by characterizing a defendant’s failure to meet professional standards as something else.” Johnson v. Proskauer Rose LLP, 129 A.D.3d 59, 68 (1st Dept. 2015). To determine whether a claim is duplicative of a malpractice claim, a court must “discern the essence of each claim.” Id. ”
“Additionally, Wimbledon’s allegations that Katten engaged in continuing concealment by failing to disclose information about Gerova and Arius Libra to the board amount to allegations that Katten failed to disclose its own malpractice, and do not furnish support for fraud claims. See White of Lake George v. Bell, 251 A.D.2d 777, 778 (3d Dept. 1998) (finding that where “a fraud claim is asserted in connection with charges of professional malpractice, it is sustainable only to the extent that it is premised upon … something more egregious than mere ‘concealment or failure to disclose [one’s] own malpractice.”‘) (citations omitted). ”
“The continuous representation doctrine “tolls the Statute of Limitations only where the continuing representation pertains specifically to the matter in which the attorney committed the alleged malpractice.” Shumsky v. Eisenstein, 96 N.Y.2d 164, 168 (2001). The doctrine, however, “is limited ‘to the course of representation concerning a specific legal matter,’ and is not applicable to the client’s ‘continuing general relationship with a lawyer. .. involving only routine contact for miscellaneous legal representation … unrelated to the matter upon which the allegations of malpractice are predicated.”‘
Encalada v. McCarthy, Chachanover & Rosado, LLP, 160 A.D.3d 475, 476 (1st Dept. 2018) (citation omitted).
Wimbledon has not demonstrated that the continuous representation doctrine applies, nor can it, as the last action by Katten detailed in the complaint occurred in July 2012. See 860 Fifth Ave. Corp. v. Superstructures-Eng’rs & Architects, 15 A.D.3d 213, 213 (I st Dept. 2005), (noting that “plaintiff [has] the burden of demonstrating that the
continuous representation doctrine applied”). The fact that Katten was still retained as attorney for Wimbledon and Partners II until 2014 is insufficient to establish applicability of the continuous representation doctrine because such representation is not related to the transactions giving rise to the claims. See Zaref v. Berk & Michaels, 192 A.D.2d at 348
(1st Dept. 1993) (stating that a “pleading must assert more than simply an extended general relationship between the professional and client … in that the facts are required to demonstrate continued representation in the specific matter directly under dispute”) (internal citations omitted).
In additions, I find Wimbledon’s remaining arguments unavailing. “