In the distant past, there were no litigation funding companies.  Slowly, they came into existence and even more slowly started to displace the strongly held belief that personal injury lawyers were required to bank the litigation costs of their clients.  As some of the largest PI firms in NYS started to engage in litigation lending/funding they became embroiled in issues of who bears the cost of debt service.

These questions can devolve into legal malpractice cases.   Gorunkati v Baker Sanders, LLC  2020 NY Slip Op 00406 Decided on January 22, 2020
Appellate Division, Second Department is today’s example.l

“The plaintiff commenced this action against, among others, the defendant Baker Sanders, LLC (hereinafter Baker Sanders), alleging that he retained Baker Sanders to engage in litigation to collect no-fault insurance proceeds he was owed on behalf of Richmond Medical Diagnostic, P.C. (hereinafter Richmond), and instructed Baker Sanders to remit those proceeds to him. The plaintiff alleged that Baker Sanders commenced various actions to collect the outstanding no-fault insurance proceeds and, after collecting those proceeds, remitted them to three different companies that had agreed to advance Richmond money in anticipation of reimbursement from the no-fault proceeds. The plaintiff asserted causes of action against Baker Sanders, inter alia, alleging legal malpractice and breach of contract, and for an accounting. Baker Sanders moved, among other things, pursuant to CPLR 3211(a)(1) and (5) to dismiss the complaint insofar as asserted against it. Alternatively, Baker Sanders moved pursuant to CPLR 3211(a)(7), inter alia, to dismiss the breach of contract cause of action as duplicative of the legal malpractice cause of action. The Supreme Court granted that branch of the motion which was to dismiss the legal malpractice cause of action and denied that branch of the motion which was to dismiss the cause of action for an accounting. [*2]The plaintiff appeals from the portion of the order which granted dismissal of the legal malpractice cause of action, and Baker Sanders cross-appeals from the portion of the order which denied dismissal of the accounting cause of action.

While we agree with the Supreme Court’s determination denying that branch of the motion which was to dismiss the cause of action for an accounting, we disagree with its determination granting that branch of the motion which was to dismiss the legal malpractice cause of action.”

“Similarly, the legal malpractice and accounting causes of action were not subject to dismissal pursuant to CPLR 3211(a)(5) on the basis of release. Specifically, Baker Sanders contends that within several documents entitled “No-Fault Payment Directive & Authorized Agent Appointment” (hereinafter Agent Appointment) and “Remittance Directive & Notice of Lien on Receivables” (hereinafter Remittance Directive) signed by the plaintiff was language in which he agreed to hold Baker Sanders harmless from and waive any claims related to the payment of funds to the appointed agents and any harm caused by Baker Sanders’s recognition of said agents. Generally, “a valid release constitutes a complete bar to an action on a claim which is the subject of the release” (Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269, 276 [internal quotation marks omitted]). However, ” [t]he meaning and coverage of a general release depends on the controversy being settled and upon the purpose for which the release was actually given . . . . A release may not be read to cover matters which the parties did not desire or intend to dispose of'” (Wechsler v Diamond Sugar Co., Inc., 29 AD3d 681, 682, quoting Lefrak SBN Assoc. v Kennedy Galleries, 203 AD2d 256, 257; see Demaria v Brenhouse, 277 AD2d 344). A defendant bears the initial burden of establishing that it has been released from any claims (see Burgos v New York Presbyt. Hosp., 155 AD3d 598, 600). Here, although Baker Sanders established the existence of various releases related to the payment of funds to agents, it did not establish that the releases, which were contained within the Agent Appointments and Remittance Directives, unambiguously encompassed the legal malpractice and accounting causes of action (see DeMaria v Brenhouse, 277 AD2d 344). As such, Baker Sanders was not entitled to dismissal of the legal malpractice cause of action or the cause of action for an accounting pursuant to CPLR 3211(a)(5).”