Real estate is a recurrent theme in the NY legal malpractice world. In a way it’s location, location, location. Real estate transactions comprise big money in New York, big money involves attorneys, and where there is attorney activity, there is someone who loses in the transaction. Where there is a lose in a transaction, there is always the possibility of legal malpractice litigation.
Harpia Asset Mgt. LLC v Shanbaum 2020 NY Slip Op 30953(U) April 16, 2020 Supreme Court, New York County Docket Number: Index No. 158691/2019 Judge: Andrew Borrok is an extreme example of a claim of conflict of interest, inasmuch as the opinion states that the attorney admitted representing two parties at once.
“The elements of a claim for breach of fiduciary duty are that (1) defendant owed plaintiff a fiduciary duty, (2) defendant committed misconduct, and (3) plaintiff suffered damages caused by that misconduct (Burry v Madison Park Owner LLC, 84 AD3d 699, 699-700 [1st Dept 2011] [citations omitted]). Here, the Plaintiffs allege that they were owed a fiduciary duty by the Shanbaum Defendants, including a duty of loyalty and honesty (NYSCEF Doc. No. 1, ¶ 99). The Plaintiffs’ further allege that the Shanbaum Defendants breached their fiduciary duty by (i) disclosing the Plaintiffs’ confidential and privileged information to other clients, including Mr. Broyn, (ii) assisting Mr. Broyn with purchasing the Property, and (iii) representing both Mr. Broyn and the Plaintiffs in the potential sale of the Property from Mr. Broyn to the Plaintiffs after the Auction (id. ¶¶ 100-102). The Plaintiffs have also alleged damages (id. ¶ 103-105). Taking the Plaintiffs allegations as true as this court must on a motion to dismiss, the Plaintiffs sufficiently state a claim for breach of fiduciary duty with the requisite particularity pursuant to CPLR §3016(b).
Dismissal is also not required because the Plaintiffs’ breach of fiduciary duty claim does not arise from the same set of facts that underlie the legal malpractice claim (Kurman v Schnapp, 73 AD3d 435, 435-436 [1st Dept 2010] [citations omitted] [explaining that a claim for breach of fiduciary duty is not duplicative of a claim for legal malpractice where each claim is premised on separate facts that support a different theory]). Here, as discussed above, the Plaintiffs allege, among other things, that the Shanbaum Defendants breached their duty of loyalty by assisting Mr. Broyn with the purchase of the Property while at the same time representing the Plaintiffs in having the Auction stayed. By contrast, the Plaintiffs’ ground their legal malpractice claim on the Shanbaum Defendants’ alleged failure to (i) timely file a motion to vacate the Foreclosure Judgment and/or stay the Foreclosure Action before the Auction, (ii) advise the Plaintiffs that the Auction would proceed on April 18, 2019, (iii) make any attempt to reschedule the Auction, and (iv) include the relevant information in the Plaintiffs’ motion to vacate the Auction (NYSCEF Doc. No. 1, ¶¶ 88-93). Under these circumstances, the breach of fiduciary claim arises from a different set of facts than the legal malpractice claim such that both may be sustained (see Exeter Law Group LLP v Wong, 2016 NY Slip Op 32425[U] [Sup Ct, NY County 2016] [denying motion to dismiss certain counterclaims, including counterclaim for legal malpractice due to reliance on alleged negligent representations when forming business ventures and counterclaim
for breach of fiduciary duty for disclosure of confidential and privileged information]; Colucci v Arisohn, 2009 NY Slip Op 32053[U] [Sup Ct, NY County 2009] [declining to dismiss breach of fiduciary claim for defendants’ alleged unauthorized use of plaintiffs’ confidential communications as duplicative of legal malpractice claim predicated on defendants’ actions as
plaintiffs’ former counsel]). Accordingly, that branch of the Shanbaum Defendants’ motion to dismiss the second cause of action for breach of fiduciary duty must be denied.”