Amtrust N. Am., Inc. v Pavloff 2020 NY Slip Op 31005(U) April 23, 2020 Supreme Court, New York County Docket Number: Index No. 156855/2019 Judge: Andrew Borrok is a wonderful recapitulation of how “but for” causation, proximate cause, allegations of damage in a pre-answer motion to dismiss should be handled. All too often, judges require proofs necessary in a summary judgment motion to be provided in a pre-answer motion, and seem away too quick to dismiss.
“To plead a legal malpractice claim, a plaintiff must allege: (1) that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, (2) that the attorney’s breach of that duty proximately caused plaintiff to (3) sustain actual and ascertainable damages (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY 3d 40, 49-50 ). A claim for legal malpractice can be viable “despite settlement of the underlying action, if it is alleged that the settlement was effectively compelled by [the] mistakes of counsel” (Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1st Dept 1990] [holding settlement of underlying action did not compel dismissal]). At the pleading stage, a legal malpractice plaintiff does not need to show “likelihood of success” but “is required only to plead facts from which it could reasonably be inferred that the defendant’s negligence caused” his loss (Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [1st Dept 2011]). As concerns damages, it is sufficient to sustain a claim for a plaintiff to allege facts from which actual damages may be reasonably inferred, a showing of actual damages is not required at the motion to dismiss stage of proceedings (id.).
Here, contrary to the Defendants’ argument, the Complaint adequately pleads a duty owed by the Defendants to AmTrust as a client. And, for the avoidance of any doubt, Ms. Pavloffhas acknowledged under oath at her deposition that Am Trust was, in fact, her client, along with CastlePoint (NYSCEF Doc. No. 15 at 5:8-16). To the extent that Ms. Pavloff may have taken the position at her deposition that advising Am Trust (or Mr. Kuhn) about the Conservation Order and/or inquiring as to whether Mr. Kuhn was aware of the Conservation Order and whether the Conservation Order impacted his authority to settle the case was outside of the scope of her representation (i.e., even after she represented to the court that funds were available in the course of the settlement of the Underlying Action), this is, at best, a factual issue for discovery and the trier of fact as Ms. Pavloff and FBZ have not produced a retainer agreement and have acknowledged that they never made a retainer agreement for their services to Am Trust in the Underlying Action.
Turning to proximate cause, although the required standard of proximate cause has been imprecisely and variously stated, the alleged malpractice needs to be at least a substantial factor if not the “but for” factor in a plaintiffs damages (180 E. 88th St. Apt. Corp. v Law Office of Robert Jay Gumenick, P.C., 2010 NY Slip Op 33848 [Sup Ct NY Cnty 2010] [discussing
varying formulations of proximate cause for legal malpractice actions] [ affd 84 AD3d 5 82 [pt Dept 2011]). Here, the Complaint alleges that, “[h]ad [Ms. Pavloff] read the Conservation Order in any meaningful way … , or call[ed] the California Conservation Court or the California Conservation and Liquidation Office, or even just discuss the Order with her client, she would have known to advise Am Trust not to proceed with the settlement conference … where she represented that the insurer would contribute its $5 million limit to the settlement,” which representation then “directly caused AmTrust to be sued (Compl., iii! 71-75). This, together with other allegations in the Complaint, is sufficient to allege that the Defendants’ conduct was a substantial factor in Am Trust’s damages for purposes of pleading a legal malpractice claim. Inasmuch as the Defendants cite Kluczka v Lecci ( 63 AD3d 796 [2d Dept 2009]) and Reibman v Senie (302 AD2d 290 [l st Dept 2003]) for the proposition that the Complaint does not allege proximate cause, those are both summary judgment decisions which do not address allegations at the pleading stage of the proceedings. Simply put, an “attorney’s conduct or inaction is the proximate cause of a plaintiffs damages if but for the attorney’s negligence the plaintiff. .. would not have sustained actual and ascertainable damages” (Gallet, Dryer & Berkley, LLP v Basile, 141AD3d405 [l st Dept 2016]). Here, the Complaint pleads that Ms. Pavloff s failure to meaningfully read and discuss the Conservation Order caused Am Trust to proceed with a settlement it would not have otherwise undertaken and that it has sustained at least a million dollars in damages as a result. This is sufficient at this juncture. ”
“Finally, to the extent that the Defendants argue that Mr. Kuhn as the client authorized Ms.Pavloff as Am Trust’s attorney to represent to counsel for Ms. Pruss and Great American and to the court that the $5 million was available for settlement in the Underlying Action, this argumentsimply misses the point. While it is true that “an attorney should not be held liable for ignorance of facts which the client neglected to tell him or her,” an attorney also “has a responsibility to investigate and prepare every phase of a client’s case” (Green v Conciatori, 26 AD3d 410, 411 “