An claim unstated in the pleadings, but which surfaces in discovery may be utilized by Plaintiff.  In Leading Ins. Group Ins. Co., Ltd. (U.S. Branch), Inc. v Friedman LLP 2021 NY Slip Op 03411 [195 AD3d 418] June 1, 2021
Appellate Division, First Department a unique theory of damages was considered, and then rejected.

“Defendant established prima facie that its alleged accounting malpractice did not cause plaintiffs lost-time damages (see generally KBL, LLP v Community Counseling & Mediation Servs., 123 AD3d 488, 488 [1st Dept 2014]). The complaint alleges that defendant failed to detect deficiencies in plaintiffs’ loss reserves during its May 2013 audit of the financial statements they submitted to the Department of Financial Services (DFS) for the 2012 calendar year and that, had the audit been done properly, plaintiffs would have made adjustments and taken corrective measures to avoid the regulatory action. However, plaintiffs’ own regulatory expert opined that DFS would have taken the same action against them regardless of whether defendant had noted their deficient reserves in its audit.

In opposition, plaintiffs failed to raise an issue of fact by way of their claim for lost-time damages. Plaintiffs submitted a report by their expert accountant, who concluded that, had the audit been done properly, DFS would have taken the same actions against plaintiffs that it took nine months later, but plaintiffs would have taken their remedial measures nine months earlier and would not have lost nine months in improving their business.

As a preliminary matter, the motion court properly considered plaintiffs’ theory of lost-time damages because, although the theory was not pleaded in the complaint, it was the subject of discovery, and defendant cannot reasonably claim that it did not have notice of or was surprised by it (see Mitchell v 423 W. 55th St., 187 AD3d 661, 662 [1st Dept 2020]; Penner v Hoffberg Oberfest Burger & Berger, 44 AD3d 554, 555 [1st Dept 2007]).

There is no evidence in the record to support plaintiffs’ expert accountant’s assumption that if DFS had taken the same actions against plaintiffs nine months earlier, plaintiffs would have undertaken the same remedial measures nine months earlier (see Brooks v Lewin, 21 AD3d 731, 734-735 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). None of plaintiffs’ witnesses addressed that issue in their testimony, and plaintiffs failed to submit an affidavit addressing the issue. Moreover, plaintiffs’ regulatory expert testified that it was unclear how plaintiffs would have responded if DFS’s action had been taken earlier.

The cases on which plaintiffs rely, Corcoran v Hall & Co. (149 AD2d 165, 175-176 [1st Dept 1989]) and Town of Kinderhook v Vona (136 AD3d 1202 [3d Dept 2016]), recognize that an accountant may be liable for damages proximately caused by the accountant’s negligent failure to timely uncover deficiencies. However, they do not [*2]establish that plaintiffs are entitled to proceed to trial on a theory of lost-time damages that is premised on speculation. “.

Email this postTweet this postLike this postShare this post on LinkedIn
Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.