The facts in Hellman v Jacob  2022 NY Slip Op 31018(U)  March 29, 2022  Supreme Court, New York County  Docket Number: Index No. 156860/2021 Judge: Barbara Jaffe are just too astounding to try to encapsulate.

“Plaintiff alleges that from January of 2008 to December of 2010, a group of investors placed approximately $112 million with a nonparty fraudster and with legal entities owned and
controlled by him. From January 2008 to March 2013, the fraudster ran Ponzi scheme, thereby stealing more than $100 million from various people and entities. A committee of creditors (committee) was thus formed from the group of investors with the goal of recovering the assets from the fraudster and his entities. Defendant Belsky was nominated as the sole member of the committee.

On or about December 21, 2010, the committee engaged lawyer-movants as legal counsel in connection with the Ponzi scheme and recovery of the stolen funds, and a “committee
agreement” was entered into between plaintiff and the other committee members on the one hand, and defendant Shalom Jacob on the other. The December 2010 agreement also provides as follows:
You agree that our sole client will be the Committee and that our representation of the
Committee shall not constitute or include the representation of any member of the
Committee with respect to his, her or its individual interests.

In addition to representing the committee and plaintiff, all three movants represented defendant Cortland Realty Investments, LLC, the investor with the largest stake in the invested funds. Plaintiffs claim is reflected therein as $1,375,000. Approximately $61,458,853 was recovered by lawyer-movants from the entities controlled by the fraudster. Plaintiff alleges that defendants were aware of his claim, that the amount due him included funds invested by others, and that the committee represented by movants “may have also included liabilities of other third-parties as part of the amount associated with each member’s respective liability.” Over the course of almost ten years, plaintiff claims, defendants took many actions on his behalf and on behalf of those who had invested with him, referencing in a footnote eight lawsuits commenced in various jurisdictions by the committee, using his
position to recover funds. Once the funds were recovered, defendants refused to distribute to him the share that he was and is entitled to, which has caused and continues to cause him significant and irreparable harm.

According to plaintiff, the committee has “purportedly” collected and recovered approximately $22,893,674.10, plus non-monetary assets, and on March 25, 2013, “purportedly” entered a judgment against the fraudster and some of his entities in the amount of $66,609,424.74, plus post-judgment interest.

On or about August 31, 2017, defendants notified plaintiff that due to certain adverse proceedings brought against the committee in bankruptcy court, they sought to make interim
distributions or, as an alternative, they proposed a buy-out by Cortland, a committee member and their client. In the buy-out agreement prepared by defendants on Cortland’s behalf, plaintiffs share of the recovery is listed as $697,801.62 with interest at 1.384 percent, whereas the buy-out amount is listed as $290,561. Defendants also indicated in the letter that the committee “had possible exposure” in the bankruptcy proceeding “because of monies it may have received from [the fraudster] as part of an allegedly unlawful and/or fraudulent transfer, which may require [the committee] to reimburse such monies.”

Plaintiff alleges that defendants counseled him to accept the buy-out proposal even though it would bring him a fraction of his share, and informed him that they were unable to
represent him, the committee, and/or Cortland in connection with the proposed buy-out. They thus arranged for another law firm to act as plaintiffs counsel in connection with the buy-out. Unaware that defendants had developed “this furtive scheme” to secure plaintiffs position for pennies on the dollar and in reliance on their advice given their role as trusted counsel, plaintiff agreed to the proposed buy-out.”

“Plaintiff’s characterization of the buy-out agreement as a “farce” that was knowingly designed to conceal the reason for Cortland’s proposal to purchase plaintiff’s claims, which was
to induce plaintiff fraudulently to convey his ownership interest in the recovery to the committee, is bereft of facts supporting such assertions. Thus, the allegations in support of the cause of action for fraud/fraudulent inducement as against lawyer-movants are too conclusory to satisfy the statutory requirement that the circumstances constituting the wrong be stated in detail (CPLR 3016[b ]).

Moreover, plaintiff acknowledges in his complaint that on December 21, 2010, lawyer movants specifically advised him that neither he nor his investors were represented by them, and
that the actions commenced by lawyer-movants were brought on behalf of the committee and not plaintiff. He also fails to dispute that the August 2017 letter and buy-out agreement clearly reflect that by signing the option for the buy-out, plaintiff conveyed his interest in any recovery to Cortland.

Plaintiff nonetheless claims to have justifiably relied on defendants’ alleged deception based on the buy-out agreement, asserting that the agreement was conveyed to him through
lawyer-movants who served as his counsel. Thus, he claims to have reasonably relied on them to his detriment which resulted in injury. Again, having acknowledged that he was informed by movants on December 21, 2010 that they did not represent him, and on August 31, 2017 that they would not represent him individually with respect to the buy-out agreement and that the other law firm would represent him, plaintiff demonstrates that he was not justified in relying on their alleged advice to enter into the buy-out agreement. “

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.