Pruss v AmTrust N. Am. Inc. 2022 NY Slip Op 02884 [204 AD3d 620] April 28, 2022 Appellate Division, First Department seems to be the story of a settlement offer made in good faith, where the offeror only found out later that its principal lacked the authority to make the offer in the first place. Was the attorney-offeror fraudulent and did the attorney-offeror violate Judiciary Law § 487? No.
“The negligent misrepresentation claims should be dismissed because there was no privity or privity-like relationship between plaintiffs and these defendants. “Before a duty can be imposed to use reasonable care in imparting correct information, an allegation of negligent misrepresentation must be based on a ‘special relationship’ between the parties . . . [t]he bond so established must be the functional equivalent of contractual privity” (Delcor Labs. v Cosmair, Inc., 169 AD2d 639, 639-640 [1st Dept 1991], lv dismissed 78 NY2d 952 ; see also Sykes v RFD Third Ave. 1 Assoc., LLC, 15 NY3d 370, 372 ). In this case, the court’s conclusion that defendants owed a duty of care to plaintiffs was not supported by legal authority.
Moreover, an agent for a disclosed principal “will not be personally bound unless there is clear and explicit evidence of the agent’s intention to substitute or superadd his personal liability for, or to, that of his principal” (News Am. Mktg., Inc. v Lepage Bakeries, Inc., 16 AD3d 146, 147 [1st Dept 2005], quoting Savoy Record Co. v Cardinal Export Corp., 15 NY2d 1, 4 ). That did not occur here, where defendants conveyed the settlement offer to plaintiffs and the court in accordance with the instructions of their principal, defendant AmTrust North America, Inc. (AmTrust). Defendants’ statements that AmTrust had conferred them with authority to settle the case for $5 million were accurate, even if the validity of AmTrust’s underlying statements was not.
Plaintiffs’ claims for violation of Judiciary Law § 487 also fail. A violation of this provision “requires a showing of ‘egregious conduct or a chronic and extreme pattern of behavior’ on the part of the defendant attorneys that caused damages” (Facebook, Inc. v DLA Piper LLP [US], 134 AD3d 610, 615 [1st Dept 2015], lv denied 28 NY3d 903 ). There are no such allegations here, and Mr. Kuhn, AmTrust’s claims adjuster, has acknowledged that he made a mistake in extending settlement authority to these defendants. Defendants were entitled to rely upon the direction given to them by AmTrust and had no independent legal duty to plaintiffs to confirm that authority with the conservator. Further, a fair review of Pavloff’s statements at the August 2017 settlement hearing reveal that while evasive they were not untruthful, and in any event do not support a finding of egregious [*2]conduct that would be sufficient to uphold the claim.”