Genesis REOC Co., LLC v Poppel 2022 NY Slip Op 02947 [205 AD3d 415] May 3, 2022 Appellate Division, First Department is the unusual case in which the Appellate Division reads the complaint in a legal malpractice case without unduly constricting the claims. Here, it finds that the complaint and the affidavit show privity, proximity and potential damage.
“Defendants’ argument that the amended complaint does not allege facts sufficient to establish an attorney/client relationship is unavailing, given the affidavits by plaintiffs’ principal, Andrew Stone, submitted in opposition to defendants’ motions, describing the parties’ relationship and defendants’ agreement to represent plaintiffs (see Rushaid v Pictet & Cie, 28 NY3d 316, 327 ). Nor is it dispositive that plaintiffs and the Williams Defendants did not have a retainer agreement with respect to the engagement, given Stone’s explanation of the agreement he had with the Williams Defendants, the advice they gave him, the acts he undertook as part of the Williams Defendants’ engagement, and his reliance on their advice (see Pellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008]).
The amended complaint and the affidavits sufficiently allege negligent representation. Plaintiffs allege that defendants had an undisclosed scheme to advance the interests of nonparty Karim Hutson and his wholly owned entities over plaintiffs’ interests, that they structured their investments in the relevant real estate projects so that the economic benefits of those projects were diverted to Hutson, and that they failed to disclose their conflict of interest while assuring plaintiffs that their financial interests would be protected (see e.g. Yuko Ito v Suzuki, 57 AD3d 205, 207-208 [1st Dept 2008]).
The amended complaint and the affidavits sufficiently allege proximate cause. Plaintiffs allege not simply that defendants made an error in judgment but that they actively and surreptitiously assisted Hutson in diverting funds away from plaintiffs (see Lappin v Greenberg, 34 AD3d 277, 279 [1st Dept 2006]). To the extent defendants rely upon evidence that other factors contributed to the loss, that simply raises an issue of fact not to be determined on the pleadings (Voluto Ventures, LLC v Jenkens & Gilchrist Parker Chapin LLP, 46 AD3d 354, 355 [1st Dept 2007]).
We reject defendants’ argument that the settlement agreements in a separate action against Hutson negated the element of proximate cause. Plaintiffs’ claims against defendants were expressly excluded from the settlement agreements in the Hutson action (see e.g. Maxwell Partners, L.L.C. v Building Studio, LLP, 32 AD3d 321, 324 [1st Dept 2006]).”