In Gad v Kramer Levin Naftalis & Frankel, LLP 2022 NY Slip Op 34357(U) December 20, 2022 Supreme Court, New York County Docket Number: Index No. 156841/2021
Judge: Margaret A. Chan Siblings fight long and hard over a very lucrative business, resulting in years of litigation, costly attorney fees, and the ultimate try at selling a portion of the business at a vast profit. For one of the siblings, it goes very wrong. He turns to legal malpractice after the loss of the sale.

Two grounds were advanced to dismiss: lack of standing and speculative damages. We discuss standing in this article.

Albert is a 45% shareholder of Almod Diamonds Ltd. (Almod), a closely held New York corporation that is family owned and operated (NYSCEF #13 – amended complaint, ,r 8). Albert’s siblings, Morris Gad (Morris) and Donna Gad Hecht (Donna), own the remaining 45% and 10% of the shares, respectively (id.). The Gad siblings have been in conflict for years over the control and operations of Almod, and Donna brought a lawsuit in 2014 against Albert, Morris, and Almod in connection with those conflicts (the Donna Litigation) (id., ,r,r 9, 16).

In April or May 2016, Albert retained defendants for legal advice concerning the business disputes involving his family members, including the Donna Litigation (id., ,r,r 9-15). The parties agreed that defendants would charge a flat fee of $10,000 per month, which was subsequently increased to $15,000 per month starting from May 2018 (id.).

While defendants did not represent Albert in the Donna Litigation, they
represented Albert in negotiating and reaching a settlement with Donna (id., ,r,r 16-
19). Albert asked defendants to protect his financial interests and made clear that
any settlement documents must include certain key points, including that (1) any
“true-up” payments to Donna shall be calculated in consideration of her previous
sale of low-quality jewelry inventory to Almod, which was allegedly improper and
unauthorized, (2) a mechanism shall be included by which either Albert or Morris is
immediately elected as the CEO of Almod, (3) all shareholder distributions, salaries,
and expenses, including legal expenses, must continue to be allocated 45/45/10
according to each shareholder’s respective interest in Almod, and (4) if Almod was to
form an independent board of directors, defendants were to vet any potential
Albert-nominated directors who should represent Albert’s interests and be highly
experienced in running retail businesses (amended complaint, ,19-20).

On June 12, 2018, defendants presented Albert with finalized settlement documents, advising Albert to sign them and assuring him that the settlement agreement and the shareholder and voting agreement supplement contained all key provisions Albert wanted (id., ,r 23). Albert alleges that he reminded defendants that he was busy operating the company and was relying on defendants’ assurances when he executed the documents (id., ,r,r 22-24). After Donna and Morris executed the settlement documents, the documents became binding and the Donna Litigation was discontinued (id.).

Albert alleges that the settlement documents did not include the key
provisions defendants assured to be included, causing ascertainable damages to him
(id., ,r,r 26-39, 44).”


As a threshold matter, defendants move to dismiss the legal malpractice claim for lack of standing, arguing that as a shareholder of Almod, Albert has no individual cause of action for the injury to Almod. Defendants argue that since the harm Albert allegedly suffered is essentially the lost value of his investment in Almod, the claim is derivative but not direct.

Defendants’ arguments overlook the nature of this action. Although Albert is a shareholder of Almod and the at-issue settlement has impacts on the company, this action centers around defendants’ attorney-client relationship with Albert in their representation of Albert’s interest in settling the Donna Litigation. In the hearing held on July 19, 2022, defendants also made clear that they represented only Albert, not the company Almod, in the settlement (NYSCEF # 29-Tr 4:15-21). Also, the amended complaint alleges harm to Albert individually as opposed to Almod. As the settlement concerns the Donna Litigation in which Albert was personally named as a defendant, the settlement agreement directly impacts on Albert’s personal legal and financial interests. Therefore, Albert has standing to bring the legal malpractice claim with respect to defendants’ representation of him in the settlement (Delos Ins. Co. v Smith & Laquercia, LLP, 84 AD3d 668, 669 [1st Dept 2011] [“[plaintiff] has standing to pursue its claims against defendant since it is undisputed that defendant represented [plaintiff]” in the underlying litigation]; The Exeter Law Group LLP v Immortalana Inc., 2016 WL 7188559, *3 [Sup Ct, NY County, Dec. 9, 2016] [individual owners of a corporation have standing in a legal malpractice claim against their attorneys for negligently structuring their business ventures]).”

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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.