Real Estate and conflicts of interest are transactional situations rife with claims of legal malpractice, and Fields v Baker & Hostetler LLP 2023 NY Slip Op 50610(U) Decided on June 23, 2023 Supreme Court, New York County Reed, J. is no exception.

“Plaintiff Richard Fields (Fields) is a resident of the State of New York and a businessman with assets and interests in several states, including certain real property located in Teton County, Wyoming (Wyoming Property) (see complaint, dated April 28, 2020, ¶¶3, 13 and 19 [NYSCEF Doc No. 9]). Plaintiffs Jackson Land and Cattle, LLC, JLC Ranch Development, LLC, and JLC Ranch, LLC are Delaware limited liability companies that own the Wyoming Property, which are controlled and indirectly owned by Fields (id., ¶14). Defendant Baker & Hostetler LLP (Baker) is a law firm allegedly organized as a limited liability partnership under the laws of the State of Ohio (id. ¶15). Defendant Laurence Markowitz (Markowitz) is alleged to be an attorney admitted to practice in the State of New York and a partner in Baker’s New York City office (id. ¶16). Defendant Raymond Sutton (Sutton) is alleged to be an attorney admitted to [*2]practice in the State of Colorado and the managing partner of Baker’s Denver office (id. ¶17).

Plaintiffs allege that, beginning in or about 2005, Baker served as attorneys for Fields and several of his corporate entities on various matters, including estate planning, tax, asset protection, general business advice, and litigation, including litigation involving the Wyoming Property (id. ¶19). During this representation, Fields purportedly shared confidential financial information with Baker, including detailed information about his assets and liabilities (id.).

Plaintiffs contend that Baker acted as escrow agent on a series of transactions involving the execution of a series of mortgages (Mortgages),^[FN2] encumbering the Wyoming Property, and that the mortgagees are business entities controlled by another Baker client, nonparty Raul Rodriguez (Rodriguez) (id. ¶3). Plaintiffs assert, upon information and belief, that defendant Markowitz was an investor in at least one of Rodriguez’s mortgagees (id. ¶7). Plaintiffs further allege that Baker represented Fields and the other plaintiffs as mortgagors and represented Rodriguez and his mortgagees in these transactions (id. ¶3).

Plaintiffs allege that, at the outset, Baker suggested to Fields that they could treat the Mortgages as “pocket mortgages” by holding them in escrow with Baker as the escrow agent, without publicly recording them, to avoid any default being accelerated and called by Bank of America, which already held mortgages on the Wyoming Property (id. ¶5). Plaintiffs contend that Fields executed the first of the Mortgages only after Baker, Rodriguez, and he had agreed that the Mortgages would not be recorded without first obtaining the express consent of both Fields and Rodriguez, and that Markowitz repeatedly acknowledged to Fields in writing that the Mortgages could not be recorded without his permission (id.). Plaintiffs further note that Baker held some of the Mortgages in escrow for over a year (id. ¶6).^[FN3]“

“Defendants contend that plaintiffs’ cause of action for malpractice accrued, if at all, upon execution of the Conflicts Waiver, dated February 26, 2014 (ex B to Siegal affirmation [NYSCEF Doc No. 14]) and that their breach of fiduciary duty claim accrued upon Rodriguez’s recording of the Mortgages, in or around October 2014 (see complaint, ¶55). They further contend that, if it were not for the Tolling Agreement, plaintiffs’ time to assert claims for [*6]malpractice and breach of fiduciary duty would have elapsed before they filed the complaint in this action.

Defendants, citing United States v Bertie Ambulance Serv. (2015 WL 5916691, *6, 2015 US Dist LEXIS 137577, *15 [ ED NC, Oct 8, 2015, No. 2:14-CV-00053-F] [applying NC law]), assert that, by suing them in Wyoming, plaintiffs materially breached the Tolling Agreement’s “forum selection provision” and “that breach, which went ‘to the very heart of the agreement, entitled [defendants] to rescission'” (quoting id., 2015 WL 5916691, at *5-6, 2015 US Dist LEXIS 137577, *17), and so would justify the court’s refusal to enforce the Tolling Agreement (citing OneBeacon Ins. Co. v NL Indus., Inc., 43 AD3d 716, 717-18 [1st Dept 2007]).

There are several flaws in this analysis. First, defendants’ counsel admitted at oral argument of this motion that they had not notified plaintiffs that they had rescinded the Tolling Agreement (Tr. 20:11-15), and so no recission has occurred (see 22A NY Jur2d Contracts § 502 [2d ed., May 2023 update], citing American Union Bank v Gubelman, 212 App Div 488 [1st Dept 1925] [“The failure of a party to perform his or her part of a contract does not per se rescind it, and the other party must manifest his or her intention to rescind within a reasonable time”]).

Furthermore, defendants’ reliance on OneBeacon is misplaced. The alleged breach in that case occurred several days before the effective termination date of the tolling agreement, and the agreement at issue expressly provided that “if either party filed an action in violation thereof, the other party could seek dismissal, without prejudice, that remedy being hereby agreed upon between the parties” (OneBeacon Ins. Co., 43 AD3d at 717 [internal quotation marks omitted]). In this case, the alleged breach occurred after the Tolling Agreement had terminated and the forum selection clause here does not “contain a provision that an action commenced in violation or breach of the [Tolling Agreement] should be dismissed” (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft, LLP, 23 Misc 3d 1134 [A], 2009 NY Slip Op 51090 [U], *10 [Sup Ct, NY County 2009], distinguishing OneBeacon). Considering these differing circumstances, defendants’ motion to dismiss plaintiffs’ causes of action for legal malpractice and breach of fiduciary duty as time-barred is denied.”