Kugel v Reynolds 2024 NY Slip Op 03173 Decided on June 12, 2024 Appellate Division, Second Department is another example of how real estate transactions, especially in New York comprise a large part of the legal malpractice milieu.

“In 2012, the defendant Kenneth Reynolds entered into a contract to sell certain real property located in Brooklyn to the plaintiffs (hereinafter the plaintiffs’ contract of sale). Later that year, Reynolds entered into a separate contract to sell the property to the defendant Henry Ausch or an entity yet to be formed (hereinafter the Ausch contract of sale). Ultimately, Reynolds sold the property to the defendant Albany Marks, LLC, of which Henry Ausch was the sole member. The plaintiffs commenced this action against (1) Reynolds, (2) the defendant Sterling Palmer, (3) the defendants Arnold Treco, Jr., PLLC, and Arnold Treco, Jr. (hereinafter together the Treco defendants), and (4) Albany Marks, LLC, Henry Ausch, and the defendant Yaakov Ausch (hereinafter collectively the Ausch defendants). The plaintiffs asserted six causes of action: (1) for a judgment declaring that the plaintiffs’ contract of sale is in full force and effect, (2) for specific performance of the plaintiffs’ contract of sale, (3) alleging tortious interference with contract, (4) alleging fraud and negligent misrepresentation, (5) alleging unjust enrichment, and (6) to impose a constructive trust on the property.

Reynolds asserted cross-claims against the Treco defendants to recover damages for legal malpractice and against all other defendants for indemnification and contribution. The Treco defendants asserted cross-claims against Palmer and the Ausch defendants for indemnification and contribution. The Ausch defendants asserted cross-claims against all other defendants alleging fraud and negligence and for indemnification and contribution. Palmer filed two answers. In the first, he did not assert any cross-claims. In the second, he asserted cross-claims against all other defendants for indemnification and contribution.”

“However, upon reargument, the Supreme Court should have adhered to the prior determination granting that branch of the Treco defendants’ cross-motion which was for summary judgment dismissing the third cause of action insofar as asserted against them. “[I]nasmuch as the relationship created between an attorney and his [or her] client is that of principal and agent, an attorney is not liable for inducing his [or her] principal to breach a contract with a third person, at least where he [or she] is acting on behalf of his [or her] principal within the scope of his [or her] authority” (Asamblea De Iglesias Christianas, Inc. v DeVito, 210 AD3d 843, 844 [internal quotation marks omitted]). “Absent a showing of fraud or collusion, or of a malicious or tortious act, an attorney is not liable to third parties for purported injuries caused by services performed on behalf of a client or advice offered to that client” (id. at 845 [internal quotation marks omitted]). Here, the Treco defendants demonstrated, prima facie, that Treco was acting on Reynolds’s behalf and within the scope of Treco’s authority as Reynolds’s attorney (see id. at 844). In opposition, the plaintiffs failed to raise a triable issue of fact. The evidence cited by the plaintiffs did not support a finding that Treco’s acts in representing Reynolds were motivated by any self-interest or self-dealing or that the acts personally benefitted Treco (see id. at 845; Pancake v Franzoni, 149 AD2d 575, 575-576).

Upon reargument, the Supreme Court also should have adhered to the prior determination granting that branch of the Treco defendants’ cross-motion which was for summary judgment dismissing so much of the fourth cause of action as alleged negligent misrepresentation insofar as asserted against them. The Treco defendants submitted evidence that they did not have “a special or privity-like relationship” with the plaintiffs, who were represented by their own attorney in this “ordinary arm’s length business transaction” (Feldman v Byrne, 210 AD3d 646, 650). In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs’ new theory of liability with respect to this cause of action insofar as asserted against the Treco defendants is improperly raised for the first time on appeal, and therefore, we do not consider it (see TJG Realty of Rockland, LLC v Con Serv Constr., Inc., 218 AD3d 713).”