Medley Mgt., IncLowenstein Sandler, LLP 2025 NY Slip Op 32436(U) July 6, 2025 Supreme Court, New York County Docket Number: Index No. 651987/2022 Judge: Joel M. Cohen is a thoughtfully written grant of summary judgment in a legal malpractice case. Here is the intro:

“At a high level, this case involves a financially troubled client that had to navigate the notoriously complex and contentious process of federal bankruptcy. The push and pull between negotiating with creditors and threatening to bypass them, all while under the glare of the bankruptcy court, involves countless difficult judgment calls. In this case, it was unsuccessful.
Having carefully reviewed the record, the Court finds that Plaintiff fails to raise a genuine issue of fact either that counsel’s judgments were negligent or that but for counsel’s actions this troubled company would have made it through bankruptcy intact. Instead, the summary judgment record reveals this case to be an attempt to shift the financial cost of the troubled company’s failed business from its owners to its lawyers. Indeed, much of Plaintiff’s purported evidentiary record consists of self-serving testimony of its principals (who only now, well after the fact and when it cannot actually impact them, profess willingness to have contributed additional funds to prop up the company during the bankruptcy) that is at odds with the contemporaneous documentary evidence.

Moreover, in opposing summary judgment Plaintiff has also dramatically veered from the
factual narrative of the complaint – in which it argued, among other things, that Defendants’
proposed bankruptcy plan “could not be confirmed” – to now argue that the plan would have
been confirmed if Defendants had advised and acted differently. A plaintiff “cannot defeat
[summary judgment] by contradicting the allegations of its own pleadings” (Syncora Guarantee
Inc v JP Morgan Sec, 110 AD3d 87, 94 [1st Dept 2013]).”

“Under CPLR 3212, summary judgment is appropriate when a party establishes with evidence “that there is no material issue of fact to be tried, and that judgment may be directed as a matter of law” (Brill v City of New York, 2 NY3d 648, 651 [2004]). If the moving party crosses that threshold, the party opposing the motion “must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his
claim or must demonstrate acceptable excuse for his failure to meet the requirement of tender in admissible form; mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
The elements of a legal malpractice claim are: (1) attorney negligence; (2) proximate causation; and (3) damages (Russo v Rozenholc, 130 AD3d 492, 497 [1st Dept 2015]). “An attorney moving for summary judgment dismissing a legal malpractice claim has the burden of establishing, through the submission of proof in evidentiary form, that the plaintiff is unable to prove at least one of the essential elements of the cause of action” (Ali v Fink, 67 AD3d 935, 936 [2d Dept 2009]).

Here, based on the summary judgment record, and giving Plaintiff the benefit of reasonable inferences in its favor, and despite very creative efforts by Plaintiff’s counsel to flood the zone with potential areas of dispute, Plaintiff’s claims fail on all three elements.

“A. Negligence
Attorney negligence is established by showing that an attorney “failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession” (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 115 AD3d 228, 236 [1st Dept 2014], affd as mod, 26 NY3d 40 [2015]).
However, “an attorney is not held to the rule of infallibility and is not liable for an honest mistake of judgment where the proper course is open to reasonable doubt. Thus, ‘selection of one among several reasonable courses of action does not constitute malpractice’. Absent such ‘reasonable’ courses of conduct found as a matter of law, a determination that a course of conduct constitutes malpractice requires findings of fact. The general rule is that an attorney may be held liable for ignorance of the rules of practice, failure to comply with conditions precedent
to suit, or for his neglect to prosecute or defend an action” (Bernstein v Oppenheim & Co., P.C.,
160 AD2d 428, 430 [1st Dept 1990] [internal citations omitted]). In response, Plaintiff argues that this “professional judgment rule” does not apply because Defendants violated bright-line rules: section 1129(b)(2)(B) (absolute priority rule) of the US Bankruptcy Code, section 327(a) (representing an interest adverse to the estate), and the U.S. Supreme Court’s rule in Bank of Am. Natl. Trust & Sav. Assn. v 203 N. Lasalle St. Partnership (526 US 434, 437 [1999]) (new value cannot be exclusive to pre-petition equity).

These arguments turn on a dispute as to whether Defendants were instructed to pursue only a consensual reorganization under section 1129(a), instead of a cramdown under section 1129(b). Plaintiffs argue that they instructed Defendants to file a plan that could be crammed down under section 1129(b) and to file a plan with cash contributions to satisfy the new value exception to the absolute priority rule. However, Plaintiff has not cited any deposition testimony or contemporaneous communications identifying who, what, when, where, or how such a
definitive instruction to pursue a cramdown was given to Defendants, let alone from the Subcommittee. At most, the testimony MDLY cites reflects a view that the Plan was structured so it potentially could be confirmed over creditor objections if the Debtor later decided to shift to a cramdown approach (B. Taube Dep. At 53:9 – 54:14, 55:4-18, 208:22 – 209:6; S. Taube Dep. at 118:17 – 121:11, 114:15 – 118:4; Fredericks Dep. at 339:25 –340:25, 540:10-17, 723:16-21).”