Legal malpractice is ubiquitous, and yet, prone to many hurdles.  Here, in  HOURANEY,  -against- BURTON & ASSOCIATES, P.C. and BERNARD BURTON,08-CV-2688 (CBA)(LB);   UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK; 2011 U.S. Dist. LEXIS 17046; February 21, 2011, Decided we see the plaintiff pro-se lose on summary judgment for lack of standing, and lack of proofs. 
 

Standing is lacking, because plaintiff retained defendants as a LLC.  Now the LLC is dissolved.  Typically, we guess, it is because the member no longer wants to or has paid state taxes for a LLC which is not doing business.  However, we don’t know why.  From the decision:

"Houraney first objects [*3] to the Magistrate Judge’s determination that he did not have standing to plead a cause of action alleging malpractice against NE Holding. Houraney argues that his right to self-representation is guaranteed; however, Houraney appears to misapprehend the finding of the R&R. Although it is true that Houraney, who is not admitted to practice law, could not represent NE Holdings on his own, see Lattanzio v. COMTA, 481 F.3d 137, 139-40 (2d Cir. 2007) (per curiam), the Magistrate Judge did not hold that Houraney had no right to representation. Instead, the Magistrate Judge held that Houraney had no standing to pursue a claim alleging wrongs to the corporation.

Limited Liability Companies (LLCs) are distinct legal entities. If the defendants committed malpractice against NE Holdings, that is a wrong committed against the LLC, not to Houraney himself. Thus, "[u]nder New York law, ‘an individual shareholder has no right to bring an action in his own name and in his own behalf for a wrong committed against the corporation, even though the particular wrong may have resulted in a deprecation or destruction of the value of his corporate stock.’" Solutia Inc. v. FMC Corp., 385 F. Supp. 2d 324, 331 (S.D.N.Y. 2005) [*4] (citing Fifty States Mgmt. Corp. v. Niagara Permanent Sav. & Loan Assoc., 58 A.D.2d 177, 179, 396 N.Y.S.2d 925, 927 (4th Dep’t 1977)). The rule is applied with equal force to Limited Liability Companies (LLCs), like NE Holdings. Solutia, 385 F. Supp. 2d at 331 n.1.

Houraney argues that he has standing because the company has dissolved, citing New York Limited Liability Company Law § 703(b). That provision reads: "[u]pon dissolution of a limited liability company, the persons winding up the limited liability company’s affairs may, in the name of and for and on behalf of the limited liability company, prosecute and defend suits, whether civil, criminal or administrative . . . ." However, Houraney is not prosecuting this action in the company’s name, but in his individual capacity. The Magistrate Judge was correct, therefore, in determining that Houraney does not have standing in his individual capacity to pursue a cause of action alleging malpractice against NE Holding.

Houraney next objects to the Magistrate Judge’s finding that plaintiff failed to allege facts to demonstrate how defendants’ alleged conduct caused the plaintiff harm. As the Magistrate Judge explained, to succeed on a [*5] legal malpractice claim under New York law, a plaintiff must "plead specific factual allegations establishing that but for counsel’s deficient representation, there would have been a more favorable outcome to the underlying matter." Dweck Law Firm LLP v. Mann, 283 A.D.2d 292, 293, 727 N.Y.S.2d 58 (1st Dep’t 2001).

The Magistrate Judge found that Houraney had failed to adequately plead causation. Houraney does not object to that determination, which is itself dispositive of Houraney’s claim. Instead, Houraney argues that the defendants breached various cannons of legal ethics. Alleging an ethical violation, however, does not relieve plaintiff of the requirement of proving causation. Schwartz v. Olshan Grundman Frome & Rosenzweig, 302 A.D.2d 193, 199, 753 N.Y.S.2d 482 (4th Dep’t 2003) ("The violation of a disciplinary rule does not, without more, generate a cause of action."); see also The William Kaufman Organization Ltd. V. Graham & James LLP, 269 A.D.2d 171, 173, 703 N.Y.S.2d 439 (1st Dep’t 2000); Kyle v. Heiberger & Associates, P.C., 25 Misc. 3d 1218A, 901 N.Y.S.2d 907 (N.Y. Sup. Ct. 2009) (explaining in claim for legal malpractice that "[w]here, as here, plaintiffs do not sufficiently allege the elements [*6] of the claim, dismissal is properly granted-even if there were allegations of ethical violations, and negligence"). Plaintiff cites to Lipton v. Boesky, 110 Mich. App. 589, 313 N.W.2d 163 (Mich. Ct. App. 1981); however, the Court applies New York, not Michigan law in this action."