In this fascinating case, everyone lost, yet no one except Marc Dreier seems to be in the wrong.  Plaintiffs went through a bankruptcy with their business Cosmetics Plus.  They suffered the loss of two stores at WTC 1, and obtained insurance payments from AIG.  Defendants represented them in the bankruptcy, and then took their law practice to Dreier LLP.  The settlement monies were deposited into Dreier escrow accounts, and, yes, were deposited just before the arrest of Marc Dreier.

In Cosmetics Plus Group, Ltd. v Traub ;2011 NY Slip Op 32149(U); August 4, 2011
Supreme Court, New York County ;Docket Number: 113240/09; Judge: Judith J. Gische we see plaintiff”s motion for summary judgment denied and defendant’s granted.

"While the court is sympathetic to the fact that plaintiffs, through no fault of their own, suffered a substantial financial loss, that loss is not answerable by the defendans in this action. For the reasons set forth below, the plaintiffs’ motion for summary judgment is denied and the defendants’ cross-motion for summary judgment is granted. Breach of Partnership Laws Preliminarily, the court recognizes that plaintiffs do not make any arguments in opposition to defendants’ cross-motion to dismiss the 4th COA. Defendants show that there is no ascertainable violation of the partnership law by either Taub or Fox. Summary judgment dismissing the 4th COA against them is, therefore, granted. Legal Malpractice is professional negligence. Brooks v. Lewin, 21 A.D.3d 731 (1st Dept 2005). An action for legal malpractice requires proof of negligence consisting of an
attorney’s failure to exercise that degree of care, skill and diligence commonly possessed and exercised by a member of the legal community.  Darby & Darby PC v. VSI Intern, Inc., 95 NY2d 308 (2000)"

"The gravamen of plaintiffs’ motion is based upon their argument that defendants “flagrantly violated” Judge Beatty’s October 30, 2008 order by failing to distribute the escrowed funds to them within 15 days of that order. They argue that defendants were further negligent when, after receiving the proceeds from Dreier LLP which defendants deposited into the TBF escorw fund, they ultimately surrendered the funds over to Gowan, the trustee in bankruptcy, rather than paying plaintiffs. They also object to the fact that defendants paid themselves from the monies on hand.
Defendants claim that they are entitled to summary judgment dismissing all the theories of malpractice alleged in the complaint. Those theories include the arguments advanced by plaintiffs on this motion, as well as claims that defendants were negligent in failing to obtain a timely dismissal of the plaintiffs’ bankruptcy case, and in depositing the settlement proceeds into the Dreier LLP escrow account because the knew or should have known about Marc Dreier’s illegal conversions.
 

In their motion for summary judgment, plaintiffs do not address or provide any support for their claim that defendants either knew or should of known about Marc Dreier’s conversion of funds in the Dreier LLP escrow account. In the cross-motion defendants assert that they had no knowledge of Marc Dreier’s activities and had no reason to believe that the monies in the Dreier LLP escrow account were not being safely guarded. This claim is not addressed by the plaintiffs in their reply. Consequently, this claim is dismissed.

In their motion for summary judgment, plaintiffs’ do not address their pleaded claim that defendants should have proceeded more quickly to obtain the dismissal of the bankruptcy case following the settlement of the matter with AIG. Defendants have provided detail about the actions undertaken by Fox, after the AIG matter was settled, to bring this plaintiff‘s bankruptcy matter to conclusion. Fox’s services included proceeding with a structured dismissal, which allowed for the dismissal to be submitted to the court without any opposition by any interested party. While these matters took several months, plaintiff has not addressed why the time taken deviated from the time that could reasonably have been expected for such proceedings. Defendants, on the other hand,
have provided the court with an expert report from the Hon. Francis G. Conrad, a retired bankruptcy judge, that the time taken to negotiate and present the structured dismissal to the court, did not deviate from the standard of care and skill of an average New York bankruptcy attorney. Consequently, this claim is dismissed ,