Disbarred lawyers, millions diverted, fraud, malpractice and missing money.  It’s a horrible story, and Plaintiffs are out $ 4.5 million.  They have been awarded summary judgment.  Will they ever collect?

135 Bowery LLC v Sofer  2016 NY Slip Op 31012(U)  June 2, 2016  Supreme Court, New York County  Docket Number: 108020/2011  Judge: O. Peter Sherwood is the story of NY real estate, attorney deceit, and a whole lot of money missing.

“This is one of two cases based on the same set of facts. Steven Seitzman and Judith Scitzman (the Seitzmans) are the sole members of 135 Bowery, LLC ( 135 Bowery). 135 Bowery owned the property located at 135 Bowery, New York, New York (the Property). In 2007, the plaintiffs sold the Property with the assistance of their attorney, Alan Young (Young, now deceased), a partner at Lindenbaum & Young, to fund the Seitzmans’ retirement. Plaintiff.o.; claim that Young diverted the proceeds of the sale, sent some of it to entities he controlled, used other monies to buy real property for his own benefit, and lied to the Seitzmans about the status of their investments. In the related case, 135 Bowery LLC. Steven Seitzrnan. and Judith Seitzman v Beach Channel Shoppers Mart Co. LLC, Index No. 156014/2013, the plaintiffs sued one of Young’s companies. According to the complaint in that case, $1,600,000 from the sale of the Property was diverted from the Lindenbaum & Young Interest on Lawyer Trust Escrow Account (LY IOLA Account) into a bank account of defendant Beach Channel Shoppers Mart Co., LLC (Beach Channel). ”

“Steven Seitzman (Stcven) and Judith Seitzman (Judith) are owners of 135 Bowery Street, LLC. In April of 2007, they hired attorney Alan Young to represent them in connection with the sale of the Property. Young counseled them in the attempt of an United States Internal Revenue Code § 1031 exchange (by which taxes would be deferred if the proceeds are invested in other. similar, real estate within a specified time after the sale). Liebman was the exchange trustee. The sale of the building closed on December 28, 2007. At the closing, plaintiffs received net proceeds of $4,513,711. This sum. was deposited in the LY IOLA Account and eventually $4,672.553.64 was transferred to Liebman, the Section 1031 Exchange Trustee (Steven aff at ii 10-12, NYSCEF Doc Nos. 106, 114, 115, J 19). A. Property Purchases On January 3, 2008, Young sent Liebman a letter instructing him lo transfer $3,500,000 to LY to be used for down payments on the purchase of two parcels of .land in Sullivan County, New York (NYSCEF Doc. No. 116). Young attached unsigned draft contracts which purportedly provided a basis for the transfer (id.). One contract was for an 83 .19 acre parcel (the “83 Acre Property,” id). The other was for a single family home (the “Mosquera Property,” id). Young was listed as counsel for the seller on both contracts (id.). Patrick Lucas, an associate at LY, appears on the draft contracts as representing the purchaser in both transactions (id.; Robert tr., NYSCEF Doc. No. 112, p.26). 10717 is named in the contract as the seller of the 83 Acre Property, with provision for Petri signing on behalf of that entity. According to the Sullivan County Tax Map and Records System, the 83 Acre Property was owned by a George Bagely (NYSCEr Doc. No. 117). Liebman transferred $3,500,000 to the LY IOLA account that day (NYSCEF Doc No. 118). On .January 4, 2008, a wire transfer was sent from the LY IOLA Account to the Ricciani & Jose LLP Attorney Escrow Account in the amount ot $ l, 738,664.10 (NYSCEF Docs. No. 123, 124 ). That money was used to purchase a different property from Robert Green in the name oi 10717 (the “18 Acre Property”) (NYSCEF Docs. No. 125, 126). Young is listed as the attorney for 10717. Additionally, $1,600,000 was transferred from the LY IOLA account to Beach Channel, which, as “” noted above, is the subject of the related litigation (NYSCEF Doc. Nos. 129-31 ). Beach Channel then transferred $1,200,000 to I 0717 and $355,00 to LY (NYSCEF Doc. No. 130). Additional facts relating to the diversion off funds to Beach Channel are set forth in the Decision and Order filed this day in the related case. ”

“The Sixth Cause of Action alleges legal malpractice against Young, LY, Robert, and I, YPC based on the same fal:ts that arc alleged against these parties for fraud (First Cause of Action), breach of fiduciary duty (Sel:ond Cause of Action). and constructive fraud (Third Cause of Adion). The same facts arc also asserted in support of the fourth (conversion), Fifth (unjust enrichment), and Tenth (negligent misrepresentations) Causes of Al:tion against Young and LY. The damages claimed in these Causes of Action are all essentially the same. In the malpractice claim, plaintiffs demand $4,500,000, arising from the misappropriation of funds entrusted to the la\vycrs and their law firms. Jn the first, Second, Third, fourth and Tenth Causes of Action, plaintiffs seek to recover the same amount (see Amended Complaint, NYSCEF Doc. No. 18 at pp. 49-52). In the Fifth Cause of Action, plaintiffs seek a portion of that amount, specifically $3,000,000. Accordingly, the first (fraud), Second (breach of fiduciary duty), Third (constructive fraud), Fifth (unjust enrichment) and Tenth (negligent misrepresentation) Causes of Action shall be dismissed as against Young and LY. The Fourth Cause of Action (conversion) shall be dismissed as against Young. All of these claims are duplicative of the malpractice claim asserted against these defendants. The above analysis cannot be applied to the claims against Robert and LYPC because plaintiffs have not established that an attorney client relationship existed between themselves and Robert or L YPC. As is discussed below, the plai ntifls · motion for summary judgment on the legal malpractice claim must be granted against Young and LY. It must be denied as against Robert and LYPC. ”

“In summary, plaintiffs’ motion for summary judgment is granted as against Young and LY as to the Sixth Cause (>f Action; as against Petri and 10717 as to the First, Third, fourth and Fifth Causes of Action; as against Hlock as to the first and Third Causes of Action and as against Mosquera under the Eleventh Cause of Action. The Motions for Summary Judgment of Robert and L YPC to dismiss the complaint as to them is granted except the Sixth Cause of Action against L YPC shall survive as there are material issues of fact based on the theory of successor liability. The . Second and Tenth Cause of Action are dismissed in their entirety. The complaint is dismissed as to 30. Accordingly, this Decision and Order disposes of all remaining claims except the Sixth Cause of Action against L YPC. ”