The scene was charged with energy.  A newly off-the-bench Federal District Judge was arguing in the First Department Appellate Division.  The issue was a situation in which a client had sued the law firm for legal malpractice in US District Court and the law firm had started a declaratory judgment action in state court seeking a declaration that it had done no wrong.  It was unusual to say the least.

The Appellate Division thought it odd too.  Their decision in Wachtell, Lipton, Rosen & Katz v CVR Energy, Inc.  2016 NY Slip Op 07091  Decided on October 27, 2016  Appellate Division, First Department, muted as it may be, speaks volumes.

“Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered October 2, 2014, which, to the extent appealed from, denied defendants’ motion to dismiss the claim for a declaratory judgment on the ground of another action pending, unanimously reversed, on the facts, with costs, and the motion granted. Order, same court and Justice, entered February 24, 2015, which granted plaintiff’s motion to dismiss defendant CVR Energy, Inc.’s counterclaim for legal malpractice, unanimously reversed, on the law, with costs, and the motion denied.

The court improvidently exercised its discretion in declining to dismiss the claim for a declaratory judgment against defendant CVR Energy, Inc., since there is another action pending between the parties for the same cause of action (CPLR 3211[a][4]; see Syncora Guar. Inc. v J.P. Morgan Sec. LLC, 110 AD3d 87, 95 [1st Dept 2013]). CVR’s choice of a federal forum for its earlier filed legal malpractice action against plaintiff (Wachtell) (see 28 USC § 1332 [diversity of citizenship]) is entitled to comity. Wachtell’s “use of a declaratory judgment action to determine the viability of [its] defense, or the existence of merit, to [CVR’s] legal malpractice claim” is an “unusual” practice (White & Case, LLP v Suez, SA, 12 AD3d 267, 268 [1st Dept 2004]), strongly suggestive of forum shopping, and does not warrant a deviation from the first-to-file rule (cf. National Union Fire Ins. Co. of Pittsburgh, Pa. v Jordache Enters., 205 AD2d 341, 344 [1st Dept 1994]).”