Salamone v Deily & Glastetter, LLP 2025 NY Slip Op 04846 Decided on September 04, 2025 Appellate Division, First Department demonstrates how clever loan scrivining can run afoul of usury laws and backfire.

“Order, Supreme Court, New York County (Shlomo Hagler, J.), entered May 8, 2024, which granted defendants’ motion to dismiss the complaint, unanimously reversed, on the law, without costs, and the motion denied.

In his complaint, plaintiff alleges that defendants “breached their duties of care, skill, and diligence” by drafting and urging plaintiff to execute a forbearance agreement that included a provision for a “forbearance fee” that was unenforceable and made the forbearance agreement “facially usurious.” As set out more fully below, the complaint adequately pleads a cause of action for malpractice against defendants and accordingly, the motion court erred in granting the motion to dismiss.”

“On November 26, 2022, plaintiff commenced this action against D&G and Hoffman seeking damages for legal malpractice. The complaint alleges that, had defendants not drafted a facially usurious forbearance agreement and counseled plaintiff to sign it, he would have “enforced his rights under the Demand Note, and separately documented the [prior] agreement [by discussions and communications with the nonparties] to compensate Plaintiff for his lost opportunity to immediately repurchase the Apple stock he liquidated to fund the 30-day loan. Plaintiff would also not have incurred considerable legal fees expended in exhausting all possible procedural avenues to avoid, minimize, or reduce the damage caused by the usurious Forbearance Agreement that Hoffman drafted, much of which was not reimbursed to Plaintiff.”

Defendants moved to dismiss. The motion court granted dismissal for failure to state a cause of action (CPLR 3211[a][7]).

Defendants state two reasons why the motion court properly dismissed the complaint. First, defendants argue that defendants could not have committed malpractice given this Court’s previous finding that plaintiff adequately alleged a “special relationship” with the nonparties to support an estoppel defense in the earlier action. Second, defendants view plaintiff’s claim for damages as “speculative.” We reject both arguments.

Defendants’ inclusion in the forbearance agreement of an unenforceable provision that made the agreement facially usurious resulted in additional legal fees for plaintiff, a substantial portion of which have not been reimbursed. The fact that this Court previously found that plaintiff adequately demonstrated in the earlier appeal that he had a “special relationship” sufficient to make out an estoppel claim against the nonparties in the earlier action does not establish that D&G selected a reasonable strategy to accomplish plaintiff’s goals (see Dweck Law Firm v Mann, 283 AD2d 292, 293 [1st Dept 2001] [“Attorneys may select among reasonable courses of action in prosecuting their clients’ cases. . . . a purported malpractice claim that amounts only to a client’s criticism of counsel’s strategy may be dismissed”]). Indeed, the fact that defendants failed to raise the estoppel argument until after the case was before this Court strongly suggests that this was not D&G’s strategy at all, but a belated attempt to cover up their errors. Moreover, whether it was a strategy or not, the estoppel claim could not and did not result in plaintiff recouping his lost opportunity costs. Furthermore, for the reasons discussed above, contrary to defendant’s claim, this Court’s prior order does not permit plaintiff to seek the $300,000 forbearance fee under an estoppel theory.

Plaintiff in a malpractice action must ultimately prove that the attorney “failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]). “An attorney is obligated to know the law relating to the matter for which he/she is representing a client and it is the attorney’s duty, if he has not knowledge of the statutes, to inform himself, for, like any artisan, by undertaking the work, he represents that he is capable of performing it in a skillful manner” (Fielding v Kupferman, 65 AD3d 437, 440 [1st Dept 2009] [internal quotation marks omitted]). On this record, we find that D&G did not meet their obligation to exercise ordinary skill in representing plaintiff in this transaction by drafting an unenforceable provision that made the forbearance agreement facially usurious.

We also reject the argument that plaintiff’s damages claim is “speculative.” “To survive a pre-answer motion to dismiss pursuant to CPLR 3211(a)(7), a pleading need only state allegations from which damages attributable to the defendant’s conduct may reasonably be inferred” (Fielding, 65 AD3d at 442 [internal quotation marks omitted]). Here, plaintiff seeks damages to reimburse him for the counsel fees he incurred in attempting to “avoid, minimize or reduce the damage caused” by the facially usurious forbearance agreement defendants drafted and advised him to sign (see Rudolf, 8 NY3d at 443). Accordingly, plaintiff’s damages attributable to defendants’ conduct are not speculative and can be easily inferred from the complaint.”