A disciplinary violation, without more, cannot support a legal malpractice case.  The lesson of Arga Capital, Inc. v Kreiner & Kreiner LLC  February 23, 2018  Supreme Court, New York County
Docket Number: 651649/2014  Judge: Saliann Scarpulla  is that a conflict of interest coupled with demonstrable negligence can definitely support a legal malpractice claim.

“Arga is a Delaware corporation authorized to do business in New York and Alexander Gildengers (“Gildengers”) is its founder and sole shareholder. In April 2011, Arga hired K&K to represent it in connection with the creation of OMG, an online mortgage broker and lender. Arga and K&K entered into a Retainer Agreement on April 15, 2011. After assisting Arga with setting up OMG, K&K  continued to represent Arga and OMG on a variety of matters until July 11, 2013. According to Gildengers, in early 2013 OMG hoped to increase its growth substantially through a capital raise, merger, or other business combination. Gildengers avers that he discussed different business. options with Peter Kreiner (“P. Kreiner”) and received legal advice about possible transactions, including the transaction with Equity Loans LLC (“Equity”) that is the subject of this lawsuit.

In late June or early July 2013, Philip Mancuso (“Mancuso”), OMG’s Chief Executive Officer, commenced negotiations with Eddie Perez (“Perez”) of Equity for , “Equity to acquire the employees and operations of OMG (the ‘Transaction’).” Plaintiffs sought to wind down OMG’s call center business and reconstitute it within Equity. Pursuant to the Transaction, Equity was to assume OMG’s office space lease and hire certain of OMG’s employees.

In a conference call on July 3, 2013, Gildengers, Mancuso and Perez discussed the idea of moving OMG employees to Equity before the parties signed and delivered a contract memorializing the proposed Transaction. During the call, OMG and Equity reached a general, verbal agreement concerning the Transaction.

It is undisputed that as of July 3, 2013, K&K represented both OMG and Equity and helped to create the structure for the Transaction. Plaintiffs allege that they were aware of the concurrent representation but that K&K neither advised OMG that this would create a co.nflict of interest nor requested a conflict waiver.”

“K&K correctly states that violation of a disciplinary rule, without more, is not sufficient to support a legal malpractice claim. Fletcher v. Boies, Schiller & Flexner LLP, 140 A.D.3d 587, 587 (1st Dept. 2016). However, Plaintiffs here allege more than just a violation of New York Rule of Professional Conduct I. 7. Plaintiffs allege that because of the conflict, K&K negligently drafted the NDA and failed to give advice that an ordinary lawyer would give in the same circumstances, leading to OMG’s damages. ”

“The conflicting expert opinions of Hyland and Holdman raise issues of fact as to whether: 1) there was informed consent to the joint representation; 2) K&K met the applicable stand<i;rd of care and 3) the causal link between K&K’s work on the NDA and OMG’s damages. Accordingly, I deny K&K’s motion for summary judgment as to the legal malpractice claim. See Silva v. Worby, Groner, Edelman, LLP, 54 A.D.3d 634, 634 (1st Dept. 2008) (finding that lower court erred in granting summary judgment in legal malpractice action because the “conflicting deposition testimony and affidavits submitted by the parties present a material issue of fact. .. “)”

 

Exeter Law Group LLP v Immortalana Inc.  2018 NY Slip Op 01269  Decided on February 22, 2018  Appellate Division, First Department  started as a fee dispute.  It now continues into the Appellate Division as a full blown legal malpractice case with third-party defendants.  Perversely, attorneys who gave favorable affidavits to Plaintiff are now third-party defendants.

The tone of the AD opinion is strikingly different from that of Supreme Court.  “Defendants/third-party plaintiffs (hereinafter referred to as the clients) sufficiently stated a claim for legal malpractice against the firm. In particular, the clients alleged an attorney-client relationship; the firm’s failure to exercise ordinary and reasonable skill and knowledge; and damages flowing from additional costs in retaining substitute counsel to restructure the client entities so as to avoid taxes, and the cost of taxes occasioned by the improper corporate structure (see generally AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007]). The engagement letter does not conclusively establish that the services rendered by the firm were outside the scope of the engagement (CPLR 3211[a][1]).”

Homeward Residential., Inc. v Thompson Hine LLP  2018 NY Slip Op 30325(U)  February 22, 2018  Supreme Court, New York County  Docket Number: 156730/2017  Judge: Arlene P. Bluth claims that when Plaintiff was successfully sued in Georgia, its attorney failed to cite a local rule which limited punitive damages.  As a result, instead of the limited $ 250,000 it was required to pay $3M.  Sounds good so far, but why is the case in NY?

“Defendant moves to dismiss for lack of personal jurisdiction. Defendant stresses that it is a limited liability partnership organized under the laws of Ohio and its principal place of business is in Cleveland, Ohio. Defendant argues that New York has no connection to the underlying lawsuit that occurred in Georgia-defendant claims that none of its New York-based attorneys were involved in the Georgia action. Defendant concludes that it is not subject to general jurisdiction in New York.
In opposition, plaintiff points to information about defendant it found listed by the New York Department of State on its website (“DOS”) which plaintiff claims demonstrates that defendant changed its principal place of business from Cleveland to New York City. Plaintiff also points to a filing in another litigation based in New York in which defendant asserted that its principal place of business is in New York City. ”

“In reply, defendant stresses that the DOS website printouts identify defendant’s principal office within New York; it does not list its principal place of business for purposes of general jurisdiction. Defendant also notes that the firm is listed as a foreign limited liability partnership with DOS. ”

“In order to arrive at plaintiffs conclusion that defendant is actually headquartered in New York, one would have to selectively rely on information that supports plaintiffs position to the exclusion of everything else. Put another way, to embrace plaintiffs conclusion would require the Court to ignore the fact that plaintiff hired defendant to represent it in a Georgia action, paid defendant at an address in Ohio, and ignore the references to Ohio in a DOS printout which identifies defendant as aforeign registered limited liability partnership. Equitable estoppel cannot apply where plaintiff cherry-picks which information to rely on and which facts to ignore. At best, the references to New York in the DOS printouts create an issue for plaintiff to investigate regarding the location of defendant’s principal place of business before commencing the instant action. And as stated above, the principle of equitable estoppel relies on fairness and it would be inherently unfair for defendant to be subject to general jurisdiction in New York because plaintiff relied exclusively on its own interpretation of information compiled by a third party (DOS) over which defendant had no control.”

“Plaintiffs reliance on the filings of other law firms does not compel a different outcome. The question is whether it was reasonable for plaintiff to think that defendant ‘s principal place of business is in New York. How other law firms may have filled out DOS’ forms does not establish that it was reasonable for plaintiff to summarily conclude that defendant moved its headquarters to New York especially given the other facts in this case. “

The statute of limitations is well known to be 3 years for legal malpractice.  When it starts is firmly set in stone.  It starts when the mistake is made.  Continuous representation is also well known, but murkier.  In general, there must be a continuing relationship of trust and confidence between the client and the attorney with a shared understanding of the necessity of further required work with that work being undertaken by the attorney.  What happens when the client changes attorneys?  That should end the continuous representation tolling, no?

Not always.  Fulton Mkt. Retail Fish Inc. v Todtman, Nachamie, Spizz & Johns, P.C.
2018 NY Slip Op 30276(U) February 16, 2018 Supreme Court, New York County Docket Number: 151002/15 Judge: Shlomo S. Hagler discussed but did not decide what happens when law firm A is handling the case (using Attorney 1) and then Attorney 1 takes the case with him to law firm B.

“Plaintiffs were commercial tenants at Pier 17 of the South Street Seaport (“Seaport”) by virtue of certain written leases. Defendants in the Underlying Action, South Street Seaport Limited Partnership and Seaport Marketplace, L.L.C. (the “Landlord”) were plaintiffs’ landlord pursuant to certain leases and amendments between the City of New York and The South Street Seaport Corporation.

Plaintiffs commenced the Underlying Action against defendants for breach of contract alleging that they suffered lost profits as a result of the Landlord’s failure to maintain, repair, promote and/or market the Seaport.4 Defendants denied these allegations and asserted counterclaims against plaintiffs for ejectment, unpaid rent and additional rent, and for an award of attorney’s fees. Without reciting the entire lengthy history, all of the plaintiffs in the Underlying Action vacated their commercial spaces except for Simply Seafood. As such, the parties agreed in the Underlying Action to bifurcate the trial on the Landlord’s counterclaim for ejectment of Simply Seafood. The contentious litigation relating to the Underlying Action arose in 2004, continued for almost a decade, spawned more than sixty (60) motions, and culminated in a protracted trial spread over many months.”

“Todtman Nachamie argues that it is undisputed that it represented plaintiffs beginning in  August 2004 and ending in April 2005. In fact, the Amended Complaint itself specifically states
that Todtman Nachamie represented plaintiffs “in connection with matters relevant to the within
suit from approximately August, 2004 until in or around April, 2005 when the defendant RFS
commenced its representation of the plaintiffs” (Amended Complaint, 41; see Id., 40, 189-
190). Todtman Nachamie maintains that the statute of limitations expired no later than April
2008, three years after Todtman Nachamie’s representation of plaintiffs ended.
In opposition, plaintiffs argue that the continuous representation doctrine applies to·
Todtman Nachamie (McCoy v Feinman, 99 NY2d 295, 306 [2002]). The Amended Complaint
alleges that Todtman Nachamie represented plaintiffs from August 2004 until April 2005,
whereupon RFS represented plaintiffs from April 20058 until April 2012. 9 Plaintiffs rely on two
cases which apply the continuous representation doctrine to toll the statute of limitations as to a
prior law firm’s representation when attorneys from a prior firm left and moved to another firm (HNH Intl., Ltd. v Pryor Cashman Sherman & Flynn, 63 AD3d 534 [l st Dept 2009]; Waggoner v Caruso, 68 AD3d 1 [1st Dept 2009]).

Inasmuch as this Court has granted defendants’ motion to dismiss on other grounds as set
forth below, this Court need not decide whether plaintiffs’ cause of action for legal malpractice is
barred by the applicable three year statute.of limitations [CPLR 214(6)]). “

In legal malpractice, one may allege pecuniary loss only.  No emotional disturbance claims permitted.  No loss of enjoyment of life permitted.  However, this professional negligence claim was dismissed for  claiming pecuniary loss.  Lerner v Douglas Elliman Real Estate, Inc.2018 NY Slip Op 30280(U), February 15, 2018  Supreme Court, New York County  Docket Number: 154000/2013  Judge: Margaret A. Chan.    “Plaintiff seeks to recover damages she allegedly sustained from the sale of her residential condominium located at 200 East End Avenue, in the city, state, and county of New York, in December 2009, which was sold at a lesser price due to the
defendant brokers’ erroneous measurement of the unit. Defendants moved in motion sequence 002 (MS2) pursuant to CPLR 3212 to dismiss the Amended Complaint, but the action was marked off the calendar by order dated September 16, 2016, due to the suspension of plaintiffs attorney. Upon restoration of the action, defendants filed an amended notice of motion in motion sequence 003 (MS3) seeking the same relief. Plaintiff, by new counsel, opposes the motion and cross· moves to strike the note of issue, reopen discovery and leave to amend the Amended Complaint. ”

“In June 2009, plaintiff and her estranged _husband, Mark J. Lerner, who is not a party in this suit, was in the middle of divorce proceedings. On July 7, 2009, Mark Lerner, the listed owner of the apartment at 200 East End Ave, executed an exclusive real estate brokerage agreement with defendants to sell the apartment, which was the marital property, for $3,000,000 (MS2 – Pltfs Mot, Cole Aff, Exh D). Plaintiff remained in the apartment and her estranged husband was to pay the
maintenance. But, since Mark Lerner had not paid the maintenance, the Cooperative commenced eviction proceedings against plaintiff. The Cooperative and plaintiff settled the eviction matter with an agreement that plaintiff will have a contract of sale of the apartment by September 30, 2009 (MS3-Pltfs Cross-Motion, Lerner Aff at 7).

Defendants listed the apartment for sale, however, they described the apartment as having 2,471 square feet in size. In August or September 2009, plaintiff informed defendants that they had incorrectly measured the indoor square footage by 632 square feet, which diminished the 3, 103 square feet by 20%. Defendants hired an architect to remeasure the apartment on September 28, 2009 and corrected the description (id. at if 8; MS2 – Deft’s Mot, Teplitzky Aff at 8). ”

“Plaintiff asserts this negligence cause of action alleging only economic harm. As stated by the Court of Appeals, “[i]t is well settled that loss of a purely economic sort may not be compensated in a negligence . . . action.” (Schiavone Construction Co. v. Elgood Mayo Corp., 56 NY2d 667, [1982]; see Travelers Insurance Co v Ferco, Inc., 122 AD2d 718, 719 [1st Dept 1986]). Accordingly, plaintiffs first cause of action is dismissed.

Plaintiffs second cause of action is for punitive damages based on allegations of defendants’ intentional and reckless acts, along with the negligence allegations. Although plaintiff does not mention what acts warrant punitive damages, her claim essentially sounds in intentional infliction of economic harm, which New York does not recognize (see Meridian Capital Partners, Inc. v Fifth A venue 58159 Acquisition Co. LP, 60 AD3d 434, 434 [Ist Dept 2009]). Thus, plaintiffs second cause of action is dismissed. ”

 

Sun Jackie Huh v Harter, Secrest & Emery, Llp   2018 NY Slip Op 30249(U)  February 5, 2018  Supreme Court, New York County  Docket Number: 160167/2016  Judge: Anthony Cannataro presents a number of challenges to understanding the dispute.  The facts are simple enough.  Plaintiff goes to an acupuncturist, who basically loses and then breaks a needle, requiring surgical removal.  Case goes to trial against the acupuncturist  and the needle manufacturer, settles with the manufacturer and gets a modest verdict against the acupuncturist.  So far, so good.  Plaintiff then brings a Judiciary Law § 487 action against the defense attorneys.  The court dismisses on what seems to be a lack of “egregious” conduct.

“Plaintiff has failed to plead deceit or collusion sufficient to support a Judiciary Law§ 487
( 1) claim. Plaintiff effectively claims that defendants interposed and pursued a frivolous
defective product defense on behalf of their client. This is insufficient to make out a claim under Judiciary Law§ 487 (see Mintz v Rosenberg, Mine, Falkojf & Wolff, LLP, 53 Misc 3d 132(A),
2016 NY Slip Op 51388[U] [App Term, pt Dept 2016] [“The allegations that defendants filed a
certificate of merit and/or a note of issue in the prior action when they lacked sufficient
supporting medical expert opinion were not ‘sufficiently egregious’ to support (a Judiciary Law§
487) claim”]). Moreover, even accepting for purposed of the motion that there was no merit to
the defective product theory against DBA (with whom plaintiff settled for $25,000), and
defendants knew it lacked merit, as the pleadings in the underlying action make clear, the
defendants imposed no such defense. They merely interposed a contingent cross claim that
sought, in the event plaintiff was successful in establishing DBA’s liability, to shift some portion
of the responsibility for plaintiffs injury to codefendant DBA on a theory plaintiff pleaded. The
fact that defendants, for economic or strategic reasons, chose not to hire an expert on the issue,
and, by plaintiffs own admission in the complaint (,-f ,-f 12, 15), did little to pursue the defective
product theory, does not alter the analysis. It was not defendants’ burden to prove a defective
product theory that plaintiff alleged against DBA. The fact defendants may not have vigorously
pursued the cross claim and relied solely on Yi’s testimony that he believed the needle was
defective, and the trial court consequently took the question away from the jury, does not make
out a cause of action under Judiciary Law§ 487. “

Attorneys irritate people all the time, and irritated people act.  Dawson v Adam Leitman Bailey P.C.  2018 NY Slip Op 30224(U)  February 8, 2018  Supreme Court, New York County
Docket Number: 152112/2017 Judge: Robert D. Kalish  is an example of how irritation can lead to litigation which fails.

“Dawson alleges that he resided from August 29, 2015, to ·August 28, 2016, in a building located at l 00 Maiden Lane, New York, New York 10038 and owned by non-party Lalezarian Properties LLC  (“Lalezarian”). Dawson further alleges that Desiderio emailed Bailey and Dawson on September 7, 2016, attaching a letter from Bailey to Dawson dated September 7, 2016. Dawson further alleges that the letter accused Dawson of creating and owning “lalezarianfraud.com” (specifically, the letter states that “Lalezarian has reason to believe … that [Dawson is] the creator and owner”) and using the website to disseminate false and defamatory statements. (Complaint~ 11.) The letter then allegedly demanded that Dawson take the website down and stated that legal action would commence against Dawson if this was not done.

Dawson alleges that the allegations in the September 7, 2016 letter are “materially false” and unsubstantiated (Id. ~ 12.) ”

“Dawson asserts four causes of action in the Complaint. The Court dismissed the first, third, and fourth causes of action as against Defendants per its decision on the record at the oral argument for the reasons set forth below.

The first cause of action, alleging violations under Judiciary Law § 487, fails to state a cause of action because Defendants did not commence any litigation. Judiciary Law § 487 states that:
“An attorney or counselor who:
1. Is guilty of any deceit or collusion, or consents to any deceit or collusion,
with intent to deceive the court or any party; or,

2. Wilfully delays his client’s suit with a view to his own gain; or, wilfully
receives any money or allowance for or on account of any money which he
has not laid out, or becomes answerable for,
Is guilty of a misdemeanor, and in addition to the punishment prescribed
therefor by the penal law, he forfeits to the party injured treble damages, to
be recovered in a civil action.”

Here, any alleged deceptive conduct by Defendants did not occur during a pending proceeding in which Dawson was a party. (See Sun Graphics Corp. v Levy, Davis & Maher, LLP, 94 AD3d 669, 669 [I st Dept 2012], citing Stanski v Ezersky, 228 AD2d 311, 313 [1st Dept 1996].) As such, the first cause of action fails to state a cause of action and is dismissed.

The third cause of action, alleging malpractice, is not applicable because there is no privity or near-privity between Dawson and Defendants. “New York courts impose a strict privity requirement to claims of legal malpractice; an attorney is not liable to a third party for negligence in performing services on behalf of its client. Thus, absent an attorney-client relationship, a cause of action for legal malpractice cannot be stated.” (Federal Ins. Co. v North American Specialty Ins. Co., 47 AD3d 52, 59 [1st Dept 2007].) Here, Dawson and Defendants were not in an attorney-client relationship, and no such relationship is alleged, nor can one be gleaned from the Complaint. As such, the third cause of action fails to state a cause of action and is dismissed.

The fourth cause of action, alleging intentional infliction of emotional distress, is duplicative of Dawson’s second cause of action, for defamation. (See Matthaus v Hadjedj, 148 AD3d 425, 425 [I st Dept 2017].) Even assuming for the sake of argument that Dawson alleges emotional distress caused by something other than Defendants’ alleged defamation (as discussed more fully below), Dawson still has no cause of action for intentional infliction of emotional distress.”

Plaintiff’s legal malpractice case rested on whether the attorneys were required to give the client any advice on the purchase of a very expensive apartment.  With $ 9.8 Million at stake, and the sponsors changing the “deposit” into a “gift” and a “loan” was there any malpractice?

Riviera Prop. Holdings, LLC v Ferber Chan Essner & Coller, LLP  2017 NY Slip Op 27424
Decided on July 31, 2017  Supreme Court, New York County  Billings, J. tells us that:  “Section 4.1 of the purchase agreement provided that the condominium unit’s purchase price was $9,850,000.00 and that the deposit was $985,000.00, 10% of the purchase price. In connection with the purchase, plaintiff, whose members were nonparties Neil Yaris, Alan Green, and Wendy Maitland, executed the second and third riders to the purchase agreement regarding the 10% deposit required by the agreement. The riders provided for payment of the deposit to the sponsor and its controlling owners, instead of the escrow agent as the purchase agreement specified. Specifically, the second rider required plaintiff to pay a non-refundable deposit of 1% of the purchase price to the sponsor itself. The third rider required plaintiff to pay a deposit of the remaining 9% of the purchase price by making a loan to the sponsor’s majority owner and the majority owner’s individual members Marc Jacobs and Ira Shapiro.

Plaintiff contends that defendants committed legal malpractice by failing to advise plaintiff that the arrangement to pay the deposit directly to the sponsor and its controlling entity and individuals instead of to an escrow agent was void under the applicable statute and regulations. NY Gen. Bus. Law (GBL) § 352-h; 13 N.Y.C.R.R. § 20.3(o)(2) and (3)(xii). Defendants do not dispute that, had plaintiff’s deposit complied with the law, plaintiff would have recouped its deposit from the escrow agent when plaintiff invoked its right to rescind the purchase and the sale never closed. Defendants contend that the statute and regulations were inapplicable and that plaintiff’s members were aware that the deposit arrangement with the sponsor posed heightened risks.”

“To determine whether an offering of condominium units for sale is public, the court considers the offering’s circumstances, including the number of purchasers, their relationship to each other and to the sponsor, the information about the sponsor available to purchasers, and whether their relationship with the sponsor substituted for the statutory protections. People v. Landes, 84 NY2d 655, 661-62 (1994). A small number of investors and lack of advertising indicate that an offering is not public. Roni LLC v. Arfa, 74 AD3d 442, 443 (1st Dep’t 2010), aff’d, 18 NY3d 846, 848-49 (2011).

Susan Green’s testimony regarding use of the “friends and family” deal does not indicate that it was necessarily an insider deal. Her testimony described both how she was permitted to implement the same process for purchase of the building’s units for any “friends,” who were undefined, as well as family members, and how other brokers, including Wendy Maitland, were permitted to do likewise.

Nor does the deposition testimony by Neil Yaris, Alan Green, and Wendy Maitland, who formed plaintiff for the purpose of purchasing the unit, undermine the offering’s public character, as their testimony nowhere indicates a long or close relationship or a history of many past dealings either among themselves or with the sponsor. People v. Landes, 84 NY2d at 662. The testimony by Neil Yaris and Alan Green indicated a desire to work with the sponsor, but not any familiarity with the sponsor or its managers or members. See id. at 663. Although Wendy Maitland worked as a broker for Brown Harris Stevens, which had entered an exclusive sales agreement with Slazer Enterprises, she largely left negotiations for the purchase of plaintiff’s unit to Neil Yaris and Alan Green. Finally, the testimony by all three of plaintiff’s members revealed no knowledge of the purchasers of any other units in the building. See id. In sum, although factual issues whether the offering was public would preclude summary judgment in plaintiff’s favor, Clark Const. Corp. v. BLF Realty Holding Corp., 54 AD3d 604, 605 (1st Dep’t 2008), defendants’ evidence, recounted above, shows no such issues.”

“Yaris’s uncontradicted affidavit that he would not have agreed to the terms of the transaction he entered for plaintiff, had he known that a statute and regulation prohibited the transaction on those terms, establishes that defendants’ failure to provide that advice proximately caused plaintiff’s damages from the transaction. Russo v. Rozenholc, 130 AD3d 492, 497 (1st Dep’t 2015). See Heritage Partners, LLC v. Stroock & Stroock & Lavan LLP, 133 AD3d 428, 429 (1st Dep’t 2015); Candela Entertainment, Inc. v. Davis & Gilbert, LLP, 126 AD3d 656, 656 (1st Dep’t 2015); Stackpole v. Cohen, Ehrlich & Frankel, LLP, 82 AD3d at 610. Defendants neither dispute that plaintiff retained them to represent it in purchasing the condominium unit and thus to provide advice applicable to the purchase, nor contradict Yaris’s testimony that he would have followed any advice by plaintiff’s attorneys to keep its deposit in escrow.

For plaintiff to recover its damages caused by legal malpractice, the damages sustained must be more than mere speculation. Gallet, Dreyer & Berkey, LLP v. Basile, 141 AD3d 405, 406 (1st Dep’t 2016); Heritage Partners, LLC v. Stroock & Stroock & Lavan LLP, 133 AD3d at 428; Engelke v. Brown Rudnick Berlak Israels LLP, 111 AD3d 444, 444 (1st Dep’t 2013); Hass & Gottlieb v. Sook Hi Lee, 55 AD3d 433, 433 (1st Dep’t 2008). Defendants’ failure to advise plaintiff of the impact of the statute and regulation transformed plaintiff’s non-refundable deposit into a gift and the loan into a simple loan, instead of a deposit toward purchase of the unit. The failure to place the deposit into escrow eliminated any recourse for plaintiff to recoup its deposit. Plaintiff’s loss of its deposit and its expenses in endeavoring to recover the deposit constitute its damages. See Hass & Gottlieb v. Sook Hi Lee, 55 AD3d at 433.”

 

 

Professionals such as doctors, lawyers, architects, engineers, can be held for tort.  Others, almost never.  But, what is the difference when they are being sued?  Dormitory Auth. of the State of N.Y. v Samson Constr. Co.  2018 NY Slip Op 01115  Decided on February 15, 2018  Court of Appeals DiFiore, Ch. J. with its two dissenting opinions, does not exactly clear up the issue.

“The two questions on this appeal are whether plaintiff City of New York (the City) is an intended third-party beneficiary of the architectural services contract between plaintiff Dormitory Authority of the State of New York (DASNY) and defendant Perkins Eastman Architects, P.C. (Perkins) and whether DASNY’s negligence claim against Perkins is duplicative of its breach of contract claim. We hold that summary judgment should have been granted in defendant Perkins’ favor on both issues.”

“”It is a well-established principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated” (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987]). Put another way, where the damages alleged “were clearly within the contemplation of the written agreement . . . [m]erely charging a breach of a duty of due care,’ employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim (70 NY2d 390).

We have also recognized that “[a] legal duty independent of contractual obligations may be imposed by law as an incident to the parties’ relationship” and that several types of defendants — including professionals — can be held liable in tort “for failure to exercise reasonable care, irrespective of their contractual duties” (Sommer v Federal Signal Corp., 79 NY2d 540, 551 [1992]). In certain circumstances, this independent duty has been imposed based on the nature of the services performed and the defendant’s relationship with its customer — specifically, where the defendant “perform[s] a service affected with a significant public interest [and where the] failure to perform the service carefully and competently can have catastrophic consequences” (79 NY2d at 553). To determine whether a tort claim lies, we have also evaluated the nature of the injury, how the injury occurred and the harm it caused (see 79 NY2d at 552). However, we have made clear that “where plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract theory” (79 NY2d at 552).

Here, the negligence allegations in the complaint are, as we held in Clark-Fitzpatrick, “merely a restatement, albeit in slightly different language, of the implied’ contractual obligations asserted in the cause of action for breach of contract” (70 NY2d at 390). Indeed, as noted above, in this case, the factual allegations set forth in each cause of action are identical, except that the negligence claim is framed in terms of Perkins’ failure to comply with professional standards of care. Moreover, despite the fact that the complaint seeks an additional unspecified $4 million in damages under the negligence cause of action, it fails to include a single allegation that contains any distinction between the damages applicable to either claim. The only damages alleged under either theory of recovery are the additional expenses required to complete the project, including the costs to repair the damage to adjacent structures. Significantly, in the contract itself, the parties contemplated Perkins’ responsibility for additional costs or expenses incurred by DASNY or the Client (in effect, the City) as a result of the architect’s design errors or omissions, and addressed it in the contract terms. Likewise, during discovery, the total amount of damages was detailed by DASNY, with no distinction between the “additional expenses” incurred based on one claim or the other.”

Clearly, there are circumstances where a professional architect may be subject to a tort claim for failure to exercise due care in the performance of contractual obligations. In seeking to “disentangl[e] tort and contract claims,” we focused in Sommer both on potential catastrophic consequences of a failure to exercise due care and on the nature of the injury, the manner in which it occurred, and the resulting harm (79 NY2d at 552). We distinguished between the situation where the harm was an “abrupt, cataclysmic occurrence” not contemplated by the contracting parties and one where the plaintiff was essentially seeking enforcement of contract rights (79 NY2d at 552). Here, the C & D building settled during the course of several months, damaging adjacent structures. However, even if any “abrupt” or “catastrophic” consequences either could have or did result from Perkins’ alleged negligence, the fact remains that the only damages alleged appear to have been within the contemplation of the parties under the contract — and, indeed, as set forth above, are identical for both claims. Put another way, there was no injury alleged here that a separate negligence claim would include that is not already encompassed in DASNY’s contract claim. In these circumstances, DASNY “is essentially seeking enforcement of the bargain, [and] the action should proceed under a contract theory” (Sommer, 79 NY2d at 552). Thus, we hold that the negligence claim is duplicative of the breach of contract cause of action and Perkins’ motion for summary judgment to dismiss that cause of action should have been granted.”

From the Dissent

“New York recognizes a distinct claim for professional malpractice and allows parties to pursue simultaneously a professional malpractice claim and a breach of contract claim (see Santulli v Englert, Reilly & McHugh, 78 NY2d 700 [1992]); Sears, Roebuck v Enco, 43 NY2d 389 [1977]; see also Robins v Finestone, 308 NY 543 [1955]). That is because, as the majority recognizes, a tort claim may be maintained in addition to a contract claim where there is a “breach of a legal duty independent of the contract” (see Sommer v Federal Signal Corp., 79 NY2d 540, 551 [1992]). Such an independent legal duty “may be imposed by law as an incident to the parties’ relationship. Professionals, common carriers and bailees, for example, may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties” (id.). Under the clear language of Sommer, architects, by their status as professionals, have the requisite independent legal duty. Of course, a contract might incorporate that duty and the standards of professional negligence, and might or might not include other requirements. Whether the contract includes terms beyond the duty of care owed by a professional in the field, a plaintiff can elect to bring a claim for professional malpractice, breach of contract, or both.

In Santulli, we reversed the Appellate Division’s grant of summary judgment on plaintiff’s breach-of-contract claim, allowing him to proceed at trial on both a legal malpractice and a breach-of-contract claim arising from the same alleged misfeasance, rejecting defendant’s argument that a breach-of-contract action may lie against a professional only where “there is either a specific promise by the attorney to perform and there is a complete failure of any performance or where the attorney has undertaken a specific task and has failed to perform that task” (78 NY2d at 706). In Sears, Roebuck, although the case came to us on a motion to dismiss, not a motion for summary judgment, we held that “inasmuch as the relationship between Sears, Roebuck as property owner and Enco Associates as architects had its genesis in the contract between them . . . the owner may recover contract damages against the architects either on the theory of breach of a particular contract provision or on the theory of failure to exercise due care in the performance of the contract services” (43 NY2d at 392-393).

Contrary to the majority’s contention, Brushton-Moira Cent. School Dist. v Thomas Assoc. (91 NY2d 256 [1998]) has nothing to do with a plaintiff’s ability to bring both claims simultaneously. The sole issue in that case [*3]was whether damages should be measured at the time of breach or the time of trial. Moreover, the majority mischaracterizes the Appellate Division’s decision in that case. The Appellate Division did not hold — or even suggest — that a party may not simultaneously pursue both a malpractice claim and a contract claim through the conclusion of trial. Instead, the plaintiff in Brushton-Moira had pursued both such claims through trial. Supreme Court denied recovery to the plaintiff on both theories. The Appellate Division reversed and awarded judgment to the plaintiff on its contract claim, and held that, because the proof and damages on the malpractice claim were identical, the plaintiff was not aggrieved by Supreme Court’s dismissal of the malpractice claim, because recovery on the contract claim fully compensated the plaintiff (195 AD2d 801, 801-802 [3d Dept 1993]; see Parochial Bus Sys., Inc. v Bd. of Educ. of City of New York, 60 NY2d 539, 544 [1983] [“Generally, the party who has successfully obtained a judgment or order in his favor is not aggrieved by it, and, consequently, has no need and, in fact, no right to appeal”]). Thus, Brushton-Moirasupports DASNY’s ability to pursue both theories through the completion of trial, and certainly contains no implication that a pretrial dismissal on the ground of duplication is appropriate. Today’s decision cannot be squared with our prior precedents.”

A decade long real estate litigation which eventually ends in a legal malpractice case with sanction hearings.  This particular decision is about whether the judge who presided over the 10 year long real estate case should then have recused himself in the subsequent proceedings.

If Fulton Mkt. Retail Fish Inc. v Todtman, Nachamie, Spizz & Johns, P.C.  2018 NY Slip Op 01038  Decided on February 13, 2018 Appellate Division, First Department teaches us anything, it is that legal malpractice cases ratchet up the stakes and the atmosphere, and can lead to strong emotional responses from bench and bar.

“The court acted within its discretion in denying plaintiffs’ motion for leave to renew their recusal motion (see People v Moreno, 70 NY2d 403, 405 [1987]; People v Glynn, 21 NY3d 614, 618-619 [2013]; Mehulic v New York Downtown Hosp., 140 AD3d 417 [1st Dept 2016]; CPLR 2221[e]). The new facts arising from the court’s conduct at three hearings that post-date the filing of the prior recusal motion would not change the prior determination (CPLR 2221[e][2], [3]). No bias is demonstrated by the court’s comments upon learning of the grounds for the recusal motion and its conduct at oral argument on that motion and at the sanctions hearing, either standing alone or in combination with credibility rulings in the landlord-tenant litigation that gave rise to the instant legal malpractice action and that were cited in the prior recusal motion. The court was at times annoyed by plaintiffs’ counsel’s disrespectful attitude and by the grounds raised in the recusal motion, which plaintiffs never proved or adequately investigated. However, the record does not demonstrate that the court was so vexed that it could not be impartial (22 NYCRR 100.3[E][1]; see Liteky v United States, 510 US 540, 555-556 [1994]; Hass & Gottlieb v Sook Hi Lee, 55 AD3d 433, 434 [1st Dept 2008]; People v A.S. Goldmen, Inc., 9 AD3d 283, 285 [1st Dept 2004], lv denied 3 NY3d 703 [2004]). The court also acted within its discretion in ordering a sanctions hearing to ascertain whether the recusal motion was frivolous (see 22 NYCRR 130-1.1[a], [c]; see also 22 NYCRR 130-1.1[a][b]).

Plaintiffs’ claims are undermined by the fact that, while they argue that the court made biased rulings in the underlying landlord-tenant litigation, they never moved for recusal in that lawsuit, which lasted over a decade (see Glatzer v Bear, Stearns & Co., Inc., 95 AD3d 707 [1st Dept 2012]). Even after the same justice was assigned to the instant action, plaintiffs did not move for recusal until 10 months after the case commenced, and then only after the court, at oral argument on a motion to dismiss, questioned the viability of plaintiffs’ legal malpractice claim on collateral estoppel grounds.”