Arbitration clauses in professional malpractice settings are not absolute, but they can be very persuasive to Courts.  When presented with defenses to an arbitration clause, or to other clauses contained in the agreement between client and professional, the Court may take up the issue and decide it, or it can send the issue to the arbitrator, as it did in Collins Bros. Moving Corp. v Pierleoni  2017 NY Slip Op 07586  Decided on November 1, 2017  Appellate Division, Second Department.

“On April 3, 2014, the plaintiffs commenced this action against Anchin, Phillip M. Ross, CPA, Christopher Kelly, CPA, Daniel Stieglitz, CPA, Vera Krupnick, CPA, Riz Ann F. Diva, CPA, Bridget Kralik, CPA, Amy Berger, CPA, and David Albrecht, CPA (hereinafter collectively the accounting defendants), among others, to recover damages for professional negligence, fraudulent concealment, aiding and abetting fraud, breach of fiduciary duty, breach of contract, violation of General Business Law § 349, and negligent misrepresentation. The accounting defendants moved pursuant to CPLR 7503(a) to, inter alia, compel mediation and arbitration of the causes of action asserted against them, pursuant to an arbitration provision in the letter agreements, and to bar the plaintiffs from “alleging any cause of action in arbitration based upon any events that occurred prior to April 3, 2011.” In opposition to the accounting defendants’ motion, the plaintiffs argued, among other things, that the limitations period was tolled by the continuous representation doctrine. By order dated February 18, 2015, the Supreme Court, inter alia, granted the accounting defendants’ motion, providing, among other things, that “any claims against the accounting defendants arising before April 2011 are barred from being heard in the mediation or arbitration.” The plaintiffs appeal.”

“Here, in opposition to the accounting defendants’ motion to bar arbitration of claims that were untimely under the three-year limitations period provided in the letter agreements, the plaintiffs did not contend that the accounting defendants had failed to meet their prima facie burden. Instead, the plaintiffs relied entirely on the continuous representation doctrine. In so doing, the plaintiffs alleged, in conclusory fashion, that “[t]he parties mutually contemplated ongoing representation following each annual review,” and that Anchin “had a continuing obligation to remedy defects in any consolidated financial statements.” The plaintiffs also submitted an affidavit of Webers, in which he averred, without any specificity, that “[r]evisions of prior years[‘] financial statements were routinely performed.” The plaintiffs’ evidence failed to raise a question of fact as to whether the limitations period contained in the letter agreements was tolled by the continuous representation doctrine (see Williamson v PricewaterhouseCoopers LLP, 9 NY3d at 9; Cusimano v Schnurr, 137 AD3d 527, 531; cf. Stein Indus., Inc. v Certilman Balin Adler & Hyman, LLP, 149 AD3d at 790; Bronstein v Omega Constr. Group, Inc., 138 AD3d 906, 908; Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d at 196). Thus, the Supreme Court correctly determined that the continuous representation doctrine was inapplicable.

The accounting efendants failed, however, to submit any evidence that would have established which of the plaintiffs’ causes of action were untimely. The letter agreements provided [*2]for a three-year limitations period, as follows: “No action, regardless of form, arising out of the services under this agreement may be brought by either of us more than three years after the date of the last services for the year in dispute provided under this agreement.” Because the record before us does not establish the relevant “last services” dates, the determination of those dates and the consequent timeliness of the plaintiffs’ various causes of action must be made in further proceedings.”

Mistakes, mistakes, shoddy performance!  This is what malpractice cases are all about.  However, litigation over these issues is rarely simply about the mistake.  It’s the surround that matters so much more.  The “surround” ?  What we mean by this is the more subtle issues such as proximate cause, professional strategy, etc. Vitale v Koenig  2017 NY Slip Op 51557(U)  Decided on October 12, 2017  Supreme Court, New York County  St. George, J. illustrates this concept.

“The undisputed facts, which this Court has condensed from its decision in motion sequence 004, are as follows: In late 2001, Joseph Vitale formed a company which he named Titan Electrical and Elevator Contracting Company (Titan I).[FN1] Mr. Vitale was the sole owner of the company. In December 2004, Mr. Vitale formed Titan Electrical Company of New York (Titan II). The business became operational after, on August 31, 2005, Mr. Vitale and Mr. Sonzone entered into a partnership. In his capacity as an electrician, Mr. Vitale’s business had worked with Mr. Sonzone’s and his general contracting business Sunrise Contracting. The parties’ partnership agreement provided that the partners would divide the shares of the company and its profits and liabilities equally. Mr. Sonzone took charge of the administrative and financial aspects of the corporation, contributing funds as necessary. The parties agreed that, in addition, Mr. Sonzone would give money to Mr. Vitale and Titan I so that the company could clear up its debts and pay back taxes. The parties dispute whether this money was a loan or was part of the agreement that Titan II would pay the expenses and liabilities of Titan I. In March 2007 Titan II ceased its operations.

At some point after the dissolution of Titan II, the former partners accused each other of fiscal improprieties and numerous other violations of the agreement. Each alleged that, through a variety of methods, the other diverted profits from Titan II and placed them into his own hands. In Vitale v Sonzone (Index No. 111440/2011 [Sup Ct NY County]), Mr. Vitale and Titan II sue [*2]Mr. Sonzone, his contracting business, and other defendants.

The current lawsuit, which is joined for discovery purposes with Vitale v Sonzone, is against Mr. Koenig, who was Titan II’s accountant. Here, plaintiffs assert that in June 2007 Mr. Vitale asked defendant to perform an accounting of Titan II. Plaintiffs states that in response Mr. Vitale simply received a few pages of handwritten notes with the title “Audit.” Allegedly, Mr. Koenig conceded that he did not review the corporate American Express card bills, which would have shown whether Mr. Sonzone made personal charges or otherwise improper charges on his corporate card, along with other bills from the company. Instead, he stated that he relied entirely on the limited papers Mr. Sonzone had provided to him. Moreover, plaintiffs state, defendant refused to evaluate these other charges when Mr. Vitale provided him with the pertinent records. Plaintiffs claim that defendant received more than $7,000.00 for his improper tax and audit work. Justice Billings, who formerly presided over this case, issued an order in 2011 which dismissed plaintiffs’ second, third, and fourth causes of action. Thus, all that remains are the first cause of action, for professional negligence and accounting malpractice, and the third cause of action, for aiding and abetting Mr. Sonzone’s breach of fiduciary duty. Plaintiffs seek damages of at least $120,000.00.”

“In Schmidt v One New York Plaza (153 AD3d 427, 428 [1st Dept 2017]), the First Department reaffirmed the standard of review for a summary judgment motion:

On a motion for summary judgment, the moving party has the initial burden of establishing its entitlement to judgment as a matter of law with evidence sufficient to eliminate any material issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1985]). The facts must be viewed “in the light most favorable to the non-moving party” (Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]). Summary judgment should not be granted where there is any doubt as to the existence of triable issues or there are any issues of fact (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

Utilizing this standard, the Court dismisses plaintiffs’ first cause of action. A claim of accounting malpractice or negligence not only “requires proof that there was a departure from accepted standards of practice” but requires a showing “that the departure was the proximate cause of the injury” (D.D. Hamilton Textiles, Inc. v Estate of Mate, 269 AD2d 214, 215 [1st Dept 2000]). Absent a showing of proximate cause, the case for professional negligence must be dismissed (See Charlap v BDO Seidman, 251 AD2d 146, 147 [1st Dept 1998]). Here, defendant [*4]persuasively argues that the claim relating to the 2007 “audit” occurred after the alleged misappropriations of funds and dissolution of the company. Thus, the Court need not reach the issue of defendant’s competence with respect to the 2007 audit.

As for the alleged malpractice relating to the tax returns, defendant was entitled to rely in good faith on the records his clients provided to him, without the need for verification (CFR § 10.34 [d]). Plaintiffs have not set forth facts that show defendant, who was hired by Titan II in a limited capacity, should not have trusted the Quickbooks which Mr. Sonzone provided. In fact, Mr. Vitale himself did not mistrust Mr. Sonzone initially.

Moreover, plaintiffs’ third cause of action must be dismissed because plaintiffs have not raised more than speculative allegations of collusion (See Lichtman v Mount Judah Cemetery, 269 AD2d 319, 321 [1st Dept 2000]). The questions of fact plaintiffs allege relate to the accounting system Mr. Sonzone employed and to the use of credit cards and the payroll system. These were not within the control of defendant, who prepared the taxes but did not create the accounting system for the company. Nor is he chargeable with knowledge simply because Mr. Sonzone retained him for tax services for himself and some of his other businesses.”

For a well written discussion of the elements of continuous representation, we suggest that RJR Mech. Inc. v Ruvoldt  2017 NY Slip Op 31232(U)  June 8, 2017  Supreme Court, New York County  Docket Number: 158764/2015  Judge: Jeffrey K. Oing serves as a prime example.

” As in the first action, the. complaint in the second action alleges that the Norwest Bank action resulted in a private auction iri which the Maspeth Property was sold, with the proceeds distributed· pursuant to a co~rt order: $424,790.42 to plaintiff and $1,450,992.89 to EMV, the prior owner of the Maspeth Property (Verified Complaint.”

“Plaintiff’s new allegations are as follows. Plaintiff alleges that not only did Ruvoldt represent it in the Norwest Bank action,.but he also represented it in another action commenced in 2004 against it and related to the Maspeth Property: EMV Realty Corp. v RJR MechanicaL- Inc., ‘Index No. 14778/2004 (Sup Ct, Queens County) (the “EMV Realty actionn). Plaintiff alleges it retained Ruvoldt to represent it and one of its principalsj Roy Leibo~itz (“Leibowitzn) in the EMV Realty a6tion (Verified Complaint, !! 14-15). The EMV Realty action has laid dormant since 2005, save for a single 2011 substitution of counsel ”

“Notwithstanding the motion to withdraw, plaintiff further alleges that defendants continued representing it and that on March 8, 2011 Espinosa informed Karpman of his continuing discussion with counsel concerning an extension of the time to appeal and settle the Nortwest Bank action (Verified Complaint, ‘1I 28) .· Plaintiff contends that this allegation is also supported by a March 7, .2011 letter sent from Espinosa to Karpman and Leibowitz stating that defendants would take steps to “protect” plaintiff’s rights (Pl. Memo of Law in Opp., p. 6; Espinosa Affirm., Ex. E). ”

“Pursuant to CPLR 214(6), an action for legal malpractice must be commenced within three years from the date of accrual (Shumsky v Eisenstein, 96 NY2d 164, 166 [2001]). A legal malpractice claim accrues when relief can be obtained in court (McCoy v Feinman, 99 NY2d 295, 301 [2002]) and from the time the actual injury stemming from the malpractice occurs, not when it is discovered (Id.). Here, defendants argue that any alleged failure to prepare for trial would have had to occur befor~ July 30, 2010, which is when the Supreme Court, Queens County, issued its distribution decision. Defendants argue that because more than three years elapsed between July _2010 and the filing of RJR’s first action on March 14, 2014, the failure to prepare allegation is time-barred by the statute of limitations. ”

“The continuous representation doctrine, which is the offspring of the continuous treatment doctrine, recognizes that a layperson seeking legal assistance “[h]as a right to repose confidence ~n the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services· are rendered” (Greene v Greene, 56 NY2d 86, 94 [1982]; Matter of Lawrence, 24 N~3d 320, 342-343 [2014]). “The continuousrepresentation doctrine tolls a statute of limitations where there is a mutual understa~ding of the need for further representation on the specific subject matter underlying the malpractice claim” (Zorn v Gilbert, 8 NY3d 933, 934 [2007] [internal quotations and citations omitted]). The two prerequisites needed to invoke a continuous representation toll are 1) a claim of misconduct regarding the mann~r in which the profession~l services were performed,· and 2) the ongoing provision bf professional services.with respect to the contested matter or transaction (Matter of Lawrence, 24 NY3d at 342). The ongoing representation must be specifically related to the matter in which the attorney committed the alleged malpractice (Id.; Johnson v Proskauer Rose LLP, 129 AD3d 59, 68 [1st Dept 2015]). The continuous representation doctrine is inapplicable where “plaintiff’s allegations establish defendant[s’] failures within a continuing professional relationship, not a course of representation as to the particular problems (conditions) that gave rise to plaintiff’s malpractice claims” (Id. at 341-342 [internal quotations and citations·omitted]). ”

“To the extent plaintiff relies on the EMV Realty action to toll the statute of limitations, plaintiff’s arguments are unavailing. Since 2011, when Loanzan Sheikh was substituted as · counsel, ther~ has been no activity in the EMV Realty action and, prior to that, since 2005, there had been no activity before the substitution. Contrary to plaintiff’s assertion, it would not have been under the reasonable belief that defendants were / actively representing it in the EMV Realty action. Further, and more import~ntly, in order for a legal malpractice claim to be subject to the continuous representation toll, the ongoing representation must be directly linked to the alleged malpractice. Given that plaintiff has failed to plead with sufficiency that the EMV Realty action is related to the underlying allegations of legal malpractice, the continuous representation doctrine cannot be transferred to the second action based on the EMV Realty action. Based on the foregoing, plaintiff’s legal malpractice claim is time-barred. ”

 

A simple fact pattern.  Customer comes to store, is offered valet parking.  Customer gives car to valet driver, who proceeds to strike a pedestrian.  Who may be responsible and how do the liabilities of the store, the valet service, the valet driver interact?

Berger v Rokeach  2017 NY Slip Op 27374  Decided on November 20, 2017  Supreme Court, Kings County  Silber, J. answers these questions with a strong degree of specificity.  The lesson here is how to protect the store.  What might the attorneys have done in the contract process, and how might it have later protected the store?

“On February 17, 2015, Berger, a pedestrian, sustained personal injuries when he was struck by a vehicle owned by defendant Rokeach and operated by defendant Clark C. McNeil (McNeil), a valet parking attendant who was providing valet parking for customers of “Breadberry,” a supermarket at 1689 60th Street in Brooklyn (Breadberry Market). The accident occurred at the intersection of 12th Avenue and 62nd Street in Brooklyn when McNeil was returning Rokeach’s vehicle to the Breadberry Market from the valet parking lot a few blocks away. At the time of the accident, Steven Pittsley (Pittsley), another valet parking attendant, was a passenger in the vehicle driven by McNeil.”

“The court notes that the “alter ego” doctrine has been applied to “pierce the corporate veil” between an individual and a corporation as well as between corporations and between LLCs or a combination thereof: the primary factor is control, and other factors considered include, but none are dispositive: overlap in ownership/officers/ directors; common office space /telephone numbers/personnel; absence of corporate formalities; inadequate capitalization; and payment of obligations interchangeably between the entities.[FN9]

Second, the Appellate Division, Second Department has held that a restaurant that provided valet parking services can be held liable for the negligence of a valet parking company and its valet parking attendants who are alleged to have caused an accident in which a pedestrian was killed, even where the restaurant contracted with an independent contractor which employed the valet parking attendants (see Spadero v Parking Systems Plus, Inc., 113 AD3d 833). Movant’s attempt to distinguish this case from Spadero is erroneous. The court in Spadero clearly states, contrary to counsel for Breadberry’s interpretation, “the submissions of [the restaurant and the parking company] defendants presented triable issues of fact as to whether [the restaurant] could be held liable for the negligence, if any, of [the parking company] (Id. at 835-386).”

“Here, the court finds that Breadberry’s duty with regard to the plaintiff, a third-party, is somewhat different than its duty to Rokeach, its customer. With regard to the plaintiff’, who was [*5]a pedestrian crossing a street, as the entity in control of the supermarket and its parking lot a few blocks away, Breadberry had a duty to exercise reasonable care in maintaining its properties in a reasonably safe condition and to have taken reasonable measures to control the foreseeable conduct of parties on the property with whom they contracted, that is, the parking attendants, to prevent them from either intentionally harming or creating an unreasonable risk of harm to others. This includes both their customers and the pedestrians who were anticipated to walk in the area where Breadberry’s agents or employees were working. (See Di Ponzio v Riordan, 89 NY2d 578 [1997]; Basso v Miller, 40NY2d 233 (1976); Jaume v Ry Mgt. Co., 2 AD3d 590 [2d Dept 2003]).

This duty arises when there is an ability and opportunity to control the conduct of its contractors, and an awareness of the need to do so. Id. Certainly that is the case here. By contrast, when a child visiting a patient with his parent ran into a patient at a medical facility and knocked her to the ground, the facility demonstrated that it did not have the ability to control the conduct of the child. Hillen v Queens Long Is. Med. Group, P.C., 57 AD3d 946 [2d Dept 2008].

Defendant Breadberry claims that it contracted out its valet parking service, did not pay any attention to the people hired by the subcontractor, and did not supervise, control or in any way involve itself in the work of the valet parking service offered to its customers. This does not make out a prima facie case for dismissal of the plaintiff’s complaint. To assert that the supermarket signed a contract with a parking company and then essentially covered its eyes with a blindfold is not a basis for summary judgment dismissing the complaint. Breadberry was obligated to exercise due care in “the execution of the contract” which, here, refers to selecting a company with, at the minimum, both appropriate insurance and competent drivers. From the documents in the record, it is clear that Royal Parking executed its subcontract with Meg before it executed its contract with Breadberry. Both contracts are on Royal stationery, and each are essentially one paragraph long. The contract between Breadberry and Royal makes no reference to whether Royal could subcontract the work to another company, or if it did, if Breadberry had the right to approve the subcontract. The court notes that McNeil testified at his EBT that his paycheck was from Royal Parking, while his co-worker Pittsley testified that his check was from Meg, creating an inference that these companies may be related.

In any event, in these circumstances, Breadberry is responsible for the negligence of the parking attendants. To be clear, whether or not Breadberry was negligent, and plaintiff claims Breadberry was negligent, the court concludes that Breadberry’s liability is also vicarious, pursuant to the doctrine of respondeat superior.

There are three circumstances which have been held to be exceptions to the general rule, in which a duty of care to a third party [the pedestrian herein] may arise out of a contractual obligation, or the performance thereof, and thereby subject the contracting party [Breadberry] to tort liability. (Church v Callanan Indus, 99 NY2d 104; Fried v Signe Nielsen Landscape Architect, PC, 34 Misc 3d 1212[A], 2012 NY Slip Op 50062[U]).”

 

Professional negligence similar to legal malpractice deals with areas of specialized knowledge.  When the term “specialized knowledge” is used, the trial lawyer thinks: “admissibility”, “lay juries” and “experts.”  In Herman v Franke, Gottsegen, Cox Architects  2017 NY Slip Op 07980
Decided on November 15, 2017 Appellate Division, Second Department one side utilized an expert, the other did not.  The result was then predictable.

“The plaintiffs, J. Maurice Herman and Windsor Plaza, LLC (hereinafter Windsor), commenced this action to recover damages for professional malpractice and breach of contract. They alleged in the complaint that Windsor owned a building located at 952 Fifth Avenue in Manhattan, and Herman owned the unused development rights associated with the building. In 2003, they retained the defendants, the architectural firm Franke, Gottsegen, Cox Architects (hereinafter FGCA), Erika N. Frank, and Norman R. Cox, to determine the maximum extent to which the building could be enlarged under the applicable codes and regulations. The defendants reported that the building could be enlarged to add an additional 22,161 square feet.

The plaintiffs alleged that, based on that report, they decided to enlarge the building by only 12,161 square feet, and to donate a restrictive covenant on the unused 10,000 square feet to the National Architectural Trust (hereinafter the NAT). Herman took a tax deduction on his 2003 personal income tax return for the value of the 10,000 square feet. The Internal Revenue Service (hereinafter the IRS) disallowed the deduction, resulting in years of litigation before the United States Tax Court, which ultimately ruled in favor of the IRS.

The plaintiffs then commenced this action, alleging that, pursuant to the Multiple Dwelling Law, the maximum permissible enlargement of the building was only approximately 12,000 square feet, not 22,161 square feet, and that if the defendants had accurately calculated the extent to which the building could be expanded, Herman would not have attempted to donate the unused 10,000 square feet to the NAT and taken a deduction for the donation. The defendants moved for summary judgment dismissing the complaint, and submitted an affidavit from Cox, a licensed architect, who affirmed, with a reasonable degree of architectural certainty, that the defendants’ determination that the building could be enlarged to add an additional 22,161 square feet was correct. The plaintiffs opposed the motion and cross-moved for summary judgment, submitting only an affidavit from Herman. The Supreme Court granted the motion and denied the cross motion, [*2]and the plaintiffs appeal.

A claim of professional malpractice requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury (see Bruno v Trus Joist a Weyerhaeuser Bus., 87 AD3d 670, 672; Kung v Zheng, 73 AD3d 862, 863; Estate of Burke v Repetti & Co., 255 AD2d 483). It is incumbent upon the plaintiff to present expert testimony to support allegations of malpractice (see 530 E. 89 Corp. v Unger, 43 NY2d 776, 777; McDermott v Manhattan Eye, Ear & Throat Hosp., 15 NY2d 20, 24), except where the alleged act of malpractice falls within the competence of a lay jury to evaluate (see 530 E. 89 Corp. v Unger, 43 NY2d at 777; Hammer v Rosen, 7 NY2d 376, 380).

Here, the Supreme Court correctly concluded that the determination of the maximum enlargement of the building permissible under New York law was the type of determination that required specialized knowledge, and thus, that expert evidence testimony was required to determine whether the defendants exercised due care in making that determination (see 530 E. 89 Corp. v Unger, 43 NY2d at 777; Michael v He Gin Lee Architect Planner, PLLC, 153 AD3d 704). The defendants established their prima facie entitlement to judgment as a matter of law dismissing the complaint by submitting, inter alia, the affidavit from Cox, a licensed architect. As the plaintiffs failed to offer an affidavit from an expert, they failed to establish their entitlement to judgment as a matter of law and failed to raise a triable issue of fact to rebut the defendants’ prima facie showing.”

 

Plaintiff sued under Judiciary Law § 487 and was promptly the subject of sanctions and dismissal.  Supreme Court granted both, and an appeal ensued.  In Liang v Wei Ji  2017 NY Slip Op 08361
Decided on November 29, 2017  Appellate Division, Second Department,  the Court affirmed because plaintiff had previously been enjoined from starting any actions without prior permission.  The Sanction was upheld because defendant had specifically made a motion for sanctions.

“NYCRR 130-1.1 for the imposition of a sanction in the amount of $160 against the plaintiff. The Supreme Court, inter alia, granted that branch of the motion which was for a sanction and, sua sponte, directed dismissal of the complaint on the ground that it violated a prior order dated September 19, 2012, issued in an action entitled Liang v Yi Jing Tan, commenced in the Supreme Court, Queens County, under Index No. 8155/12, which enjoined the plaintiff from commencing any action related to that apartment without prior leave of court. The plaintiff appeals.

Contrary to the plaintiff’s contention, the Supreme Court properly directed dismissal of the complaint on the ground that the plaintiff commenced this action in violation of the order dated September 19, 2012. Public policy generally mandates free access to the courts (see Vogelgesang v Vogelgesang, 71 AD3d 1132, 1134; Sassower v Signorelli, 99 AD2d 358, 359). However, a party may forfeit that right if he or she abuses the judicial process by engaging in [*2]meritless litigation motivated by spite or ill will (see Duffy v Holt-Harris, 260 AD2d 595; Matter of Shreve v Shreve, 229 AD2d 1005). Here, there was ample basis to support the court’s determination to dismiss this action and prevent the plaintiff from engaging in further vexatious litigation.

The plaintiff’s contention that he was not given an opportunity to be heard on that branch of the defendants’ motion which was for the imposition of a sanction is without merit. Under 22 NYCRR 130-1.1(d), “[a]n award of costs or the imposition of sanctions may be made either upon motion in compliance with CPLR 2214 or 2215 or upon the court’s own initiative, after a reasonable opportunity to be heard. The form of the hearing shall depend upon the nature of the conduct and the circumstances of the case.” Here, the defendants moved to dismiss the complaint and also for imposition of a sanction. The plaintiff was given notice of the motion, and he had a reasonable opportunity to be heard in opposition thereto (see Matter of Minister, Elders & Deacons of Refm. Prot. Dutch Church of City of N.Y. v 198 Broadway, 76 NY2d 411, 413; Duncan v Popoli, 105 AD3d 803, 804-805).”

 

It takes a while to work through the events of Josephs v AACT Fast Collections Servs., Inc. 
2017 NY Slip Op 08357  Decided on November 29, 2017  Appellate Division, Second Department and to determine whether it was a mistake not to oppose a motion for dismissal.  Near the end of the decision we see what appears to be the determining factor:  the case remains good against one of the corporate forms of the law firm.

“The plaintiffs commenced this action, inter alia, to recover damages for legal malpractice against Lubarsky & Tarnovsky Attorneys and Counselors at Law, P.C. (hereinafter L & T), and another defendant by summons and complaint filed August 23, 2012. On or about December 9, 2014, the plaintiffs moved for leave to amend the caption of the action to add Leon Lubarsky, Rada Tarnovsky, and another person as additional defendants. Lubarsky and Tarnovsky opposed the motion, arguing that the statute of limitations had elapsed. In reply, the plaintiffs contended that the relation-back doctrine applied. In an order dated August 11, 2015, the Supreme Court, inter alia, granted those branches of the plaintiffs’ motion which were for leave to amend the [*2]caption to add Lubarsky and Tarnovsky as defendants and directed the plaintiffs to serve the amended complaint upon all parties within 20 days of the order. Lubarsky and Tarnovsky appeal.

Thereafter, L & T, Lubarsky, and Tarnovsky moved pursuant to CPLR 3211(a)(8) to dismiss the amended complaint insofar as asserted against them for lack of personal jurisdiction. The plaintiffs did not oppose the motion. In an order dated March 16, 2016, the Supreme Court, inter alia, denied the motion. L & T, Lubarsky, and Tarnovsky appeal.

As to the order dated August 11, 2015, the Supreme Court properly granted those branches of the plaintiffs’ motion which were for leave to amend the caption to add Lubarsky and Tarnovsky as additional defendants, since the plaintiffs established the applicability of the relation-back doctrine (see Castagna v Almaghrabi, 117 AD3d 666, 667; Austin v Interfaith Med. Ctr., 264 AD2d 702, 703-704). Therefore, the August 11, 2015, order must be affirmed insofar as appealed from.

As to the order dated March 16, 2016, the Supreme Court should have granted those branches of the motion of L & T, Lubarsky, and Tarnovsky which were pursuant to CPLR 3211(a)(8) to dismiss the amended complaint insofar as asserted against Lubarsky and Tarnovsky for lack of personal jurisdiction. The affidavits of service filed by the plaintiffs, indicating that they attempted to effect service of the supplemental summons and amended complaint upon Lubarsky and Tarnovsky pursuant to CPLR 308(2), fail to indicate that the process server mailed the supplemental summons to either of these defendants. “Jurisdiction is not acquired pursuant to CPLR 308(2) unless both the delivery and mailing requirements have been strictly complied with” (Gray-Joseph v Shuhai Liu, 90 AD3d 988, 989; see Washington Mut. Bank v Murphy, 127 AD3d 1167, 1174). Therefore, the affidavits of service did not establish, prima facie, that service was properly effected pursuant to CPLR 308(2) (see Daguerre, S.A.R.L. v Rabizadeh, 112 AD3d 876, 878-879; cf. Roberts v Anka, 45 AD3d 752, 753-754). We note that “[w]hen the requirements for service of process have not been met, it is irrelevant that defendant may have actually received the documents” (Raschel v Rish, 69 NY2d 694, 697; see County of Nassau v Letosky, 34 AD3d 414, 415; Long Is. Sav. Bank v Meliso, 229 AD2d 478). Since the plaintiffs failed to submit any evidence that the requirements for service of process were met with respect to Lubarsky and Tarnovsky, the court should have directed the dismissal of the amended complaint insofar as asserted against those defendants pursuant to CPLR 3211(a)(8).

With respect to L & T, however, the record includes an affidavit of service from a process server indicating that service upon L & T in this action was effected by delivery of the original summons and complaint to the Secretary of State, which creates a presumption of proper service on L & T (see CPLR 311[a][1]; Business Corporation Law § 306; Thas v Dayrich Trading, Inc., 78 AD3d 1163, 1164). Since L & T did not submit any evidence to rebut this prima facie showing of proper service, the Supreme Court properly denied that branch of the motion which was pursuant to CPLR 3211(a)(8) to dismiss the amended complaint insofar as asserted against L & T for lack of personal jurisdiction.”

Just as the roof proved inadequate to the task, so the proofs on plaintiff’s case were inadequate to the claim in Petre v Alouidor & Assoc.  2017 NY Slip Op 51590(U) Decided on November 27, 2017 Appellate Term, First Department.  It appears that there was no expert.

“The trial court correctly dismissed the action at the close of plaintiff’s case. Viewing the evidence in the light most favorable to plaintiff, there was no rational basis by which the trier of fact could have found in his favor on his purported legal malpractice claim (see Szczerbiak v Pilat, 90 NY2d 553, 556 [1997]). Plaintiff failed to present any competent evidence to demonstrate that the firm that represented him in a real estate transaction, defendant Alouidor & Associates, P.C., did not exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]).

Even accepting plaintiff’s contention that the law firm defendant breached the specific provision of the retainer agreement requiring “representation at closing” (see generally Goldfarb v Hoffman, 139 AD3d 474, 475 [2016]), plaintiff failed to establish that the breach was the [*2]proximate cause of the damages complained of – the cost to replace the roof of the property purchased. Nor in any event did plaintiff show that a defect in the roof existed at the time of closing or that a complete replacement of the roof was required.”

Weintraub v Petervary  2017 NY Slip Op 51595(U)  Decided on November 16, 2017 Appellate Term, Second Department is an example of how lower courts over-determine cases in favor of the attorney and to the detriment of the client.  Legal malpractice cases, we have argued in the past, are dismissed at a greater rate than in the general inventory of cases, and courts routinely delve into the specifics of cases rather than review the pleadings.

“Appeal, and cross appeal on the ground of inadequacy, from a judgment of the District Court of Suffolk County, Third District (C. Stephen Hackeling, J.), entered February 13, 2015. The judgment, entered upon so much of an order of that court dated January 31, 2014 as granted plaintiff’s motion for summary judgment dismissing the counterclaim, and after a nonjury trial of plaintiff’s cause of action, awarded plaintiff the principal sum of $5,092 and implicitly dismissed defendant’s counterclaim. Defendant’s appeal from the judgment brings up for review so much of an amended order of that court dated February 20, 2015 as denied the branch of defendant’s motion seeking leave to file an amended answer to add affirmative defenses (see CPLR 5501 [a] [1]).

ORDERED that the judgment is reversed, without costs, so much of the order dated January 31, 2014 as granted plaintiff’s motion for summary judgment dismissing the counterclaim is vacated; plaintiff’s motion for summary judgment dismissing the counterclaim is granted only to the extent of granting plaintiff partial summary judgment dismissing so much of the counterclaim as seeks to recover for legal malpractice based on plaintiff’s alleged failure, while representing defendant in a Supreme Court equitable distribution action, to establish that, [*2]under Hungarian law, defendant had entered into a common-law marriage with her former spouse prior to their New York marriage; so much of the amended order dated February 20, 2015 as denied the branch of defendant’s motion seeking leave to file an amended answer is vacated; and the matter is remitted to the District Court for a new determination of that branch of defendant’s motion and, thereafter, for a new trial on plaintiff’s cause of action and on the remaining portions of the counterclaim;”

“Defendant and Nicholas Petervary (Nicholas) were married in New York on November 15, 1998 and were divorced by a Hungarian court in March 2007. The Hungarian court referred to the New York courts the issues regarding the distribution of property located in New York. On January 30, 2008, defendant retained plaintiff to represent her in a postdivorce action for equitable distribution, which was thereafter commenced in the Supreme Court of Suffolk County on February 8, 2008. After Nicholas failed to appear in that action, an inquest was held in 2009, following which the Supreme Court did not award defendant the portion of the assets to which she felt she was entitled, and denied her an award of counsel fees on the ground that plaintiff had not submitted his invoices to the court. Plaintiff was discharged by defendant on March 16, 2010. Plaintiff subsequently commenced this action to recover for legal services he had rendered in the Supreme Court action between February 2, 2008 and March 11, 2010, alleging a balance due of $12,582.48.

In her answer, defendant generally denied the allegations of the complaint and interposed a counterclaim, contending that, because plaintiff had committed legal malpractice in the Supreme Court action, he was not entitled to be reimbursed for any of the legal services he had rendered therein. Essentially, defendant alleged four instances of plaintiff’s malpractice, to wit, that plaintiff had failed to: (1) establish that defendant had entered into a valid common-law marriage with Nicholas, pursuant to Hungarian law, prior to their November 1998 marriage, which proof would have enhanced defendant’s entitlement to equitable distribution of the marital assets located in New York; (2) promptly obtain and serve a temporary restraining order on Citibank/Smith Barney, which would have prevented Nicholas from removing funds which, she alleged, constituted marital property, from an account held at that institution; (3) secure an expert appraiser to testify at the inquest in the Supreme Court action regarding the appreciation, during the marriage, of the value of the marital residence, which had been owned by Nicholas prior to their 1998 marriage, in order to demonstrate defendant’s entitlement to an interest therein; and (4) submit to the Supreme Court the invoices pertaining to his representation of defendant, resulting in the court’s denial of her application for an award of attorney’s fees.”

“Contrary to the District Court’s determination dismissing so much of the counterclaim as was based upon plaintiff’s failure to retain an appraiser, promptly restrain the Citibank/Smith Barney account, and annex his invoices to the counsel fee application, we find that plaintiff failed to establish his prima facie entitlement to judgment as a matter of law, as his submissions in support of his motion with respect to these three alleged instances did not demonstrate that defendant will be unable to prove either that plaintiff did not exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession or that the breach of this duty proximately caused defendant’s damages. Consequently, so much of plaintiff’s motion as sought summary judgment dismissing defendant’s counterclaim based upon these three alleged instances of legal malpractice should have been denied.”

A straight forward allegation of legal malpractice is the first step in a successful claim.  A second step is connecting the described shortcomings and the claimed damages.  In Lisi v Lowenstein Sandler LLP  2017 NY Slip Op 32411(U)  November 16, 2017  Supreme Court, New York County
Docket Number: 160298/2016  Judge Shirley Werner Kornreich finds that where a claim might be stated, damages cannot be linked to the shortcomings.

“In May 2012, Lisi hired LS, a law firm with its principal office in New York City, to negotiate the terms of his employment as a Senior Vice President with A vadel Pharmaceuticals flk/a as Flame! Technologies SA and Eclat Pharmaceuticals, LLC (Flame!). AC iii! 2, 9-11; Dkt. 49 (Retainer Letter). Defendants Defalco and Greenbaum were partners at LS; Defalco was the LS attorney primarily responsible for representing Lisi in the negotiations with Flame!. AC ml 3- 6; Dkt. 49 at 1. ”

“On May 17, 2012, Defalco sent Lisi an email (the Defalco Email) concerning the ongoing negotiations, attaching a revised draft of Lisi’s employment agreement. Dkt. 22 (Defalco Email); Dkt. 60 (copy of DeFalco Email with attachments included). In the email, DeFalco discussed the possibility of making an 83(b) election under the Internal Revenue Code with respect to a grant of restricted stock that was part of Lisi’ s compensation under the attached draft of his employment agreement. 2 See Defalco Email; Dkt. 60 at 6. Defalco began the discussion by informing Lisi that “restricted stock [received] in connection with the provision of services … is taxable to the recipient as compensation income (since it is received in connection with employment); i.e., ordinary income subject to payroll taxes,” based on the stock’s value less any amount paid for it. Defalco Email (emphasis in original). Lisi’s employment agreement was executed on May 28, and took effect on June 25, 2012. Employment Agreement at 1.”

“On December 8, 2016, Lisi commenced this action by filing his summons and initial complaint. Dkt. 1. He subsequently filed the AC on February 6, 2017. Dkt. 3. The AC asserts a single cause of action for legal malpractice, seeking $5,300,000 in damages. AC iii! 75-85. It alleges that LS negligently failed to advise Lisi that he would be taxed at the ordinary income rate on the increase in the value of his option shares upon exercise, rather than at the capital gains rate upon disposition of the shares. It further alleges that, but for this failure to advise, Lisi would not have been “left vulnerable to market fluctuations in the stock price of Flamel,” because he “would have” employed alternative investment strategies, that accounted for the true amount of his tax liabilities, to “receive the optimal market value for [his] Flamel shares.” AC iii! 68-83. LS moved to dismiss on March 21, 2017. Dkt. 13. The court reserved on the motion after oral argument. See Dkt. 67 (8/30/17 Tr.). ”

“Although Lisi’ s lack of records and recollection are insufficient to challenge the authenticity of the Defalco Email, the court finds that the content of the email itself does not unambiguously refute Lisi’ s allegation of professional negligence. The Defalco Email does mention stock options in passing, but not in the portion of the email that discusses the tax treatment of stock “received in connection with employment.” That portion of the email is specifically couched as a general description of the tax consequences that attach to the receipt of restricted stock. And although the email may easily be read to imply that other forms of stocksuch as non-qualified stock options-are likewise subject to ordinary income tax because they are “received in connection with employment,” that advice is never explicitly stated. Accordingly, the Defalco Email does not refute Lisi’s allegation of negligence in a manner that is “essentially undeniable.” See Amsterdam Hosp. Grp., 120 AD3d at 432. Lisi’s malpractice claim nevertheless fails because his allegations are insufficient to show that but for LS’s failure to give proper tax advice, his trading losses would have been avoided. See Leder v Spiegel, 31 AD3d 266, 268 (I st Dept 2006) (“The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardles~ of whether the attorney was negligent.”). Lisi does not (and cannot) allege that LS’s failure to advise him had any effect on the nature of his tax liability-the exercise of his options was always going to be subject to ordinary income tax. He does not allege that he would not have executed the separation agreement had he been properly advised. Rather, Lisi’s theory of loss causation is that, absent proper tax advice, he was unaware of the true amount of the tax liability incurred by the exercise of his options, and was therefore unable to strategically manage his investment post-exercise in a manner that minimized market risk and allowed him to realize “the optimal market value” of his shares. AC iii! 68-71. He acknowledges that the exercise of his options exposed him to “market fluctuations in the stock price of Flame!,” but asserts that, with proper advice, he would not have been left vulnerable to such fluctuations because he “would have locked in his sales price for all options exercised to allow and account for the fixed exercise price and tax basis,” and “would have capitalized on the sale of the shares at a fixed and higher price.” iii! 74, 82-83. “