There are certain areas of the law which are reserved to the federal courts.  These areas of law arise because the relevant law is found in federal statutes, or because the area which was previously spread across both state and federal statute or common law has become preempted by later federal statutes or case law.  Patents and trademarks exist because of protections granted by the US Constitution.  These and other federal areas are known as “federal questions.”  Generally speaking litigation over patents must take place in US District Court, not in state courts.

A legal malpractice case concerning patents may be heard by state court because it is not a direct “federal question.” Economic Alchemy LLC v Byrne Poh LLP  2017 NY Slip Op 31640(U)
August 4, 2017  Supreme Court, New York County  Docket Number: 653632/2015  Judge: Manuel J. Mendez is an example.

“On March 31, 2016 Plaintiff Economic Alchemy LLC (“EA”) commenced this action against Defendants alleging that the Defendants- who, as a law firm, represented EA in certain patent applications before the United States Patent and Trademark Office (“USPTO”) beginning on October 11, 2012- were liable for damages because of legal malpractice and breach of contract. EA was formed in 2011 to employ social media and other real time data to quantify economic expectations and to forecast the United States economy. EA alleges that Defendants committed numerous errors in the process of filing five (5) separate “placeholder claim” patents created by EA and failing to amend them at a later date. Allegedly, this has caused substantial impairment to the value of EA’s patent portfolio and caused EA significant damages to mitigate the potential losses. The patents, if granted, would be breakthrough technology that would help track the United States economy in real-time and be a highly attractive software for market speculators.”

“The Defendants have not stated a basis for dismissal of the legal malpractice causes of action under CPLR §3211 [a][7]. To dismiss a complaint for failure to state a cause of action there can be no legally cognizable theory that could be drawn from the complaint. The test of the sufficiency of a complaint is whether liberally construed, it states in some recognizable form, a cause of action known to the law (Union Brokerage, Inc. v Dover Insurance Company, 97 AD2d 732, 468 NYS2d 885 [1st Dept. 1983)). The court must accept as true the facts alleged in the complaint as well as all reasonable inferences that may be extracted from those facts (Amaro v Gani Realty Corp., 60 AD3d 491, 876 NYS2d 1 [1st Dept. 2009)). The court is not permitted to assess the merits of the complaint or any of its factual allegations, but may only determine if, assuming the truth of the facts alleged, the complaint states the elements of a legally cognizable cause of action (Skillgames, LLC v Brody, 1AD3d247, 767 NYS2d 418 [1st Dept. 2003)). Deficiencies in the complaint may be remedied by affidavits submitted by the plaintiff (Amaro, supra).

“Recovery for professional malpractice against an attorney requires proof of three elements: (1) attorney negligence; (2) the negligence was the ‘proximate cause’ of the actual loss sustained; and (3) quantifiable damages (Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 960 NYS2d 388 [1st Dept. 2013)). It requires the plaintiff to establish that counsel failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that ‘but for’ the attorney’s negligence the plaintiff would have prevailed in the matter or would have avoided damages (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1, 865 N.Y.S.2d 14, 15 [1st Dept. 2008)).

The Complaint sufficiently pleads attorney negligence. Plaintiff alleges that the Defendants “fail[ed] to provide competent representation to EA, repeatedly miss[ed] US PTO deadlines, [lied] about the status of patent applications and provid[ed] erroneous information” (Complaint). Importantly, Plaintiff plead that Defendants “filed ‘placeholder’ patents that were supposed to be used temporarily to meet the deadline, but never filing the legitimate claims” to amend them as they promised (id).

This court has jurisdiction to entertain lawsuits regarding contracts relating to patents regardless if the validity of the patent may somehow be involved (Am. Harley Corp. v Irvin Indus., Inc., 27 NY2d 168, 263 NE2d 552, 315 NYS2d 129 [1970)). It is not for this court to determine whether Plaintiff’s software is currently patentable under recent Supreme Court decisions and therefore, Plaintiff sufficiently plead that Defendants’ negligence was the “proximate cause” of its damages. Plaintiff alleges that “[h)ad Byrne Poh not committed malpractice, upon information and belief, EA would have received patent protection for all five patents by March of 2014” (id). “

Yesterday, we reviewed the first go-round in Mrs. Weinberg’s litigation to undo the sale of two buildings, one of which was her family home for the past 50 years.  Today, in Weinberg v Kaminsky 2017 NY Slip Op 31628(U)  August 4, 2017  Supreme Court, New York County
Docket Number: 150869/2017 Judge: Manuel J. Mendez, we see that this attempt will fail as well.  Mrs. Weinberg is no longer lucid, and cannot make out fraud allegations in the case.

“Plaintiff is an elderly widow who allegedly suffers from Alzheimer’s disease. On May 10, 2013 Plaintiff sold two buildings including the “family home” she has resided in for the past fifty (50) years. Plaintiff commenced an action in Supreme Court, New York County, under Index No. 652273/2013 approximately one month after the sale of the properties. Plaintiff asserted causes of action for rescission and to set aside the sale and deed due to fraud, conversion, unjust enrichment and legal malpractice (“First Action”). The First Action was dismissed in the early stages of litigation and Plaintiff appealed. On September 1, 2016 the Appellate Division, despite concerns over Plaintiff’s representation, affirmed the dismissal finding that the complaint was “bare bones” and failed to allege any “material misrepresentation,” as required on claims of fraud and undue influence, or “proximate cause” needed for the legal malpractice claims (Weinberg v Sultan, 142 AD3d 767, 37 NYS3d 13 [1st Dept. 2016]). ”

“To plead a cause of action for fraud, a party must allege the elements of representation of a material existing fact, falsity, scienter, justifiable reliance and damages (Bramex Assocs., Inc. v CBI Agencies, Ltd, 149 AD2d 383, 540 NYS2d 243 [1st Dept. 1989]). Each of these essential elements must be supported by factual allegations sufficient to satisfy CPLR §3016[b], which requires that the circumstances constituting the wrong shall be stated in detail. CPLR §3016[b] imposes a more stringent standard of pleading than the generally applicable ‘notice of the transaction’ rule of CPLR §3013, and complaints based on fraud which fail in whole or in part to meet this special test of factual pleading will be dismissed (Megaris Furs v Gimbel Bros., 172 AD2d 209, 568 NYS2d 581 [1st Dept. 1991]). Actual knowledge of the fraud may be generally stated (Stanfield Offshore Leveraged Assets, Ltd. v Metro. Life Ins. Co., 64 AD3d 472, 883 NYS2d 486 [1st Dept. 2009]). However, statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud (Facebook, Inc. v DLA Piper LLP (US), 134 AD3d 610, 23 NYS3d 173 [1st Dept. 2015]). ”

“The court is constrained by the law in dismissing this case against the Moving Defendants. Had Ms. Weinberg been lucid, she may have been able to allege facts sufficient to state a viable claim. However, by Plaintiff’s own account she is not and her Verified Complaint against Moving Defendants alleged on “information and belief” must be dismissed. “

Looking back at Weinberg v Sultan  2016 NY Slip Op 05939 [142 AD3d 767]  September 1, 2016
the question before the Appellate Division, First Department seems to have been was whether plaintiff was duped or not, and whether her former son-in-law took a large “consulting fee” and did so to her detriment.  Whether former sons-in-law can be trusted in general, in this case the AD dismissed all legal malpractice claims against defendants for lack of proximate cause.

“The motion court correctly dismissed the third and fourth causes of action. We have some concerns over the manner in which the sale of the building owned by the elderly plaintiff was orchestrated by defendant Kaminsky, her former son-in-law. Kaminsky, an attorney, procured the purchaser and referred plaintiff to the attorneys who represented her in the transaction and assisted her at the closing. It is unclear from the record whether these attorneys ever met with plaintiff before the closing or what role defendant Asher, the self-described “estate attorney,” played; that is, what advice, if any, he provided regarding her estate. It is also unclear how the purchase price for the building was arrived at and whether the representations made to plaintiff regarding the sale proceeds were accurate. Also, Kaminsky collected a $200,000 consulting fee for his work on the transaction, paid by the buyer.

Nonetheless, the amended complaint is barebones. It fails to allege any “material misrepresentation,” which is a required element of a fraud claim (see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]; Nicosia v Board of Mgrs. of the Weber House Condominium, 77 AD3d 455, 456 [1st Dept 2010]). Further, plaintiff does not allege how defendant purchaser Linda Salamon and her company, defendant 22 West 30th St. Properties, LLC (together Salamon), exerted any undue influence over plaintiff (see Franklin v Winard, 199 AD2d 220, 220 [1st Dept 1993]) or coerced her into a transaction that she alleges made no [*2]economic sense. The amended complaint also failed to plead the fraud and undue influence claims with sufficient particularity, as required by CPLR 3016 (b) (see id.). In addition, there is no private right of action against an attorney or law firm for violations of the Code of Professional Responsibility or disciplinary rules (Kantor v Bernstein, 225 AD2d 500, 501 [1st Dept 1996]; see Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193, 199 [1st Dept 2003]). Plaintiff failed to address her breach of contract claim in her opening appellate brief, so it can be deemed abandoned (see Bridgers v West 82nd St. Owners Corp., 114 AD3d 606, 607 [2014]). In any event, plaintiff provides no indication of how the contract was breached.”

“The motion court correctly granted the motions for summary judgment dismissing the first and second causes of action, for legal malpractice. The moving defendants made a prima facie showing of a lack of proximate cause, which is an essential element of a legal malpractice claim (see Sabalza v Salgado, 85 AD3d 436, 437 [1st Dept 2011]; Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). In opposition, plaintiff failed to raise a triable issue of fact, since she merely speculated that the building she formerly owned, which was in foreclosure at the time of its sale, could have been sold for its appraised value (see Heritage Partners, LLC v Stroock & Stroock & Lavan LLP, 133 AD3d 428, 428-429 [1st Dept 2015], lv denied 27 NY3d 904 [2016]).”

Matter of Ginsburg  2016 NY Slip Op 07733 [144 AD3d 1357]  November 17, 2016  Appellate Division, Third Department is a sad story of despair overlaid with a sordid story of attorney fee grasping.  In the end, not a lot was accomplice.  The decision gives some practical advice on settlements and attorney retention.

“On February 17, 2010, Bradley Marc Ginsburg (hereinafter decedent), then a freshman at respondent Cornell University in Tompkins County, jumped to his death from the Thurston Avenue Bridge—one of several bridges extending across the gorges located on or near Cornell’s campus. The bridge in question, which spans Falls Creek Gorge and connects two portions of Cornell’s campus, is owned by respondent City of Ithaca. Petitioner, who is both decedent’s father and an attorney licensed to practice in this state, was granted letters of administration in May 2011 and thereafter retained respondent Leland T. Williams as counsel for the estate. In late 2011, Williams commenced an action upon petitioner’s behalf against, among others, Cornell and [*2]the City of Ithaca in the United States District Court for the Northern District of New York. The complaint set forth 14 causes of action sounding in, among other things, wrongful death and premises liability and sought damages in the amount of $180 million, including $12 million in punitive damages.

After District Court dismissed the punitive damages claim and all claims against those Cornell representatives or employees named in their individual capacities, petitioner terminated Williams’ representation and retained respondent McCallion & Associates, LLP (hereinafter the firm) as counsel.^[FN1] Thereafter, Kenneth F. McCallion (hereinafter McCallion)—a principal therein—entered into settlement negotiations with Cornell and the City of Ithaca upon petitioner’s behalf. After much discussion, the parties devised a proposed settlement of the wrongful death claim—specifically, that petitioner would accept a monetary sum from the City of Ithaca and, as to Cornell, would agree that a scholarship would be established in decedent’s name.^[FN2] While McCallion was not opposed to this resolution, he advised petitioner via email that, “[b]efore [he] sign[ed] onto any settlement proposal,” petitioner and the firm would need to “reach an understanding as to the allocation of any settlement funds”—namely, that “the balance of the net cash component of the settlement,” then anticipated to be $200,000, would be allocated to the firm as counsel fees. In response, petitioner advised District Court that he, in his capacity as co-counsel, would be handling all further negotiations, and McCallion was excluded from the settlement conferences that followed.

In September 2014, petitioner entered into stipulations of settlement with Cornell and the City of Ithaca resolving the wrongful death claim. Specifically, the City of Ithaca agreed to pay $100,000 in settlement of the District Court action against it, and Cornell agreed to establish a perpetual scholarship in memory of decedent. Although documentation in the record reflects that such scholarship, if funded by a private donor, would have required an endowment of approximately $1.6 million, the stipulation of settlement provided that the scholarship would be established “using existing financial aid funds” and, inasmuch as Cornell was neither “allocating any new money” to the scholarship nor otherwise making any payment to petitioner, the scholarship itself had “no monetary value”—except to the student recipients thereof. District Court thereafter signed off on the respective stipulations of settlement.”

“There is no question that a client “may at any time before judgment, if acting in good faith, compromise, settle, or adjust his [or her] cause of action out of court without [counsel’s] intervention, knowledge, or consent, notwithstanding any contingent fee agreement and even though he [or she] has agreed with [counsel] not to do so” (Dagny Mgt. Corp. v Oppenheim & Meltzer, 199 AD2d 711, 713 [1993] [internal quotation marks and citation omitted]; see Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.2 [a]). Similarly, “notwithstanding the terms of the agreement between them, a client has an absolute right, at any time, with or without cause, to terminate the attorney-client relationship by discharging the attorney” (Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 43 [1990]; see Doviak v Lowe’s Home Ctrs., Inc., 134 AD3d 1324, 1326 [2015], lv denied 27 NY3d 904 [2016]). Finally, “Surrogate’s Court is vested with broad discretion to fix the reasonable compensation of an attorney who renders legal services to a fiduciary of an estate, subject to modification only where that discretion has been abused” (Matter of Benware, 121 AD3d 1331, 1332 [2014] [citations omitted]). Notably, such authority is “independent of the terms of a retainer agreement or the consent of interested parties to the requested compensation” (Matter of Elenidis, 120 AD3d 1229, 1231 [2014], lvs denied 24 NY3d 910 [2014], 25 NY3d 904 [2015]; see Matter of Greenfield, 127 AD3d 1189, 1191 [2015], lv denied 26 NY3d 904 [2015]).

Contrary to respondents’ assertion, we discern no basis upon which to disturb the determination of Surrogate’s Court that petitioner, a licensed and experienced real estate attorney, exercised due diligence in the performance of his fiduciary duties relative to decedent’s estate, including giving careful consideration to the settlement offers at issue. Nor are we persuaded that petitioner’s ultimate decision to compromise and settle the wrongful death claim against Cornell and the City of Ithaca in exchange for $100,000 and the establishment of a perpetual scholarship in decedent’s memory evidenced bad faith or otherwise called into doubt the performance of his fiduciary duties. Hence, as to the award of counsel fees, the issue primarily distills to whether Surrogate’s Court abused its discretion in concluding that the subject scholarship had no monetary value to decedent’s estate.”

A personal injury takes place, and is litigated.  It goes to verdict which exceeds the insurance coverage.  What is a defendant to do?  Well, one solution is a bad faith litigation against the carrier, and an assignment to the plaintiff.  Plaintiff gets the chance to obtain the balance (over the policy limits) from the insurer, and the defendant gets out from the excess money claims.  So, the various attorneys enter into an agreement where they split portions of the fees.  What happens when the Appellate Divisions INCREASES the award?  Chaos.

Wolfe & Yukelson, PLLC v Davis, Saperstein & Salomon, P.C. 2017 NY Slip Op 05997
Decided on August 2, 2017  Appellate Division, Second Department determines that all the attorneys get paid.

“In October 2012, upon the defendant’s denial of the plaintiff’s request for payment pursuant to the fee-sharing agreement, the plaintiff commenced this action to recover damages for breach of contract seeking to enforce the fee-sharing agreement. The Supreme Court denied the defendant’s motion for summary judgment dismissing the complaint and the plaintiff’s cross motion for summary judgment on the complaint. Thereafter, the court granted the plaintiff’s motion for leave to reargue its prior cross motion for summary judgment and, upon reargument, granted the cross motion, finding that since the defendant violated rule 1.5(g) of the Rules of Professional Conduct (22 NYCRR 1200.0), it could not seek to void the fee-sharing agreement by which it agreed to be bound and of which it received the benefit. A judgment thereafter was entered in favor of the plaintiff and against the defendant in the principal sum of $208,257.94.

The appeals from the intermediate orders must be dismissed because the right of direct appeal therefrom terminated with the entry of the judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeals from the orders are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501[a][1]).

In fee-sharing disputes between attorneys, “the courts will not inquire into the precise worth of the services performed by the parties as long as each party actually contributed to the legal work and there is no claim that either refused to contribute more substantially” (Benjamin v Koeppel, 85 NY2d 549, 556 [internal quotation marks omitted]). This Court has held that such an agreement is enforceable as long as the attorney who seeks his or her share of the fee “has contributed some work, labor or service toward the earning of the fee” (Witt v Cohen, 192 AD2d 528, 529 [internal quotation marks omitted]; see Reich v Wolf & Fuhrman, P.C., 36 AD3d 885, 886; Rozales v Pegalis & Wachsman, 127 AD2d 577, 578). Here, the Supreme Court correctly determined that the plaintiff provided sufficient legal services toward the earning of the fees generated by settlement of the claims at issue. Contrary to the defendant’s contention, the commencement of a bad faith action against Imperium or a legal malpractice action against Wilson Elser was not a condition precedent to recovery under the fee-sharing agreement. Thus, the court, upon reargument, properly determined that the plaintiff established its prima facie entitlement to a share of the legal fee as allocated in the fee-sharing agreement (see Reich v Wolf & Fuhrman, P.C., 36 AD3d at 886; Edelstein v Pirrotti, 286 AD2d 660; Sickmen v Birzon, Szczepanowski & Quinn, 276 AD2d 689).

In opposition to the cross motion, the defendant failed to raise a triable issue of fact. Moreover, the defendant, which is bound by the same Rules of Professional Conduct (22 NYCRR 1200.0) as the plaintiff, cannot be heard to argue that the fee-sharing agreement and the obligations thereunder must be voided on ethical grounds, when it freely agreed to be bound by, and received the benefit of, the same agreement, particularly since there is no indication that the client was in any way deceived or misled (see Samuel v Druckman & Sinel, LLP, 12 NY3d 205, 210; Benjamin v Koeppel, 85 NY2d 549, 556).”

In legal malpractice there are transactional representations and there are litigation representation.  It’s easier to show privity when the attorney has signed on as attorney of record.  It’s more difficult when the attorney may/may not be involved in a transactional setting.  Breslin v Raich, Ende, Malter & Co., LLP  2016 NY Slip Op 32015(U)  July 25, 2016  Surrogate’s Court, Nassau County
Docket Number: 290592J  Judge: Margaret C. Reilly probably reaches the outer edge of representation.  Dismissal is avoided based solely on the affidavit of plaintiff, with no particular document to show lawyering by the defendant.

“Robert Frankel (the decedent) died on April 21, 1995, survived by his wife, Adele Frankel-Loeb, and three adult children, Wendy Frankel, Richard Frankel and Lynn Frankel Fleetwood (Wendy, Richard and Lynn, collectively, the objectants). Under the terms of decedent’s will, each of the objectants is a beneficiary under Article III of the will and a beneficiary of 1/3 of decedent’s residuary estate. Prior to his death, the decedent owned a chain of stores and was a real estate investor and manager. The decedent and Breslin jointly owned a number of real estate ventures, and had personally and jointly guaranteed related bank debt of approximately $100,000,000.00.  At the time of the decedent’s death, some of these ventures were in financial distress. Shortly after the death of the decedent, an arrangement was reached among the preliminary executors of the decedent’s estate, Gerald Deutsch, Stephen Levy, Breslin, and the decedent’s children, whereby Breslin’s family purchased control over a portion of the decedent’s assets, and reserved the right to acquire the remaining assets for $2,500,000.00 (the Weary Option). Pursuant to this agreement, on December 11, 1995, Breslin was appointed as successor executor of the estate, taking over management of the real estate ventures that previously had been jointly owned by Breslin and the decedent, as well as the decedent’s assets and properties.”

“Breslin hired Tenzer in 1995, when Tenzer was associated with a prior accounting firm, and continued to utilize Tenzer’s services after Tenzer joined Raich Ende as a principal and accountant in 2002, pursuant to a retainer letter, dated November 7, 2002. The defendants, among other services, were to prepare a final accounting for the Frankel estate. On February 22, 2012, the defendants produced the accounting, which covered the period from April 21, 1995 through March 31, 2010.”

“The defendant further raises the Statute of Limitations and a failure to allege a timely claim against Tenzer for legal malpractice and against Raich Ende under the doctrine of respondent superior. The defendant argued that, in order to prevail in an action for legal malpractice, the plaintiff must show that the attorney failed to exercise ordinary reasonable skill and knowledge possessed by a member of the legal profession, and that the breach of duty caused damages. However, first the plaintiff must establish the existence of an attorney-client relationship. The defendant further posited that the plaintiff only offers conclusory allegations, without factual support, that Tenzer rendered both accounting and legal advice, and that Raich Ende operates solely as an accounting firm, in which capacity it cannot offer legal services.

The plaintiff submitted an affidavit and a memorandum of law in opposition to the motion to dismiss. Breslin states that he retained Tenzer as both his attorney and his accountant and claims that Tenzer held himself out to the plaintiff as having expertise as both a lawyer and an accountant, in which capacities he continuously provided the plaintiff with legal and accounting services in connection with the estate, including tax law advice. According to the plaintiff, the professional relationship rose to a fiduciary level between the plaintiff and the various partners, accounting firms and professionals who worked with Tenzer.

“In Breslin’s complaint, he states that the defendants were retained “to perform a variety of accounting, audit, tax, and consulting services with regard to Breslin’s role as both a major creditor and Successor Executor of the Frankel Estate.” Breslin asserts that “for many years prior to December 1995, Tenzer had already provided substantial legal, accounting and tax services to Breslin . . .” and that “Tenzer repeatedly induced Breslin to repose an extremely high degree of trust and confidence in Tenzer with respect to numerous legal, tax and accounting matters . . . .” In his claim for legal malpractice, Breslin asserts that Tenzer breached his “duty to exercise due professional care and to render reasonable and competent legal advice and legal services . . . .”

The court finds that the plaintiff’s complaint states a cause of action. The defendants’ motion to dismiss the cause of action for legal malpractice is DENIED.”