Continuous representation tolls the running of the statute of limitations, and requires the dual mutual understanding that more work is required to be undertaken after the act of malpractice, and that there continues to be a relationship of trust and confidence between attorney and client.

Everyone agrees on those two principles, but the application can be strict or lenient.  Here is a lenient application in Stein Indus., Inc. v Certilman Balin Adler & Hyman, LLP 
2017 NY Slip Op 02688 Decided on April 5, 2017 Appellate Division, Second Department.

“In March 2010, the plaintiff Andrew Stein retained the defendant law firm to represent him in connection with the purchase of his brother’s interest in several companies, including the plaintiff Stein Industries, Inc. (hereinafter Stein Industries). The closing of the transaction occurred in April 2010. On March 27, 2015, the plaintiffs commenced this action against the defendant, inter alia, to recover damages for legal malpractice, alleging that the employees of Stein Industries were members of a union and that the defendant failed to discover that, upon the sale of the business, an “Unfunded Vested Pension Liability” became due and owing to the union, which caused the plaintiffs to be damaged in the sum of $500,000. In the order appealed from, the Supreme Court, inter alia, granted that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(5) to dismiss, as time-barred, the first cause of action, which was to recover damages for professional negligence, and the second cause of action, which was to recover damages for legal malpractice.”

“Here, the defendant satisfied its initial burden by demonstrating, prima facie, that the alleged legal malpractice occurred more than three years before this action was commenced in March 2015 (see Kennedy v H. Bruce Fischer, Esq., P.C., 78 AD3d 1016, 1017). In opposition, however, the plaintiffs raised a question of fact as to whether the applicable statute of limitations was tolled by the continuous representation doctrine. The plaintiffs submitted Andrew Stein’s affidavit, in which he averred that he met with members of the defendant on July 26, 2012, to determine how to rectify the pension liability issue. Andrew indicated that he was not satisfied with their recommendations concerning how to rectify the issue and directed them to formulate another idea. Andrew’s affidavit was sufficient to raise a question of fact as to whether the defendant engaged in a course of continuous representation intended to rectify or mitigate the initial act of alleged malpractice (see Melnick v Farrell, 128 AD3d 1371, 1372; DeStaso v Condon Resnick, LLP, 90 AD3d 809, 812-813; Gravel v Cicola, 297 AD2d 620, 621).

Accordingly, the Supreme Court should have denied that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(5) to dismiss the first and second causes of action.”

A massive stock fraud involving Chinese coal, and a US stock offering involved an opinion letter by defendant law firm.  The opinion letter overlooked a red flag, a huge red flag.  Nevertheless, too much time went by, and the claims were all dismissed on the statute of limitations and duplicitive pleading.

Murray v Morrison & Foerster LLP  2017 NY Slip Op 30602(U)  March 28, 2017
Supreme Court, New York County  Docket Number: 651024/2016  Judge: Saliann Scarpulla holds that the statute ran long before the case was commenced.

“Puda Coal, Inc. (“Puda”) was a Delaware corporation listed on the New York Stock fa~.change, which conducted its operations in China through Shanxi Puda Coal Group Co., Ltd. (“Shanxi Coal”). Puda reported in public filings that it owned a 90 percent interest in Shanxi Coal. In the Fall of2010, Puda hired plaintiff Brean, Murray, Carret & Co. (“Brean”) along with Macquarie Capital (USA) Inc. (“Macquarie”), to underwrite a public offering of Puda stock in the U.S. market to be conducted in December 2010. According to the allegations of the complaint, in November 2010, Macquarie hired Morrison, a law firm with substantial China-related expertise, as counsel for all underwriters, to conduct due diligence for the transaction and to provide legal advice regarding the offering. Macquarie also h~red international private investigation firm, Kroll Inc. (“Kroll”) to investigate the character, integrity and reputation of the individuals associated with Puda. Brean was not aware ofMacquarie’s retention of Kroll at the time of the offering or for years thereafter. Kroll issued a report on December 2, 2010 (“the Kroll Report”), which disclosed that Puda did not own a 90 percent interest in Shanxi Coal, in contradiction of Puda’s public representations and reports. In fact, in September 2009, Puda’ s 90 percent ownership in Shanxi Coal had been transferred to Ming Zhao, who was Chairman of Puda’s Board.ofDirectors, a major Puda shareholder, and an 8 percent owner of Shanxi Coal. Puda conducted two public offerings in 2010 without disclosing the change in ownership structure. Puda raised millions of dollars from investors selling shares in what was essentially an empty shell company. Kroll provided th~ Kroll Report to Macquarie via William Fang, an associate, who, on December 2, 2010, emailed the report to several other members of the Macquarie deal team, and then forwarded it to Morrison with a cover email that indicated “no red flags were identified.” Neither Macquarie nor Morrison picked up on the finding in the Kroll report that Puda did not, in fact, own a 90 percent interest in Shanxi Coal. ”

“The statute of limitations for malpractice is three years, and the limitations period begins to run on the day an actionable injury occurs, even if the aggrieved party is then ignorant of the wrong or injury. CPLR 214; McCoy y. Feinman, 99 N.Y.2d 295, 301 (2002). The doctrine of equitable estoppel is an extraordinary remedy which may bar a defendant from asserting a statute oflimitations defense, when the plaintiff was prevented from filing an action within the applicable time period due to its reason~~le reliance on defendant’s fraud, misrepresentations or deception. Putter v. North Shore Univ. Hosp., 7 N.Y.3d 548 (2006); Pahlad v. Brustman, 33 A.D.3d 518, 519 (1st Dept. 2006) affd 8 N.Y.2d 901 (2007). The party seeking estoppel must demonstrate due diligence on its part in trying to ascertain the facts and commence this action. Walker v. New York City Health & Hosps. Corp., 36 A.D.3d 509 (1st Dept. 2007). Equita.ble estoppel will not toll a limitations statute, however, where a plaintiff possesses timely knowledge sufficient to have placed it under a duty to make inquiry and ascertain all the relevant facts prior to the expiration of the applicable statute oflimitations. Rite Aid Corp. v. Grass, 48 A.D.3d 363 (1st Dept. 2008). At oral argument, Br~an acknowledged that its malpractice claim accrued in December 2010, when the Puda public offering of stock occurred. It was then on inquiry notice of a potential malpractice claim as of April 2011, when Puda’s fraud was disclosed to the public. At that time, and certainly shortly thereafter when the first class action lawsuit was commenced against it, Brean was charged with making further inquiry and ascertaining all relevant facts and possible failures that occurred on Morrison’s part in failing to discover Puda’s actual ownership interest in Shanxi. ”

“First, it is well settled that concealment by a professional, or failure to disclose his or her own malpractice, does not give rise to a cause of action in fraud or deceit separate and different from the customary malpractice action, thereby entitling the plaintiff to bring his action within the longer period limited for such claims. Weiss v. Manfredi, 83 N.Y.2d 974 (1994); Simcuski v. Saeli, 44 N.Y.2d 442, 452 (1978). Here, Brean filed its malpractice complaint, and only after.Morrison moved to dismiss the complaint on statute of limitations grounds, did Brean file an amended complaint alleging fraud. Brean’ s allegation of Morrison’s concealment of its malpractice by resigning as counsel does not give rise to a claim for fraud. Further, the remaining basis for the fraud claim is duplicative of the legal malpractice claim because it arose from the same underlying facts and alleged similar damages. See Dinho/er v Medical Liab. Mut. Ins; Co., 92 A.D.3d 480 (Pt Dept. 2012). The key to determining whether a claim is duplicative of one for malpractice is discerning the essence of each claim. Johnson v. Proskauer Rose LLP, 129 A,D.3d 59, 68 (Pt Dept. 2015). In the remaining basis for its fraud claim, Brean alleges that Morrison made misrepresentations in the opinion letter, ‘in “affirmatively represent[ing] to Plaintiff that the firm had completed the work necessary in order to form its opinion” when in fact, it was issued with actual or .constructive knowledge of its falsity. Its malpractice claim states that Morrison was negligent in conducting its due diligence and in issuing its opinion letter without discovering Puda’s true ownership in ~hanxi. The allegations in both of those claims arise from the same underlying facts and allege similar damages. “

Schiller v Bender, Burrows & Rosenthal, LLP  2014 NY Slip Op 02422 [116 AD3d 756]  April 9, 2014  Appellate Division, Second Department is a case in which plaintiff argued that he was misled by his matrimonial attorneys and settled the case in a situation where he was “effectively compelled” to settle.  The AD did not like that argument, and affirmed the dismissal.

Today, in Carbone v Brenizer  2017 NY Slip Op 02574  Decided on March 31, 2017  Appellate Division, Fourth Department we see basically the same fact pattern, and the same settlement position, with an opposite result.  The AD quoted Schiller.

“We agree with plaintiff that Supreme Court erred in granting defendants’ motion to dismiss to the extent they relied on CPLR 3211 (a) (1). A court may grant such a motion “only where the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law” (Goshen v Mut. Life Ins. Co. of N.Y., 98 NY2d 314, 326; see Vassenelli v City of Syracuse, 138 AD3d 1471, 1473). In an action alleging legal malpractice during the course of an underlying action that resulted in a settlement, “the focus becomes whether settlement of the action was effectively compelled by the mistakes of counsel’ ” (Chamberlain, D’Amanda, Oppenheimer & Greenfield, LLP v Wilson, 136 AD3d 1326, 1328, lv dismissed 28 NY3d 942). In her affidavit in opposition to the motion, plaintiff stated that defendants advised her that an investigation into her ex-husband’s financial assets would be a costly and lengthy process, but did not explain that she could apply to the court for her ex-husband to bear the costs of the investigation. As a result, plaintiff was convinced that she could not afford to conduct an investigation and settled the matter without knowing what she was giving up. Thus, although the settlement agreement in the underlying action contained a comprehensive waiver of plaintiff’s rights, we conclude that the language of that waiver does not conclusively establish that plaintiff was not effectively compelled to settle by defendants’ allegedly deficient representation (see Schiller v Bender, Burrows & Rosenthal, LLP, 116 AD3d 756, 757; see generally CPLR 3211 [a] [1]).

To the extent that defendants moved in the alternative to dismiss the action as barred by the three-year statute of limitations for legal malpractice actions (see CPLR 214 [6]; 3211 [a] [5]), we agree with plaintiff that defendants are not entitled to that alternative relief. ” The continuous representation doctrine tolls the statute of limitations . . . where there is a mutual understanding of the need for further representation on the specific subject matter underlying the [*2]malpractice claim’ ” (Zorn v Gilbert, 8 NY3d 933, 934; see R. Brooks Assoc., Inc. v Harter Secrest & Emery LLP, 91 AD3d 1330, 1331). Regardless of when plaintiff’s claim accrued, defendants’ representation of plaintiff in the underlying action ended, at the earliest, upon entry of the judgment of divorce in June 2014 (see Zorn, 8 NY3d at 934; Gaslow v Phillips Nizer Benjamin Krim & Ballon, 286 AD2d 703, 706, lv dismissed 97 NY2d 700).”

Vogel v American Guar. & Liab. Ins. Co.  2017 NY Slip Op 02462  Decided on March 29, 2017 Appellate Division, Second Department is the story of a fight between a law firm and its insurer, which will be going to trial.  Did the carrier have to defend this case of legal malpractice which arose over escrowed funds?

“In an action, inter alia, to recover damages for breach of a legal malpractice insurance policy and for a judgment declaring that the plaintiffs are covered under that policy, (1) the defendant American Guarantee & Liability Insurance Company appeals from so much of an order of the Supreme Court, Nassau County (Bruno, J.), dated July 20, 2014, as denied those branches of its motion, made jointly with the defendant Zurich American Insurance Company, which were for summary judgment dismissing the first and second causes of action in the second amended complaint insofar as asserted against those defendants and thereupon searched the record and awarded the plaintiffs summary judgment on the first and second causes of action in the second amended complaint insofar as asserted against those defendants, and (2) the defendants American Guarantee & Liability Insurance Company and Zurich American Insurance Company appeal from a judgment of the same court (Marber, J.) dated November 18, 2014, which, upon the order, is in favor of the plaintiffs and against them in the principal sum of $781,475.39. The plaintiffs cross-appeal, as limited by their brief, from (1) so much of the same order as granted that branch of the motion of the defendants American Guarantee & Liability Insurance Company and Zurich American Insurance Company which was for summary dismissing the third cause of action in the second amended complaint insofar as asserted against them, and (2) so much of the same judgment as failed to award them certain interest.”

“”[A]n insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision” (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; see Cumberland Farms, Inc. v Tower Group, Inc., 137 AD3d 1068, 1070). “To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations of the complaint [in the underlying action] cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision” (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175; see 492 Kings Realty, LLC v 506 Kings, LLC, 88 AD3d 941, 943; Exeter Bldg. Corp. v Scottsdale Ins. Co., 79 AD3d 927, 929).

The language of the policy determines the coverage (see Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347; Certain Underwriters at Lloyd’s London Subscribing to Policy No. SYN-1000263 v Lacher & Lovell-Taylor, P.C., 112 AD3d 434, 434-435; Utica First Ins. Co. v Star-Brite Painting & Paperhanging, 36 AD3d 794, 795-796; Shapiro v OneBeacon Ins. Co., 34 AD3d 259).

Here, in moving for summary judgment, AG/Zurich did not eliminate all triable issues of fact relating to the issue of its duty to defend or indemnify the plaintiffs in the underlying action (see Cumberland Farms, Inc., v Tower Group, Inc., 137 AD3d at 1071; Soho Plaza Corp. v Birnbaum, 108 AD3d 518, 522; Franklin Dev. Co., Inc., v Atlantic Mut. Ins. Co., 60 AD3d at 901). Since AG/Zurich failed to meet its burden as movant, it is not necessary to review the sufficiency of the plaintiffs’ opposition papers. Accordingly, the Supreme Court properly denied AG/Zurich’s motion for summary judgment dismissing the first and second causes of action in the second amended complaint.

However, there are triable issues of fact relating to Vogel’s alleged negligent supervision of the escrow account, and the application of the policy provisions to the circumstances, such that it was not established as a matter of law that the allegations in the complaint require AG/Zurich to defend and indemnity the plaintiffs (see Soho Plaza Corp. v Birnbaum, 108 AD3d at 522; Franklin Dev. Co., Inc. v Atlantic Mut. Ins. Co., 60 AD3d at 901). Accordingly, the Supreme Court erred in searching the record and awarding summary judgment to the plaintiffs on the first and second causes of action.”

Filing a petition in bankruptcy falls into three well-settled paths, Chapters 7,11 and 13.  The rules and the effects of such a filing vary strongly between them.  In a legal malpractice case, the debtor loses its capacity to sue and damages which might go to the litigant now go to the trustee.  As Nicke v Schwartzapfel Partners, P.C.  2017 NY Slip Op 02437  Decided on March 29, 2017   Appellate Division, Second Department shows us, Chapter 13 is different.

“In contrast to Chapter 7 proceedings, the object of a Chapter 13 proceeding is the [*3]rehabilitation of the debtor under a plan that adjusts debts owed to creditors by the debtor’s regular periodic payments derived principally from income. Thus, in a Chapter 13 proceeding, a debtor generally retains his property, if he so proposes, and seeks court confirmation of a plan to repay his debts over a three- to five-year period (see 11 USC §§ 1306[b]; 1322, 1327[b]). Payments under a Chapter 13 plan are usually made from a debtor’s “future earnings or other future income” (11 USC § 1322[a][1]). “Accordingly, the Chapter 13 estate from which creditors may be paid includes both the debtor’s property at the time of his bankruptcy petition, and any wages and property acquired after filing” (Harris v Viegelahn, __US __, __, 135 S Ct 1829, 1835; see 11 USC § 1306[a]). Assets acquired after a Chapter 13 plan is confirmed by the court are not included as property of the estate, unless they are necessary to maintain the plan (see 11 USC §§ 1306[a]; 1326), or the trustee seeks a modification of the plan to remedy a substantial change in the debtor’s income or expenses that was not anticipated at the time of the confirmation hearing (see 11 USC § 1329[a]; In re Solis, 172 BR 530, 532 [Bankr SD NY]). Unlike Chapter 7 proceedings, there is no separation of the estate property from the debtor under a Chapter 13 proceeding, except to the extent that the plan, as confirmed by order of the court, places control over an asset in the hands of the trustee (see Harris v Viegelahn, __ US at __, 135 S Ct at 1835). This is the basis for the conclusion that, while Chapters 7 and 11 debtors lose capacity to maintain civil suits, Chapter 13 debtors do not (see Giovinco v Goldman, 276 AD2d 469; Olick v Parker & Parsley Petroleum Co., 145 F3d at 515-516). Thus, a Chapter 13 debtor keeps all, or at the very least some, of the income and property he or she acquires during the administration of the repayment plan. Accordingly, in this action, it was never the bankruptcy estate, or its creditors, that was damaged by a decrease in the amount awarded in the underlying personal injury action due to the alleged conduct of the defendants. Only the plaintiffs had an interest in the recovery of damages in the personal injury action (see Olick v Parker & Parsley Petroleum Co., 145 F3d at 516). Moreover, it was the plaintiffs and the defendants who were engaged in a face-to-face relationship in the underlying personal injury action and to the extent the defendants allegedly breached a duty in that action the foreseeable harm was to the plaintiffs, not the trustee or the bankruptcy estate. Thus, under the circumstances presented here, the relationship of the plaintiffs to the personal injury action is unique and demands an exception to the general rule regarding privity (see Baer v Broder, 86 AD2d 881).

Accordingly, the Supreme Court erred in granting those branches of the defendants’ separate motions which were pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against each of them for lack of capacity and/or standing to sue.”

Doscher v Mannatt, Phelps & Phillips, LLP  2017 NY Slip Op 01973 Decided on March 16, 2017 Appellate Division, First Department is a case with Judiciary Law § 487 claims.  Supreme Court dismissed and the Appellate Division affirmed for these reasons:

1.  Collateral estoppel:  Plaintiff had two chances in the arbitration and both were denied;
2. The arbitration award is a valid final judgment;
3. JL § 487 does not apply to anything but court proceedings; not arbitrations or administrative proceedings;
4. JL § 487 does not apply to proceedings outside of NYS;
5. This misconduct is neither “egregious” enough nor a “chronic and extreme pattern of behavior”.

Daniel R. Wotman & Assoc., PLLC v Chang   2017 NY Slip Op 02141  Decided on March 23, 2017  Appellate Division, First Department is a 2010 case which has finally reached its final resting place.  What started as a fee collection case ends as a fee collection case, with the legal malpractice issues dismissed and affirmed on appeal.

“In this action commenced by plaintiff to recover legal fees, defendant asserted a counterclaim for legal malpractice. Plaintiff moved for summary judgment dismissing that counter-claim and in response, defendant cross-moved for leave to amend the counterclaim to expand and alter her theory of recovery.

Supreme Court providently exercised its discretion in denying defendant leave to amend her legal malpractice counterclaim. The motion for leave to amend came years after the counterclaim was first asserted and well after the conclusion of discovery. Moreover, defendant failed to articulate a reasonable excuse for her delay in amending the counterclaim and was unquestionably in possession of all the facts she needed to seek leave at an earlier time in the litigation (see Holliday v Hudson Armored Car & Courier Serv., 301 AD2d 392 [1st Dept 2003], lv dismissed, denied 100 NY2d 636 [2003]).

The motion court also properly granted plaintiff summary judgment dismissing the counterclaim. Defendant’s proof failed to demonstrate that plaintiff was negligent in any way (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]).”

Pro-se legal malpractice cases often unearth interesting descriptions of human behavior.  Sometimes they are baffling.  This is an example.

Checksfield v Berg  2017 NY Slip Op 01924  Decided on March 16, 2017  Appellate Division, Third Department.

“Plaintiff commenced this legal malpractice action in March 2002, alleging that defendant failed in his responsibility to commence an action on plaintiff’s behalf against his former employer. Defendant was served with the summons with notice and complaint in May 2002 and defaulted in appearing. Matters rested there until 2015, when plaintiff moved for a default judgment and defendant cross-moved to dismiss the complaint pursuant to CPLR 3215 (c). Supreme Court granted the cross motion, prompting this appeal by plaintiff.

We affirm. CPLR 3215 (c) provides that, where a “plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed” (see CitiMortgage, Inc. v Lottridge, 143 AD3d 1093, 1094 [2016]; Aurora Loan Servs., LLC v Gross, 139 AD3d 772, 773 [2016]). “To establish ‘sufficient cause,’ the party opposing dismissal must demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action” (Aurora Loan Servs., LLC v Hiyo, 130 AD3d 763, 764 [2015] [citations omitted]; see Micheli v E.J. Builders, 268 AD2d 777, 779 [2000]).

Assuming without deciding that plaintiff articulated a potentially meritorious claim against defendant, he did not provide a reasonable excuse for his delay in pursuing it. Plaintiff [*2]stated his legally unsupported belief that the case was “on indefinite extension” after the attorney who prepared the complaint withdrew from representation. Plaintiff then explained that, after defendant “wouldn’t talk” to another attorney he consulted, he embarked upon ill-defined efforts to “check into [defendant’s] financials” out of court. Even had these assertions been backed by any competent proof, however, they in no way justify over a decade of procedural inaction on plaintiff’s part (see Counsel Abstract, Inc. Defined Benefit Pension Plan v Jerome Auto Ctr., Inc., 23 AD3d 274, 275-276 [2005]; Monzon v Sony Motor, 115 AD2d 714, 714-715 [1985]). Thus, in the absence of a reasonable excuse for the delay, Supreme Court properly dismissed the action as abandoned (see Perricone v City of New York, 62 NY2d 661, 663 [1984]; Ohio Sav. Bank v Decaudin, 129 AD3d 925, 926 [2015]; Memorial Hosp. v Wilkins, 143 AD2d 494, 494-495 [1988]).”