Molina v. Faust Goetz Schenker & Blee, (S.D.N.Y. 2017) illustrates the difficulty of assignments of legal malpractice cases.  To be sure, assignment is permitted.  “While legal malpractice claims may be assigned in New York (even to former litigation adversaries), nothing prevents a New York court from applying judicial estoppel to a case where all of its requisite elements are satisfied.”  However, there are a number of intellectual hurdles to clear.

In this case, condo owners sued contractor for negligent construction.  Condo owner won a default judgment, and the insurance carrier disclaimed coverage for a series of complicated reasons. The contractor (with no coverage) then agreed with the condo owners to sue the contractor’s attorneys, and to turn over the proceeds to the condo owner.  So far, so good.

However:  “Plaintiff Benny Molina brought this legal malpractice suit against the lawyers who represented him in two related state court actions that culminated in the entry of substantial default judgments against him. But, due to a series of agreements between Molina and the plaintiff-judgment-creditor in one of the underlying actions, Molina sues here as the assignee of the judgment-creditor. Defendants have moved for summary judgment dismissing the amended complaint on several grounds. They rely chiefly on the equitable doctrine of judicial estoppel. The Court agrees that the doctrine applies and holds that Molina, as the judgment-creditor’s assignee, may not take positions here contrary to those his assignor successfully advanced in the state court actions. For that reason, the Court grants defendants’ motion for summary judgment in its entirety without addressing their remaining arguments.”

“In line with many jurisdictions and the federal courts, New York follows the doctrine of judicial estoppel, whereby “a party who assumes a certain position in a prior legal proceeding and secures a favorable judgment therein is precluded from assuming a contrary position in another action simply because his or her interests have changed.”13 The equitable doctrine “rests upon the principle that a litigant should not be permitted to lead a court to find a fact one way and then [*7]  contend in another judicial proceeding that the same fact should be found otherwise.”14 Doing so could be viewed as “playing fast and loose with the courts.”15

Equitable in nature, the doctrine [*8]  “cannot be reduced to a precise formula or test,”16 but its requirements are well catalogued. The New York Court of Appeals has cited approvingly17 to the United States Supreme Court’s helpful articulation of the factors courts typically consider:

“First, a party’s later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party’s earlier position . . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”18

These factors are not “inflexible prerequisites” and do not constitute “an exhaustive formula,” as [a]dditional considerations may inform the doctrine’s application in specific factual contexts.”19 Ultimately, judicial estoppel is invoked at the court’s discretion.20

The somewhat convoluted series of assignments in this case present a twist on an otherwise routine application of the doctrine. Molina brought this suit in his own name, ostensibly to redress the financial harm he allegedly has suffered to due to the alleged negligence of his lawyers in the underlying actions. But defendants argue that Gregory Oyen is the “de facto plaintiff.”21 That is so, they say, because Molina gave away his right to sue in the First Assignment and derives his role as plaintiff here solely from the Second Assignment. Defendants further maintain that Molina, acting on behalf of Oyen, should be precluded from taking positions in this case inconsistent with those Oyen took in the underlying actions, which they contend Molina must do to prevail on either cause of action in the amended complaint. Not surprisingly, Molina opposes the application of judicial estoppel at each point.”

Oral argument sometimes drifts to the “analogy” stage, where an example must be used in order to show the simplest type of legal malpractice case.  It is often the particular fact pattern found in Detoni v McMinkens  2017 NY Slip Op 01334  Decided on February 22, 2017  Appellate Division, Second Department.

“On November 19, 2005, the plaintiff allegedly sustained serious injuries as a result of a motor vehicle accident in Queens. She allegedly retained the defendants on December 15, 2005, to represent her in a personal injury action against the owner and operator of the motor vehicle that struck her vehicle, but the defendants failed to commence an action before the expiration of the statute of limitations. The plaintiff commenced this action, inter alia, to recover damages for legal malpractice. ”  For the legal malpractice example one need only add that she was in the rear seat, and the car was stopped at a red light.  What is possibly left for defendant to argue?

“The defendants moved for summary judgment dismissing the complaint on the ground that, even if they were negligent in failing to timely commence the underlying personal injury action, the plaintiff would not have prevailed because she did not sustain a serious injury within the meaning [*2]of Insurance Law § 5102(d) as a result of the accident. In an order dated March 5, 2014, the Supreme Court granted the defendants’ motion for summary judgment dismissing the complaint.”

This issue bedeviled Supreme Court.  First it found for the attorneys on summary judgment and then it reversed itself and found against the attorneys on summary judgment.

“Upon reargument, the Supreme Court properly denied the defendants’ motion for summary judgment dismissing the complaint. The defendants failed to establish, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) (see Cross v Labombard, 127 AD3d 1355, 1357; Poole v State of New York, 121 AD3d 1224, 1225). Among other things, the defendants submitted the plaintiff’s deposition testimony that, after the accident, she was confined to bed for two months and she was out of work for approximately 10 months (compare Lanzarone v Goldman, 80 AD3d 667, 669, with Bacon v Bostany, 104 AD3d 625, 628). Thus, the defendants failed to establish, prima facie, that, even if they were negligent in failing to timely commence the underlying personal injury action, the plaintiff would not have prevailed on the underlying cause of action. Since the defendants failed to meet their prima burden, it is unnecessary to consider whether the plaintiff’s opposition papers were sufficient to raise a triable issue of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).”

Superior Tech. Solutions, Inc. v Rozenholc  2017 NY Slip Op 01136 Decided on February 10, 2017 Appellate Division, First Department is an example of trying anything to fix a deadly problem.  When this happens, anyone in the general vicinity becomes a target.

From what we can glean, longtime tenant gets into a problem with the landlord, and has to try to fix that problem.  It was a violation of some part of the lease, and the solution is a Yellowstone action, which gets the tenant a stay while it fixes the violation.  Defendant attorney was retained to do the Yellowstone litigation.  Apparently he did so successfully.  Then the tenant fails to renew the lease correctly.  Is there someone available to blame?

“Defendant has established that the malpractice claim fails for multiple reasons, and plaintiffs have failed to raise any triable issues (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Sabalza v Salgado, 85 AD3d 436, 437 [1st Dept 2011]). There is no support for plaintiffs’ contention that defendant had a duty to renew the lease on their behalf, or to advise them of the need to do so (see Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 9 [1st Dept 2008], lv denied 12 NY3d 715 [2009]). The record demonstrates that defendant’s representation was limited to litigating and negotiating a settlement with respect to the Yellowstone action, which defendant brought on plaintiffs’ behalf, and that the scope of his services was not transactional. Defendant was not actively representing plaintiffs at the time the lease was negotiated or when the renewal option was to be exercised.

Defendant has also demonstrated that it cannot be shown that any alleged negligence by him was the proximate cause of plaintiffs’ damages (Stolmeier v Fields, 280 AD2d 342, 343 [1st Dept 2001], lv denied 96 NY2d 714 [2001]). Plaintiff Lee’s testimony establishes that he knew that notice for the renewal had to be in writing and sent by certified or registered mail to the landlord, and his own affidavits reflect his knowledge that the lease ran until January 31, 2011 with the option to renew.

In fact, Lee had renewed a prior lease, identical to the lease at issue, years before he even retained defendant to represent him in the Yellowstone litigation.”

Plattsburgh New York is a city far away from most other places in NY.  It is at the extreme upper right corner of New York, on Lake Champlain and at the Canadian border.  Its so far away from everything else that the story in Plattsburgh Hous. Auth. v Cantwell  2017 NY Slip Op 50184(U) Decided on February 10, 2017  Supreme Court, Clinton County  Muller, J. does not really surprise.  An attorney works her way up in the Plattsburgh Housing Authority, eventually takes both the Executive Director and General Counsel positions, and works a salary over $ 160,000.  That had to put her in the top 1% of all upstate earners.  Here is the court decision:

“I. LORI CANTWELL BREACHED HER FIDUCIARY DUTY TO THE PLATTSBURGH HOUSING AUTHORITY.

The PHA is entitled to a judgment in its favor on its cause of action for Ms. Cantwell’s breach of her fiduciary duties as the PHA’s attorney. To succeed on its claim for breach of fiduciary duty, the PHA was required to prove: (1) the existence of a fiduciary relationship between it and Ms. Cantwell; (2) misconduct by Ms. Cantwell; and (3) damages that were directly caused by Ms. Cantwell’s misconduct (see East Schodack Fire Co., Inc. v Milkewicz, 140 AD3d 1255, 1256 [2016]; see also Fitzpatrick House III, LLC v Neighborhood Youth & Family Servs., 55 AD3d 664, 664 [2008]).

A. A Fiduciary Relationship Existed Between the PHA and Ms. Cantwell.

Attorneys stand in a fiduciary relationship to their clients (see Graubard Mollen Dannett & Horowitz v Moskovitz 86 NY2d 112, 118 [1995]). The attorney-client relationship “imposes on the attorney [t]he duty to deal fairly, honestly and with undivided loyalty . . . including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients’ interests over the lawyer’s” (Country Club Partners, LLC v Goldman, 79 AD3d 1389, 1391 [2010], quoting Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 9 [2008] [internal quotation marks and citations omitted]). “Any doubts [about the existence of an attorney-client relationship] should readily [be] resolved against the [attorney], absent proof of a clear and forthright statement to his [or her] clients that he [or she] was no longer their attorney and that they should obtain outside counsel before continuing any negotiations” (Howard v Murray, 43 NY2d 417, 422 [1977]).

Ms. Cantwell was first retained by the PHA as its attorney in 1997 (Trial Tr. 418:22-23). On March 1, 2003 she became an employee of the PHA and began serving as its General Counsel pursuant to the GC Agreement (Trial Tr. 413:8-11, Plaintiff’s Exhibit 2). As the PHA’s General Counsel, Ms. Cantwell worked for the PHA full time, attending PHA Board meetings and providing legal advice to both the PHA Board and the Executive Director (Trial Tr. 64:10-14, 65:18-22, 65:8-17, 237:3-24). Ms. Cantwell continued to serve as General Counsel until she was asked to resign on May 3, 2013. Therefore, at all relevant times, Ms. Cantwell had a duty to deal with the PHA fairly, honestly and with undivided loyalty.”

“Ms. Cantwell also breached her fiduciary duty to the PHA by advising the PHA that she [*19]was entitled to an increase in her salary of over $30,000. At the time the parties signed the ED Agreement, Ms. Cantwell understood that her base salary as Executive Director was $85,000 per year (Trial Tr. 469:24-25, 473:3-7, 727:1-6). Ms. Cantwell even sent an e-mail to the PHA accountant that her Executive Director salary should be reported to HUD as $85,000 (Trial Tr. 345:8-10, Plaintiff’s Exhibit 85).

Nonetheless, less than one year after she became Executive Director, Ms. Cantwell managed to increase her salary as Executive Director by over $30,000. First, Ms. Cantwell invited Ms. Etesse — the PHA accountant — to a meeting and suggested to her that she should be paid as an employee on step 11 of the PHA salary schedule for both her Executive Director and General Counsel salary rather than step two for her Executive Director salary and step four for her General Counsel salary (Trial Tr. 353:19-25, 354:1-5, 359:4-25, Plaintiff’s Exhibit 7, Plaintiff’s Exhibit 1).

The basis for this increase was the language in the “Other Benefits” section of the ED Agreement, which stated that Ms. Cantwell “should be considered to have 14 years of service with the [PHA] as of 12/30/11″ (Plaintiff’s Exhibit 1). Ms. Cantwell interpreted this language to mean that she should have started at an Executive Director salary of $98,378 (based upon the 2011 PHA salary schedule and 14 years of service) and that, by the time she met with Ms. Etesse, her salary should have been $108,807 (based upon the 2012 PHA salary schedule and 14.5 to 18.5 years of service) — rather than $87,125 (based upon the 2012 PHA salary schedule and 6 to 18 months of service). Notably, Ms. Cantwell’s salary at step eleven (14.5 to 18.5 years of service) of the 2012 PHA salary schedule was higher than what the 2011 PHA Salary Schedule provided for an Executive Director with over 18.5 years of service, the maximum salary that the Executive Director could reach in 2011 (Defendant’s Exhibit 78 p. 4). The 2012 PHA Salary Schedule set a higher maximum figure for the Executive Director because it started, in accordance with Ms. Cantwell’s ED Agreement, at a beginning salary of $85,000 effective January 1, 2012, approximately the time Ms. Cantwell became sole Executive Director (Defendant’s Exhibit 78 p. 5).”

“For the reasons set forth herein, the Court hereby awards judgment to the PHA on its causes of action for breach of fiduciary and rescission and directs that the $261,871.79 in funds paid by the PHA to Ms. Cantwell from October 1, 2011 to May 13, 2013 be returned by Ms. Cantwell forthwith, together with interest at 3% per annum from October 1, 2011 to the date of this Decision and Order.^[FN6] The Court expressly declines to award attorneys’ fees to the PHA.

Ms. Cantwell’s counterclaims for breach of the ED Agreement and breach of the GC Agreement are dismissed in their entirety.

The Court has given consideration to each cause of action alleged in the complaint and, to the extent that they are not specifically addressed, each has been ruled upon in a manner not inconsistent with the findings of fact and conclusions of law herein.

The parties are directed to submit a jointly agreed upon Judgment consistent with the foregoing within fifteen (15) days of the date of service of this Decision and Order with notice of entry thereon.

The original of this Decision and Order has been filed by the Court. Counsel for plaintiff is hereby directed to promptly obtain a filed copy of the Decision and Order for service with [*25]notice of entry in accordance with CPLR 5513.”

Alphas v Smith 2017 NY Slip Op 01277  Decided on February 16, 2017 Appellate Division, First Department packs a semester’s worth of lecture into one short case.

Lesson 1:  Privity in a Small Corporate Setting.  “In opposition to defendants’ motion, plaintiff’s counsel submitted an affirmation citing Good Old Days Tavern v Zwirn (259 AD2d 300 [1st Dept 1999]) and averring that plaintiff was the president and sole shareholder of the Alphas Company of New York, Inc. (Alphas NY) and that running that corporation was the business from which plaintiff derived his livelihood. Thus, contrary to defendants’ contention, plaintiff is not claiming for the first time on appeal to have derived his livelihood from Alphas NY. In light of the similarity between this case and Good Old Days, and in light of the procedural posture of this case (a CPLR 3211 motion to dismiss), plaintiff should be allowed to assert an individual malpractice claim, even though defendants represented only Alphas NY in the federal action in which they allegedly committed malpractice. However, plaintiff’s damages are limited to those he suffered individually (e.g., the loss of $1.4 million in unsecured loans that he made to Alphas NY, the losses he incurred as a result of guaranteeing the company’s debt, lost income, loss of his Perishable Agricultural Commodities Act license, a lower personal credit score, legal fees for his personal liabilities, and the cancellation of an agreement for 30% of his interest in Alphas NY), as opposed to damages suffered by Alphas NY (e.g., the $1.2 million judgment entered against it in the federal action, its bankruptcy, the liquidation of its cooperative shares in the Hunts Point Terminal Produce Cooperative Association, and the legal fees incurred by it) (see generally Griffith v Medical Quadrangle, 5 AD3d 151, 152 [1st Dept 2004]).”

Lesson 2: Breach of Contract: “While the motion court did not discuss whether the second cause of action (breach of contract and fiduciary duties) was duplicative of the first (malpractice), defendants did make this argument below, as well as on appeal. Defendants are correct.

“Unless a plaintiff alleges that an attorney defendant breached a promise to achieve a specific result, a claim for breach of contract is insufficient and duplicative of the malpractice claim” (Mamoon v Dot Net Inc., 135 AD3d 656, 658 [1st Dept 2016] [internal citations and quotation marks omitted]). As in Mamoon, “[p]laintiff does not allege that . . . defendants breached a promise to achieve a specific result” (id.).”

Lesson 3: Breach of Fiduciary Duty: “Plaintiff argued below that the fiduciary duty claim was not “predicated on the same allegations” as the malpractice claim (Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 290 AD2d 399, 400 [1st Dept 2002]) because the former alleged that defendants acted willfully and intentionally due to a conflict of interest, whereas the latter merely alleged that they were negligent. However, we have found that a breach of fiduciary duty claim was “properly dismissed” as “redundant of the legal malpractice cause of action” (Waggoner v Caruso, 68 AD3d 1, 6 [1st Dept 2009], affd 14 NY3d 874 [2010]), even though the fiduciary duty claim was [*2]based on the defendants’ conflict of interest (id.).

Plaintiff also contended below that the relief sought in the fiduciary duty claim was not “identical to that sought in the malpractice cause of action” (Nevelson, 290 AD2d at 400). However, we have dismissed a fiduciary duty claim as duplicative of a malpractice claim where it “allege[d] similar damages” (InKine Pharm. Co. v Coleman, 305 AD2d 151, 152 [1st Dept 2003] [emphasis added]). Except for damages for emotional and mental distress — which cannot be recovered on a legal malpractice claim (see Wolkstein v Morgenstern, 275 AD2d 635, 637 [1st Dept 2000]; see also Dombrowski v Bulson, 19 NY3d 347, 349, 351-352 [2012]) — and punitive damages — which are “awarded only in exceptional cases” (Marinaccio v Town of Clarence, 20 NY3d 506, 511 [2013]; see also Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 13 [1st Dept 2008]) — the damages sought in the first and second causes of action are the same.”