The family is large, and the husband has been married at least twice.  There are adult children from the first marriage, and the husband has significant sums of money.  What is this?  It is a recipe for internecine war;  of course, it is over money.   Did Dad fraudulently and wrongfully give the adult kids money that belonged to wife #2?  Did the accountants help out?

Swartz v Swartz  2016 NY Slip Op 08390  Decided on December 14, 2016  Appellate Division, Second Department looks into this question.

“In April 2009, the plaintiff, Starnette Swartz, commenced an action for a divorce and ancillary relief against her husband, Jerome Swartz (hereinafter the matrimonial action). In connection with the matrimonial action, Starnette Swartz and Jerome Swartz entered into a so-ordered stipulation, which, inter alia, restricted their ability to transfer or dispose of certain assets. The plaintiff then commenced this action against Jerome Swartz; James P. King and James P. King & Associates, LLC (hereinafter together the King defendants), who were the accountants for the plaintiff and Jerome Swartz during their marriage; Shanah Swartz-Gordon and Nikola Swartz-Hennes, who are Jerome Swartz’s two daughters from a prior marriage (hereinafter together the Swartz daughters); Joshua Swartz, who is Jerome Swartz’s son from the prior marriage; and 27 trust, partnership, and corporate entities that Jerome Swartz allegedly had an interest in or controlled (hereinafter collectively the corporate defendants). In an amended summons and complaint, 3 partnerships and 1 corporate entity were added as defendants (hereinafter collectively the added defendants). The plaintiff contended that Jerome Swartz, with the help of the King defendants, transferred assets to his children, the corporate defendants, and the added defendants in order to hide these assets and to deprive the plaintiff of her right to equitable distribution in connection with the matrimonial action.”

“The plaintiff moved for a preliminary injunction, inter alia, enjoining the corporate defendants, the Swartz daughters, and Joshua Swartz (hereinafter collectively the Swartz defendants), and the King defendants from transferring or disposing of assets or funds to the extent that they received such assets or funds from Jerome Swartz beginning on January 1, 2009, until the present. The King defendants moved, inter alia, to dismiss the amended complaint insofar as [*3]asserted against them pursuant to CPLR 3211(a)(7), or to stay the action pending resolution of the matrimonial action. The Swartz defendants separately moved, inter alia, to dismiss the amended complaint insofar as asserted against them pursuant to CPLR 3211(a)(4) and (7), and for sanctions pursuant to 22 NYCRR 130-1.1 from the plaintiff. The plaintiff cross-moved for sanctions pursuant to 22 NYCRR 130-1.1 against all of the defendants.”

“With respect to that branch of the King defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the sixth cause of action, which alleged breach of fiduciary duty insofar as asserted against them, ” [t]he elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct'” (Stortini v Pollis, 138 AD3d 977, 978-979, quoting Deblinger v Sani-Pine Prods. Co., Inc., 107 AD3d 659, 660, and Rut v Young Adult Inst., Inc., 74 AD3d 776, 777). A cause of action sounding in breach of fiduciary duty must be pleaded with particularity under CPLR 3016(b) (see Deblinger v Sani-Pine Prods. Co., Inc., 107 AD3d at 660; Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 808). Here, affording the amended complaint a liberal construction, accepting the facts alleged therein to be true, and granting the plaintiff the benefit of every possible favorable inference, the amended complaint failed to plead with the requisite particularity the existence of a fiduciary duty between the plaintiff and the King defendants and a breach thereof (see Theaprin Pharms., Inc. v Conway, 137 AD3d 1254, 1255). Accordingly, the Supreme Court properly granted that branch of the King defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging breach of fiduciary duty asserted against them.”

“The Supreme Court properly granted those branches of the motions of the King defendants and the Swartz defendants which were pursuant to CPLR 3211(a)(7) to dismiss the first cause of action, which alleged fraud insofar as asserted against the King defendants, the Swartz daughters, and the corporate defendants. The elements of a cause of action to recover damages for fraud are (1) a misrepresentation or a material omission of fact which was false, (2) knowledge of its falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damages (see Ginsburg Dev. Cos., LLC v Carbone, 134 AD3d 890, 892). To sustain a cause of action alleging fraudulent concealment, the plaintiff must allege that the defendant had a duty to disclose the material information (see Bannister v Agard, 125 AD3d 797, 798). Pursuant to CPLR 3016(b), where a cause of action is based on fraud, the “circumstances constituting the wrong” must be “stated in detail,” including “specific dates and items” (Orchid Constr. Corp. v Gottbetter, 89 AD3d 708, 710 [internal quotation marks omitted]; see Doukas v Ballard, 135 AD3d 896, 898).

With respect to the King defendants, although the amended complaint alleged that they made a statement to the plaintiff to transfer her interest in certain real property for tax purposes, there was no factual support for the plaintiff’s assertion that this statement was false or a misrepresentation of fact (see Nanomedicon, LLC v Research Found. of State Univ. of N.Y., 112 AD3d 594, 598; Caldwell v Gumley-Haft L.L.C., 55 AD3d 408). The remaining allegations in the amended complaint regarding alleged misstatements that the King defendants made to the plaintiff, including that they issued false financial statements and accounting reports to the plaintiff, were not pleaded in accordance with CPLR 3016(b). The amended complaint also failed to allege a basis for imposing a duty on the King defendants to disclose to the plaintiff the alleged transfers that Jerome Swartz made because they did not have a fiduciary or confidential relationship with the plaintiff. Additionally, the amended complaint failed to allege that the Swartz daughters made any material misrepresentations of fact to the plaintiff or that they owed a duty to the plaintiff to disclose the transfers that Jerome Swartz allegedly made (see Nafash v Allstate Ins. Co., 137 AD3d 1088, 1090; Sanford/Kissena Owners Corp. v Daral Props., LLC, 84 AD3d 1210, 1211). Similarly, there were no allegations in the amended complaint that the corporate defendants made any misrepresentations of fact to the plaintiff or that they owed a duty to disclose information to the plaintiff.

“The elements of a cause of action alleging aiding and abetting fraud are an underlying fraud, [the] defendants’ knowledge of this fraud, and [the] defendants’ substantial assistance in the achievement of the fraud'” (Ginsburg Dev. Cos., LLC v Carbone, 134 AD3d 890, 894, quoting High Tides, LLC v DeMichele, 88 AD3d 954, 960-961), and, pursuant to CPLR 3016(b), the “circumstances constituting the wrong” must be “stated in detail” (Doukas v Ballard, 135 AD3d at 898 [internal quotation marks omitted]). Here, the Supreme Court properly granted those branches of the motions of the King defendants and the Swartz defendants which were pursuant to CPLR 3211(a)(7) to dismiss the ninth cause of action alleging aiding and abetting fraud insofar as asserted against the King defendants, the Swartz daughters, and the corporate defendants (see McBride v KPMG Intl., 135 AD3d 576, 579; High Tides, LLC v DeMichele, 88 AD3d at 960-[*4]961; CRT Invs., Ltd. v BDO Seidman, LLP, 85 AD3d 470, 472; Stanfield Offshore Leveraged Assets, Ltd. v Metropolitan Life Ins. Co., 64 AD3d 472, 476).”

“The King defendants were not entitled to dismissal pursuant to CPLR 3211(a)(7) of the eighth cause of action, which alleged unjust enrichment insofar as asserted against them. “The elements of a cause of action to recover for unjust enrichment are (1) the defendant was enriched, (2) at the plaintiff’s expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered'” (GFRE, Inc. v U.S. Bank, N.A., 130 AD3d 569, 570, quoting Mobarak v Mowad, 117 AD3d 998, 1001). A cause of action alleging unjust enrichment requires the plaintiff to set forth that the defendant possessed property or assets of the plaintiff (see Roslyn Union Free School Dist. v Barkan, 71 AD3d 660, 661, mod 16 NY3d 643). Here, construing the amended complaint liberally, as augmented by the plaintiff’s affidavit, the plaintiff sufficiently alleged that her assets were used to compensate the King defendants for their accounting services, and that they were unjustly enriched at her expense when they failed to perform or negligently performed these services on her behalf. Accordingly, the Supreme Court erred in granting that branch of the King defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging unjust enrichment insofar as asserted against them.”

 

Yesterday, we spoke about commercial litigation, intra-company claims and how minority shareholders can bring claims that attorneys for the corporation or the majority shareholders have wronged them.  Yesterday, it was “legal malpractice.”  Today it’s “breach of fiduciary duty.”

Exeter Law Group LLP v Wong  2016 NY Slip Op 32425(U)  December 9, 2016 Supreme Court, New York County Docket Number: 161667/2014 Judge: Eileen A. Rakower.

“A client can state a claim for breach of fiduciary duty against an attorney by alleging “the existence of a fiduciary relationship, misconduct by the defendant, and damages that were caused by the defendant’s misconduct.” (Harbor Consultants Ltd. v Roth, 907 N.Y.S.2d 100, 100 [N.Y. Sup. Ct. 2010]). “As a fiduciary, an attorney is charged with a high degree of undivided loyalty to his [or her] client.” (Harbor Consultants, 907 N.Y.S.2d at 100). The second counterclaim alleges that Exeter and Wong, as the attorney of Day, Eisner, Immortalana and Salvaragen, “owed them a duty of undivided and undiluted loyalty” and “were required to keep certain information privileged and confidential.” It alleges that Exeter and Wong breached their fiduciary duty to them “by disclosing confidential and privileged information with A. Richard Golub (“Golub”), a known associate oflmmortalana’s principals … for the sole purpose of coercing one oflmmortalana’s owners, Kelly Day, to provide payment to Exeter.” More specifically, it alleges in April 2014, at Wong’s “instigat[ing], “Wong and Golub contacted Day by telephone” at which point “Golub began screaming and reprimanding Day for not paying Exeter and Wong” and “shouted at Day in an aggressive tone that Day’s ‘partners’ were ‘screwing her’ and that the company they had formed was a sham.” It alleges that “[t]he information Golub referred to in the telephone call with Day was information Wong and Exeter obtained while representing Counterclaim Plaintiffs” which Wong and Exeter disclosed to Golub “in order to coerce payment for monies they believe are owed to them.”

“Exeter and Wong seek to dismiss the second counterclaim under CPLR 321 l(a)(l) on the grounds that the engagement letter signed by the Day and Eisner in 2012 explicitly authorizes Exeter to confer with Mr. Golub. Here, the 2012 engagement, which is signed by Eisner and Day, letter provides, “Additionally, I will be consulting with Aaron Richard Golub, Esq., from the law office of Aaron Richard Golub, Esquire, P.C., whom You [Day and Eisner] already know.” While the 2012 engagement letter may permit Wong to consult with Mr. Golub on certain matters, it does not flatly contradict Eisner and Day’s allegations that Mr. Golub may have disclosed confidential communications that Day and Eisner did not – authorize. Furthermore, the alleged coercive nature of the communication may rise to the level of a breach of a fiduciary duty. Alternatively, Exeter and Wong seek to dismiss the second counterclaim under CPLR 321 l(a)(7) on the grounds that New York Rules of Professional Conduct (“NYRPC”) l.6(b)(4) and 1.6(b)(5)(ii) authorized Exeter and Wong to reveal client confidences in consulting with other lawyers. NYRPC l .6(b) provides, in relevant part, that a lawyer “may reveal or use confidential information to the extent that the lawyer reasonably believes necessary: (4) to secure legal advice about compliance with these Rules or other law by the lawyer, another lawyer associated with the lawyer’s firm or the law firm; ***[or] (5)(i)(ii) to establish or collect a fee . .. “(emphasis added). NYRPC 1.6, Comment 14, states “[p ]aragraph (b) permits disclosure only to the extent the lawyer reasonably believes the disclosure is necessary to accomplish one of the purposes specified in paragraphs (b )( 1) through (b )( 6).” Comment 14 to NYRPC 1. 6 further states that “[b ]efore making a disclosure, the lawyer should, where practicable, first seek to persuade the client to take suitable action to obviate the need for disclosure.” Here, while Exeter and Wong may have a defense based on NYRPC 1.6, it does not provide a basis to dismiss the Complaint based on a failure to state a claim at this juncture. Lastly, Exeter and Wong argues that the second counterclaim fails to state a claim because “[t]here is no private right of action for a violation of the Code of Professional Responsibility” under controlling First Department law.” “The violation of a disciplinary rule does not, without more, generate a cause of action.” (Schwartz v. Olshan Grundman Frame & Rosenzweig, 302 A.D.2d 193, 199 [1st Dep’t 2003]). However, a claim for breach of fiduciary duty can be stated where the defendant lawyer is alleged to have used confidential information to disadvantage a former client even though it was also a violation of disciplinary rules. (Sharbat v Law Offs. of Michael B. Wolk, P. C., 2011 WL 197825 (N.Y. Sup. Ct. Jan. 12, 2011).

Accordingly, Movants have failed to establish a basis for dismissal of the second counterclaim for breach of fiduciary, and the claim stands.”

In the world of commercial litigation, intra-company claims often morph into legal malpractice cases.  In LLCs one member may go against another member, in corporations, boards can split into majority/minority groups, each pitted against the other.  When the LLC or the Corporation hired an attorney, to whom does that attorney owe an obligation?  Put another way, who may sue that attorney for legal malpractice.  Mirroring this question is whether a claim for breach of fiduciary duty can successfully be brought.

Exeter Law Group LLP v Wong  2016 NY Slip Op 32425(U)  December 9, 2016  Supreme Court, New York County  Docket Number: 161667/2014
Judge: Eileen A. Rakower takes a look at both of these questions, as will we.

The first counterclaim, asserting legal malpractice, alleges, “Exeter, Wong, Tan, and/or Tan Firm provided legal advice, services, and counseling to Counterclaim Plaintiffs [Day, Eisner, Immortalana and Salvaragen] relating to Immortalana and Salvaragen relating to corporate structuring and formation,” “each had an independent duty to counsel Immortalana and Salvaragen along with Day and Farias-Eisner in their capacity as individuals owning interests in each entity and as officers of each entity,” and “participated in, managed, supervised, directed, and controlled the legal representation of the corporate structuring and formation of Immortalana and Salvaragen, including taking steps to create each entity.”

“In seeking to dismiss the legal malpractice claim, the Exeter Parties argue that Day and Eisner lack standing to bring the legal malpractice claim “because as shareholders they had no standing to bring a direct action for injuries allegedly suffered by their corporations.” They further argue that Salvaragen and Immortalana lack standing to bring the claim because neither entity engaged Exeter or Wong, and no privity exists between them. Day, Eisner, Immortalana and Salvaregen, in tum, argue Day and Eisner “do not bring these claims as shareholders, but rather as individuals who were harmed when they relied on negligent representation by [Exeter and Wong] in structuring and forming their business ventures.” Day, Eisner, Immortalana and Salvaregen argue that Salvaragen and Immortalana have standing to bring the legal malpractice claim against the Exeter Parties because the Exeter Parties repeatedly undertook specific tasks on behalf of the corporate entities as reflected in the invoices and such services established an attorney-client relationship. ”

“”To determine whether an attorney-client relationship exists, a court must consider the parties’ actions.” (Pellegrino v Oppenheimer & Co., Inc., 49 A.D. 3d 94, 99 [1st Dept 2008] [citations omitted]). “[A]n attorney-client relationship is established where there is an explicit undertaking to perform a specific task.” (Id.). While the existence of an attorney-client relationship is not dependent upon the payment of a fee or an explicit agreement, a party cannot create the relationship based on his or her own beliefs or actions. (Id.). See Jane St. Co. v Rosenberg & Estis, P.C., 192 A.D. 2d 451, 451 [1st Dept 1993] (holding “[t]here is nothing in the record to indicate that defendant law firm either affirmatively led plaintiff to believe it was acting on plaintiffs behalf or knowingly allowed plaintiff to proceed under this misconception.”). In order to defeat a motion to dismiss, a party must plead facts showing the privity of an attorney-client relationship, or a relationship so close as to approach privity. (Cal. Pub. Employees Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427, 434 [2000] [affirming dismissal of legal malpractice claim for failure to plead actual privity or “a relationship so close as to approach that of privity”]). To show “a relationship so close as to approach that of privity,” or “near privity,” “[t]he evidence must demonstrate “( 1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance by a known party on the statement in furtherance of that purpose; and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance.” Cal. Pub. Employees, 95 N.Y.2d at 434. “To show ‘near privity,’ a plaintiff must allege that the attorney was aware that its services were used for a specific purpose·, that the plaintiff relied upon those services, and that the attorney demonstrated an understanding of the plaintiffs reliance.” Candela Entertainment, Inc. v. Davis & Gilbert, LLP, 39 Misc 3d 1232(A) [Sup Ct 2013]. Here, to the extent that Day and Eisner bring claims as individuals who were harmed when they relied on alleged negligent representation by Exeter and Wong in structuring and forming their business ventures, they have stated a claim for legal malpractice. With respect to Immortalana and Salvaregen’s claims for legal malpractice, the lack of a retainer agreement between them and Exeter is not dispositive on the issue of whether there was an attorney-client relationship. Furthermore, Exeter’s Amended Complaint asserts causes of action for unjust enrichment and quantum meruit, seeking to recover for legal services they provided. Accordingly, accepting all facts as alleged in the pleading to be true and according the nonmoving party to the benefit of every possible inference, the first counterclaim for legal malpractice stands.”

Attorneys have duties to clients, in the nature of a fiduciary duty. Professionals other than doctors have duties to their clients/customers in varying levels.  Pharmacists, who are professionals owe an independent duty to persons for whom they fill a prescription…don’t they?  Well…not really, even though the profession of pharmacology is traced back to ancient Egypt and Babylonia where “a class of prepares of medicines existed separate from those who prescribed and administered drugs.”

Abrams v Bute 2016 NY Slip Op 01627 [138 AD3d 179]  March 9, 2016  Miller, J.  Appellate Division, Second Department tells us that they have roughly the same level of obligation to a customer as an intern has to a patient.  If they follow the supervising doctors’ instructions, and those instructions are not wildly off the mark, they will not be liable.

“This appeal and cross appeal require consideration of the duty owed by a pharmacist in filling a prescription issued by a{**138 AD3d at 181} physician. In view of our limited precedent on this subject, we take this opportunity to clarify the nature of a pharmacist’s duty and the means by which the appropriate standard of care may be established in any particular case. We conclude that when a pharmacist has demonstrated that he or she did not undertake to exercise any independent professional judgment in filling and dispensing prescription medication, a pharmacist cannot be held liable for negligence in the absence of evidence that he or she failed to fill the prescription precisely as directed by the prescribing physician or that the prescription was so clearly contraindicated that ordinary prudence required the pharmacist to take additional measures before dispensing the medication. Applying this standard here, the defendants Jessica “Smith,” CVS Pharmacy, and CVS Albany, LLC, are entitled to summary judgment dismissing the complaint insofar as asserted against them.”

 

Weinstein v CohnReznick, LLP  2016 NY Slip Op 08068  Decided on November 30, 2016
Appellate Division, Second Department is an example of the Second Department Appellate Division dicing a Suffolk County dismissal into component parts. and keeping one claim alive.

Plaintiffs essentially sued the accountants for a group that took them over.  Was there sufficient privity?  No.  Were there sufficient fraud allegations?  No.  Was there something?  Yes.

“The Supreme Court properly granted that branch of Cohn’s motion which was to dismiss the cause of action alleging accounting malpractice. Accepting the factual allegations in the complaint as true, and according the plaintiffs the benefit of every favorable inference, the complaint [*2]failed to adequately allege the existence of actual privity of contract between the plaintiffs and Cohn, or a relationship so close as to approach that of privity, sufficient to impose a professional duty upon Cohn for the benefit of the plaintiffs (see Security Pac. Bus. Credit v Peat Marwick Main & Co., 79 NY2d 695, 702-703; Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551; Signature Bank v Holtz Rubenstein Reminick, LLP, 109 AD3d 465, 466-467). Inasmuch as the complaint failed to adequately allege the existence of a duty owed by Cohn to the plaintiffs, it failed to state a cause of action alleging accounting malpractice.

The Supreme Court also properly granted those branches of Cohn’s motion which were to dismiss the causes of action alleging fraud, fraudulent concealment, and aiding and abetting fraud, as those causes of action failed to satisfy the particularity requirements of CPLR 3016 (see CPLR 3016[b]; Moore v Liberty Power Corp., LLC, 72 AD3d 660, 661). With respect to the causes of action alleging fraud and fraudulent concealment, the plaintiffs failed to make specific factual allegations that would establish that Cohn knowingly misrepresented a material fact for the purpose of inducing the plaintiffs’ reliance, actual justifiable reliance on the part of the plaintiffs, and damages (see Theaprin Pharms., Inc. v Conway, 137 AD3d 1254, 1255; Fulton v Hankin & Mazel, PLLC, 132 AD3d 806, 807; Bannister v Agard, 125 AD3d 797, 798; Schwatka v Super Millwork, Inc., 106 AD3d 897, 900; Brualdi v IBERIA, Lineas Aereas de España, S.A., 79 AD3d 959, 960-961). Similarly, with respect to the cause of action alleging aiding and abetting fraud, the complaint failed to adequately allege the existence of an underlying fraud, knowledge of that fraud by Cohn, and substantial assistance by Cohn in perpetrating that fraud (see Matter of Woodson, 136 AD3d 691, 693; Nabatkhorian v Nabatkhorian, 127 AD3d 1043, 1043-1044; Goel v Ramachandran, 111 AD3d 783, 792-793; High Tides, LLC v DeMichele, 88 AD3d 954, 960-961).

The plaintiffs’ cause of action alleging breach of fiduciary duty also failed to satisfy the particularity requirements of CPLR 3016 (see CPLR 3016[b]; Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 808), as the plaintiffs failed to make specific factual allegations that would establish that Cohn had a fiduciary obligation running to the plaintiffs (see Tal v Superior Vending, LLC, 20 AD3d 520, 521; see also Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 561; Atkins Nutritionals v Ernst & Young, 301 AD2d 547, 548).

Nevertheless, the Supreme Court improperly granted that branch of Cohn’s motion which was to dismiss the cause of action alleging aiding and abetting breach of fiduciary duty. “A claim for aiding and abetting a breach of fiduciary duty requires: (1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that [the] plaintiff suffered damage as a result of the breach” (Kaufman v Cohen, 307 AD2d 113, 125; see AHA Sales, Inc. v Creative Bath Prods., Inc., 58 AD3d 6, 23). Here, the complaint adequately alleged that the Levines breached their fiduciary obligations to the plaintiffs, that Cohn knowingly participated in that breach, and that the plaintiffs suffered damages as a result (see Wallkill Med. Dev., LLC v Catskill Orange Orthopaedics, P.C., 131 AD3d 601, 604; Aranki v Goldman & Assoc., LLP, 34 AD3d 510, 512; Operative Cake Corp. v Nassour, 21 AD3d 1020, 1021).”

When reading an Appellate Division decision, the tone and subject matter rapidly indicate that the case is a pro-se legal malpractice litigation, as the participants spend inordinate amounts of time debating useless issues.  As an example, Hyman v Pierce 2016 NY Slip Op 08272 Decided on December 8, 2016 Appellate Division, Third Department deals entirely with appellate practice over the completely inane matter of whether some discovery was provided in paper or electronic form.  Plaintiff spend endless hours making motions and perfecting an appeal, when the same result could have been had by printing out the email.

“On January 5, 2015, plaintiff moved for an extension of time to complete discovery and to compel defendants to respond to certain document demands. In support of this motion, plaintiff submitted copies of correspondence wherein she requested that defendants produce a “copy of the complete file with an itemized table of contents of any and all unprivileged correspondences related in any manner” to her dealings with defendants and provide dates for depositions. Indisputably, defendants did not produce the requested documents, asserting that plaintiff already possessed the requested materials, and no depositions were completed. By an order entered in March 2015, Supreme Court denied plaintiff’s motion to compel defendants to produce the requested documents, extended the existing schedule to allow the parties to complete depositions and directed plaintiff to file a note of issue within 90 days. Plaintiff filed a notice of appeal from this order and an April 2015 order denying her motion to reargue.

On July 31, 2015, Supreme Court (Cercio Jr., J.) issued an order directing defendants to provide an electronic copy of the requested discovery material. Plaintiff does not dispute that defendants have complied with that order but, instead, asserts that she was entitled to a paper copy of the documents. Since plaintiff has obtained copies of the documents that she requested, albeit in electronic format, we agree with defendants that plaintiff’s appeal from the March 2015 order must be dismissed as moot (see Matter of Jewett v Ames, 276 AD2d 892, 893 [2000]; Matter of Franklin [International Bus. Machs. Corp.], 215 AD2d 759, 759 [1995]; Middleton v State of New York, 49 AD2d 989, 989 [1975]).”

Bullock v Miller  2016 NY Slip Op 08268  Decided on December 8, 2016  Appellate Division, Third Department is a perfect example of how the “but for” portion of the legal malpractice world works, or alternatively, an example of how court tend to protect attorneys from their own mistakes.

Plaintiff demonstrates at least one statutory shortcoming where the attorney simply failed to argue that the child support statute required certain missing findings of fact.  That however is just not enough to avoid summary judgment.

“Plaintiff retained defendant Miller Mayer, LLP to represent her in a divorce action, with the legal work performed by defendant R. James Miller. Miller commenced an action for divorce on plaintiff’s behalf by filing a summons with notice in January 2009, but did not serve it, instead electing to prosecute a second action commenced in July 2009. Plaintiff and her husband appeared for trial on September 3, 2010, and counsel placed a stipulation on the record that resolved all outstanding issues. They stipulated as to the division of expenses relating to two children under the age of 21 and also agreed, in conclusory fashion, to waive any other child support obligation. Miller agreed to, but did not, submit a proposed judgment of divorce for signature by December 1, 2010. Supreme Court received and executed a judgment of divorce [*2]later that month, and executed an amended judgment of divorce in February 2011.

Plaintiff retained new counsel and made an unsuccessful motion in the divorce action to, among other things, reopen the issue of child support by vacating the relevant provisions of the stipulation. She then commenced action No. 2 and alleged that defendants had committed legal malpractice in their representation of her. Following joinder of issue and discovery, defendants moved, and plaintiff cross-moved, for summary judgment. Plaintiff appeals from the July 2014 order granting defendants’ motion and dismissing the complaint in action No. 2”

“Turning to the record that is before us, we affirm. In order to succeed on a claim for legal malpractice, a plaintiff must show “that the attorney failed to 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 the plaintiff to sustain actual and ascertainable damages” (Arnold v Devane, 123 AD3d 1202, 1203-1204 [2014] [internal quotation marks, brackets and citations omitted]; see Dombrowski v Bulson, 19 NY3d 347, 350 [2012]). Defendants, as the proponents of a motion for summary judgment, bear the initial burden of “present[ing] evidence in admissible form establishing that plaintiff is unable to prove at least one of these elements” (Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d 925, 926 [2003]; accord Miazga v Assaf, 136 AD3d 1131, 1133-1134 [2016], lv dismissed 27 NY3d 1078 [2016]). Contrary to defendants’ contention, the “conclusory, self-serving statements” of Miller regarding the applicable standard of care did not constitute “expert . . . evidence which would tend to establish . . . that [defendants] did not” depart from it (Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 259 AD2d 282, 284 [1999]; see 400 E. 77th Owners, Inc. v New York Eng’g Assn., P.C., 122 AD3d 474, 475 [2014]; cf. Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d at 926). As a result, the issue “distills to whether defendant[s] met [their] threshold burden as to the element of either proximate cause or damages” (Arnold v Devane, 123 AD3d at 1204; see Schrowang v Biscone, 128 AD3d 1162, 1164 [2015]; Carey v Campbell, 93 AD2d 923, 923-924 [1983]).

Defendants met that initial burden by submitting competent proof — including the affidavit of Miller, his and plaintiff’s deposition testimony and documentary evidence — that any breach of duty on defendants’ part did not result in damages to plaintiff. Plaintiff and her husband both claimed to be the custodial parent of their children, and she asserted that Miller committed malpractice by failing to pursue an award of child support on her behalf. Miller explained that he did not do so because plaintiff would not have been found to be the custodial parent, a belief justified by the refusal of Supreme Court to order either party to pay temporary child support and an investigation that led Miller to believe that the children either lived on their own or spent the bulk of their time with the father. Miller therefore declined to do anything that could backfire and end in plaintiff paying child support, and instead negotiated a settlement in which neither party would pay child support. In response to this proof, plaintiff continued to assert that she was the custodial parent. She provided nothing to show that an application for [*3]child support would have succeeded, however, and did not raise a question of fact as to whether she was damaged by the failure to make one (see Miazga v Assaf, 136 AD3d at 1134; Sevey v Friedlander, 83 AD3d 1226, 1227 [2011], lv denied 17 NY3d 707 [2011]).

Plaintiff’s additional challenges to the actions of defendants do not demand extended discussion. She complained that defendants committed malpractice in not prosecuting the first divorce action commenced. That being said, defendants provided proof that she was benefitted by that delay, as settlement negotiations were underway prior to the commencement of the second divorce action and plaintiff received far more in voluntary spousal support during that period than she was entitled to (and subsequently received) in court-ordered maintenance. Lastly, while Miller admittedly failed to include necessary language in the stipulation regarding the presumptively correct basic child support obligation and the reasons for deviation from that amount (see Domestic Relations Law § 240

[1-b] [h]), as noted above, there is little to show that plaintiff was damaged by the failure to pursue the issue of child support more vigorously [FN2]. Her remaining contentions, to the extent that they are properly before us, have been considered and rejected.”

One way to look at how legal malpractice cases come out is by applying Occam’s razor.  Which result will more likely be final…now, not later?   Optical Communications Groups, Inc. v Rubin, Fiorella & Friedman, LLP  2016 NY Slip Op 08180  Decided on December 6, 2016  Appellate Division, First Department is a fine example.  The case came out badly for Plaintiff, a pre-requisite for the legal malpractice case.  Plaintiff says case came out badly because certain evidence was not obtained and certain evidence was not precluded.  Attorneys say the case came out just fine, and let’s just rely on  the 2d Circuit Court of Appeals decision.  Application of the hypothesis indicates that simply relying on the 2d Circuit is the simpler and more final method.  Voila!

“n this legal malpractice action, plaintiff Optical asserts that its former attorneys, Rubin, Fiorella and Friedman, mishandled the litigation of a maritime action in which it sought to recover damages caused when its submarine fiber optical cable was struck and destroyed by an anchor inadvertently released from a cargo vessel owned by Marbulk Canada, Inc. Rubin Fiorella, on behalf of Optical, brought a maritime action in federal court against the vessel and Marbulk. In the maritime action, Optical alleged that the vessel dropped its anchor in an area designated for laying cable, and that Marbulk was therefore liable. The parties agreed that Marbulk would be liable only if the vessel was located in the designated cable area when its anchor dropped.

Marbulk successfully moved for summary judgment dismissing the complaint in the maritime action. The district court found, inter alia, that sonar data evidence submitted by plaintiff Optical showed that the vessel was outside the boundaries of the designated cable area (Optical Communications Group, Inc. v M/V Ambassador, 938 F Supp 2d 449 [SD NY 2013] [Optical I], affd. 558 Fed Appx 94 [2d Cir 2014] [Optical II]). The conclusion was also supported by evidence submitted by Marbulk, specifically, a screen shot of Simplified Vessel Data Radar (SVDR) data that pinpointed the location of the vessel outside the boundaries of the cable area. As indicated, that decision was affirmed on appeal by the Second Circuit.

In the instant action, plaintiff alleges that, as noted by the Second Circuit in Optical II, Rubin Fiorella failed to preserve an objection to the SVDR data submitted by Marbulk in support of its motion, and also failed to renew a discovery motion that had been denied without prejudice to renewal. Optical alleges that but for these failures, it would have defeated the motion for summary judgment and ultimately prevailed in the maritime action.

The motion court properly found that the Second Circuit’s order in Optical II, affirming [*2]Optical I, is documentary evidence within the meaning of CPLR 3211(a)(1), and that its holding flatly contradicts the legal conclusions and factual allegations in the complaint (see Amsterdam Hospitality Group, LLC v Marshall-Alan Assoc., Inc., 120 AD3d 431, 432 [1st Dept 2014]; Morgenthow & Latham v Bank of N.Y. Co., 305 AD2d 74, 78 [1st Dept 2003], lv denied 100 NY2d 512 [2003]).

Even assuming that Rubin Fiorella had successfully challenged the admissibility and authenticity of the SVDR data proffered by Marbulk, the district court found that plaintiff Optical’s own sonar data evidence, submitted through its expert, indicated that the vessel was outside the cable field when it released its anchor. Thus, plaintiff’s evidence submitted in the maritime action refutes its allegations in this action that, but for Rubin Fiorella’s negligence, it would have prevailed in the maritime action (see e.g. Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]).

The district court’s decision also refutes Optical’s allegation that, but for Rubin Fiorella’s failure to conduct further discovery, it would have prevailed in the maritime action, since that court found that the record with respect to the location of the vessel was “immutable and complete” so that “further discovery will not recreate the events underlying the anchor drop or enhance the existent evidence in any meaningful way” (Optical I, 938 F Supp 2d at 464; see Biondi v Beekman Hill House Apt. Corp., 257 AD2d 76, 81 [1st Dept 1999], affd 94 NY2d 659 [2000]).”

The privity rule in legal malpractice is both a policy and a substantive nightmare for peripheral clients.  These include the beneficiary, the individual in a corporate setting and others.  The exception permits a law suit when there is fraud, collusion, malice or special circumstances.  The exception is rarely invoked, and the “special circumstances” portion even more rarely.  Thus, Deep Woods Holdings LLC v Pryor Cashman LLP,  2016 NY Slip Op 08156 .  Decided on December 6, 2016   Appellate Division, First Department is very unusual.

“Defendant Pryor Cashman LLP represented nonparty David Lichtenstein in a transaction in which Lichtenstein was to purchase $10 million worth of stock in nonparty Park Avenue Bank. Before the transaction could close, nonparty Savings Deposit Insurance Fund of the Republic of Turkey (SDIF) sued the holder of 99% of the bank’s shares and obtained a restraining order preventing any transfer of the shares (Deep Woods Holdings, L.L.C. v Savings Deposit Ins. Fund of the Republic of Turkey, 745 F3d 619, 621 [2d Cir 2014], cert denied __ US __, 135 S Ct 964 [2015]).

On June 22, 2004, Lichtenstein and SDIF entered into a stipulation, pursuant to which Lichtenstein had the right to exercise a call option to buy shares of stock in the bank for a specified sum, provided Lichtenstein exercised his right within 45 days after SDIF was able to deliver the shares. SDIF was able to deliver the shares on July 12, 2005, but Pryor Cashman did not exercise Lichtenstein’s call option until November 2, 2005 (Deep Woods, 745 F3d at 623), and SDIF then refused to honor it.

Thereafter, Pryor Cashman recommended to Lichtenstein that he, together with nonparties Donald Glascoff, chairman of the bank, and Charles Antonucci, form plaintiff Deep Woods Holdings LLC, and that Lichtenstein assign the call option to Deep Woods, which would then sue SDIF to exercise the call option. In or about 2007, Pryor Cashman organized Deep Woods, drafted the assignment, and insisted on acting as counsel for Deep Woods in the litigation against SDIF. The assignment read in its entirety: “In consideration of the issuance to David Lichtenstein (“Assignor”) of a 75% interest in Deep Woods Holdings LLC, a Delaware limited liability company (“Deep Woods”), as described in the Deep Woods Operating Agreement dated February 6, 2007, the Assignor hereby assigns, transfers and delivers to Deep Woods his entire right, title and interest in and to the option contained in Paragraph 8 of that certain Stipulation dated June 22, 2004 between the Assignor and [SDIF].” Pryor Cashman did [*2]not draft the assignment so as to specifically assign any tort claims Lichtenstein might have in connection with the exercise of the call option to Deep Woods.

According to Mr. Glascoff, when Pryor Cashman formed Deep Woods and prepared the assignment, it acted on behalf of Lichtenstein, the other members of Deep Woods, and Deep Woods itself. Mr. Glascoff further alleges that, during this process, Pryor Cashman was silent on the issue of whether the assignment transferred tort claims, but that it was Mr. Glasscoff’s understanding that it did, and, if he had understood that it did not, he would have insisted on adding any necessary language so that it did.

At the trial level, Deep Woods won $25.3 million in damages. However, the Second Circuit reversed, finding that the call option had not been not exercised in a timely manner (Deep Woods, 745 F3d at 620).”

“However, accepting plaintiff’s affidavit in opposition to defendants’ motion as true, we find that plaintiff sufficiently pleaded that defendants should be equitably estopped from arguing that the assignment did not assign tort claims. Contrary to defendants’ contention, estoppel can be based on silence as well as conduct (see e.g. Rothschild v Title Guar. & Trust Co., 204 NY 458, 462 [1912]). Under these circumstances, where defendants drafted the assignment at a time when it represented both Lichtenstein and plaintiff, and that interpreting the assignment to exclude tort claims would mean that neither the assignor nor plaintiff, the assignee, would be able to sue defendants for malpractice for failing to exercise the call option in a timely manner, we find that the “special circumstances” exception to the privity requirement applies (see [*3]generally Estate of Schneider v Finmann, 15 NY3d 306, 308-309 [2010]; Good Old Days Tavern v Zwirn, 259 AD2d 300 [1st Dept 1999]). To do otherwise might insulate defendants from liability for their alleged wrongdoing.”

Real Estate in New York is always a hot topic.  Prices for apartments can reach $3000 per square foot in certain circumstances, and the value of landmarked real property cannot be overstated.  What happens when a building project goes badly wrong?  Litigation.

143 Bergen St., LLC v Ruderman  2016 NY Slip Op 07936  Decided on November 23, 2016
Appellate Division, Second Department is the story of an architect and his draftsman inexplicably losing focus.

“The plaintiffs, who are owners of a landmark building as defined by Administrative Code of the City of New York § 25-302, entered into an oral agreement with the defendant Herbert Ruderman. Pursuant thereto, Ruderman agreed to provide architectural services for construction on the plaintiffs’ building, including obtaining required approvals from the New York City Landmarks Preservation Commission (hereinafter LPC) and Department of Buildings (hereinafter DOB). Ruderman subsequently retained the services of the defendant George Restivo to complete the architectural drawings.

Ruderman and Restivo obtained approval from the LPC and the DOB for the initial construction. They subsequently submitted amended plans to the DOB to comply with various changes that the plaintiffs requested. However, they failed to submit the amended plans to the LPC or obtain approval from the LPC for the changes. When the construction was near completion, the LPC determined that the construction did not comply with the plans that it had approved. Ultimately, the LPC directed the plaintiffs to demolish aspects of the construction.

The plaintiffs commenced this action, inter alia, to recover damages for breach of contract against Ruderman and professional malpractice against both defendants. Ruderman asserted a counterclaim alleging that the plaintiffs had not paid the full contract price.

The Supreme Court granted the plaintiffs’ renewed motion for summary judgment on the first and second causes of action, which alleged breach of contract and professional malpractice, respectively, and dismissing Ruderman’s counterclaim.

Contrary to the defendants’ contentions, the Supreme Court properly granted that [*2]branch of the plaintiffs’ renewed motion which was for summary judgment on the first cause of action (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324). In the first cause of action, the plaintiffs sought to recover damages for breach of contract against Ruderman. The essential elements of a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff’s performance pursuant to the contract, the defendant’s breach of its contractual obligations, and damages resulting from the breach (see Tudor Ins. Co. v Unithree Inv. Corp., 137 AD3d 1259, 1260; Legum v Russo, 133 AD3d 638, 639). Here, the plaintiff made a prima facie showing that Ruderman entered into an oral contract with the plaintiffs and pursuant thereto, the plaintiffs paid Ruderman certain monies. The plaintiffs also established, prima facie, that Ruderman breached this contract by failing to obtain the required approval from the LPC, which caused them damages. In opposition, the defendants failed to raise a triable issue of fact.”