It’s our last blog for the year, and it is a classic situation.  We leave you ’till January with this story.

Copeny v George T. Peters, PLLC  2016 NY Slip Op 32501(U)  December 16, 2016  Supreme Court, Kings County  Docket Number: 501818/14  Judge: Larry D. Martin is all about a car accident, and the selection of the absolutely wrong court, coupled with what appears to be a poor application to get into the right court.  Note how current plaintiff’s attorney deftly stayed out of the mess, and then came in to sweep up.

“This action arises from defendants’ representation of plaintiff Tarsheema M. Copeny (“plaintiff’) in an underlying personal injury action. On or about July 17, 2012, plaintiff was in an automobile accident involving a vehicle operated by plaintiff and a vehicle owned by New York Office of Children and Family Services (“OCFS”) and operated by Michael Jackson (“Jackson”), an OCFS employee.  Plaintiff then retained defendants to represent her.  On or about May 7, 2013 defendants filed a summons and complaint, on behalf of plaintiff, against OCFS and Jackson under Index No. 502376 in the Kings County Supreme Court (the “underlying personal injury action”). Subsequently, defendants learned that claims against OCFS had to be made in the Court of Claims. Thereafter, on or about, June 6, 2013, defendants filed a stipulation of discontinuance dated May 31, 2013 with the Kings County Supreme Court for the discontinuance of the underlying personal injury action. On or about August 12,2013, defendants, on behalf of plaintiff, filed a motion for permission to file a late claim against OCFS in the Court of Claims. By letter dated August 20,2013, plaintiff, among other things, terminated defendants’ services on her behalf and advised that she had retained the law firm Sinel & Associates, PLLC to represent her. By decision and order (Soto, J.) dated October 7,2013, the motion for permission to file a late claim against OCFS was denied in the Court of Claims. By letter dated February 27, 2015, Sinel & Associates, PLLC advised defendants that they would not be substituting in as counsel in the underlying personal injury action. On or about March 3, 2014, plaintiff commenced the instant action against defendants asserting causes of action sounding in legal malpractice. Defendants now move for the relief requested herein.”

“The Court notes that plaintiff’s current counsel, Sinel & Associates, PLLC, treats the instant motion as one for dismissal pursuant to CPLR 3212 rather than dismissal pursuant to CPLR 3211. Plaintiff also requests that the instant motion be converted into one for summary judgment and, upon conversion, she be granted judgment as a matter of law on her claims in the complaint. Pursuant to CPLR 3211, the Court, upon adequate notice to the parties, may treat a CPLR 3211 (a) motion to dismiss as a motion for summary judgment where the parties deliberately chart a summary judgment course (see CPLR 3211 [c]; see Mihlovan v Grozavu, 72 NY2d 506, 508 [1988]; compare Kaplan v Roberts, 91 AD3d 827, 828 [2d Dept 2012]). The Court declines to grant plaintiff’s request to convert the instant motion to one for summary judgment and, upon conversion, granting judgment as a matter of law in her favor. Nevertheless, based upon a review of the record submitted by the parties and the relevant law, the Court denies defendants’ motion to dismiss. Here, plaintiff alleges in the complaint that defendants breached the duty of care by, among other things, (1) failing to file a notice of intention to file a claim with the Court of Claims within the statutory 90-day time period, (2) failing to timely move for permission to file a late notice of claim pursuant to Court of Claims Act Article II, Section 10 (6) and (3) failing to submit an affidavit from plaintiff establishing that she has a valid cause of action or to submit any medical records regarding her claims pursuant to Insurance Law 9 5102 (d) (Complaint, ¶ 27). As a result, plaintiff claims that she would have been able to “prove[]a case of liability” against OCFS and Jackson and also that her claims in the Court of Claims would not have been dismissed leaving her “no remedy at law for her personal injuries” (Complaint, ~ 28). The Court finds that these claims are sufficient to state a cause of action for legal malpractice (see CPLR 32 I I [a][7]). As such, that branch of defendants’ motion to dismiss the complaint for failure to state a cause of action is denied. Moreover, the documents submitted by defendants did not conclusively establish a defense as a matter of law. Defendants’ submissions fail to utterly refute plaintiffs allegations so as to warrant dismissal of the complaint herein (see CPLR 321 I [a][I]; see also Randazzo, 128 AD3d at 937). Plaintiff correctly points out that Jackson was never served with the summons and complaint in the underlying personal injury action. In addition, a review of the Court’s record indicates that a request for judicial intervention was never filed in the underlying personal injury action. In this regard, that branch of defendants’ motion to dismiss the complaint on the grounds of documentary evidence is denied.”

This case mentions legal malpractice, and is a variant of the classic “you did me wrong, so I’m suing” trope.  Here, an international investor, is accused of defamation of a well-regarded law firm and its principal.

Morelli v Wey  2016 NY Slip Op 32487(U)  December 16, 2016  Supreme Court, New York County
Docket Number: 153011/16  Judge: Carol R. Edmead.  “In this defamation action, plaintiffs Benedict P. Morelli,(Morelli), Arlene B. Morelli (Mrs. Morelli), and The Morelli Law Firm, PLLC f/k/a Morelli Alters Ratner, LLP (Morelli Law Firm) allege that defendants Benjamin Wey (Wey), FNL Media LLC (FNL), and NYGG Capital  LLC d/b/a New York Global Group (NYGG) have waged a campaign to defame them through the publication of numerous false and defamatory statements in their online magazine, blogs, and  social media, in order to injure their professional reputations. Plaintiffs allege that these attacks were prompted by the Morelli  Law Firm’s representation of a former NYGG employee, Hanna Bouveng (Bouveng), in a federal action asserting sexual harassment, retaliation, and defamation claims against defendants herein (see: Bouveng v NYGG Capital LLC, 175 F Supp 3d 280 [SD NY 2016]). Defendants now move, pursuant to CPLR 3211 (a) (1), (5), and (7), to dismiss the complaint in its entirety. ”

“Beginning in 2015 and continuing through the present, defendants allegedly repeatedly published over 600 separate false and defamatory statements and images about plaintiffs (id.,¶s 20, 26-72; appendix A to verified complaint). Specifically, defendants accused plaintiffs of numerous criminal or repugnant: acts, including but not limited to, extortion, bank fraud, falsifying evidence, witness intimidation, conspiracy to commit fraud, sexual harassment, and professional misconduct (id.). According to plaintiffs, defendants perpetrated these attacks in order to injure plaintiffs in their profession, business, and livelihoods, though defendants were initially motivated to compromise plaintiffs’ representation of Bouveng (id.,¶¶21, 30, 73). To maximize the damage to plaintiffs’ reputations and livelihoods, defendants or their agents performed internet search engine “optimization” to increase the exposure of their false and defamatory .articles to users of Google and other internet search engines (id, if 23). ”

“Here, contrary to defendants’ contention, as alleged by plaintiffs, defendants did not merely make “a statement that there is an investigation.” Rather, the complaint alleges that defendants published an article entitled “The FBI investigation targets BENEDICT MORELLI [and] ARLENE MORELLI” (verified complaint,¶ 39 [b]), stated that plaintiffs committed “bank fraud” and “massive bank fraud” (id.,¶¶40; 42, 43 [a]), and made statements indicating that plaintiffs are “law violators” with a “long history of committing fraud” (appendix A to verified complaint). 1 In addition, in light of plaintiffs’ allegations that defendants stated that Morelli, a partner of the law firm, was a member of the Ku Klux Klan (verified complaint, irir 4, 72 [c], [d]), plaintiffs have sufficiently stated a cause of action for defamation per se (see Sheridan v Carter, 48 AD3d 444, 446-447 [2d Dept 2008] [domestic worker’s published statements which depicted couple that formerly employer her as racists were defamatory per se]; Herlihy v Metropolitan Museum of Art, 214 AD2d 250, 261 [1st Dept 1995] [complaint stated cause of action for slander per se where it stated that volunteers made statements that former coordinator was anti-Semitic and was biased in her treatment of Jewish,volunteers]): Moreover, plaintiffs’ allegations that defendants stated that plaintiffs.were members of the Mafia or a “gang” and were guilty of a serious crime are sufficient to state a cause of action for defamation per se (see Harris v Queens County Dist. Atty’s Office, 2012 WL 832837, *9 [ED NY 2012] [statement that attorney was security threat to the courthouse was defamatory per se]). For example, defendants allegedly stated that “[t]he court accuses the Morelli mafia of fabricating evidence that resulted in extortion of a Texas based chemical company,” “City National Bank charges the Morelli ‘gang’ members with orchestrating a multi-year money laundering scheme and massive loan frauds,” “Benedict Morelli and his fellow ‘gang members at Morelli Alters Ratner conspired with Morelli’ s wife, Arlene B. Morelli and David Ratner to swindle City National Bank; Batik: United and the Esquire Bank,” “Benedict Morelli and, the con man’s wife Arlene were sued for money laundering,  bank fraud and suspected mafia affiliation,” “[t]he gang at Morelli Alters Ratner is wantonly defrauding City National out of millions of dollars,” “shady lawyers Benedict Morelli, David Ratner, Martha McBrayer extortion ‘mob’ members were finally captured” (verified complaint,¶ 28 [b], 31 [a], 33 [c], 35 [a], 37 [b], 43[c]). Therefore, plaintiffs’ allegations are sufficient to state a cause of action for defamation per se.”

We continue with the cases:

7.  Neroni v Follender  2016 NY Slip Op 01527 [137 AD3d 1336]  March 3, 2016  Appellate Division, Third Department is the story of a defendant who was sued and lost, then turned around and sued the plaintiffs and their attorneys not unlike a poster-child for the principle of privity.  It is, and has always been, the judiciary’s fear that relaxing rules in legal malpractice would lead to wholesale suit after suit.  Here, the plaintiff was eventually enjoined from filing any other suits.

8.  Manhattan Sports Rests. of Am., LLC v Lieu  2016 NY Slip Op 01617 [137 AD3d 504]
March 8, 2016  Appellate Division, First Department    Defendant might have said that she did not want “ghetto people from the Bronx” in the restaurant, and may have kept the restaurant from moving its perishable foods out of the building, and she may have been an attorney, but the affidavits she submitted were those of a fact witness, not an attorney, and were not susceptible of JL 487.

9.   Lipin v Hunt  2016 NY Slip Op 01746 [137 AD3d 518]  March 10, 2016  Appellate Division, First Department.  Perhaps a little too energetic in bringing actions, Plaintiff was enjoined from commencing more cases.  The material upon which the JL 487 claims was based was “absolutely privileged.”  Query:  are deceitful utterances made in litigation always absolutely privileged?

Vol.2 of all the Judiciary Law Cases of 2016:

  1. Hudson v Hahn Kook Ctr. (USA), Inc.  2016 NY Slip Op 00882 [136 AD3d 459]  February 9, 2016  Appellate Division, First Department . Plaintiffs agreed to allow non-party attorney to withdraw while a motion to dismiss for discovery failures was pending.  Their claim that he committed deceit was dismissed and affirmed on appeal, no reason given.
  2. Katz v Essner  2016 NY Slip Op 01268 [136 AD3d 575]  February 23, 2016  Appellate Division, First Department is another in the First Department line of cases where plaintiff is non-suited in part because of a settlement allocution in which Plaintiff says that he is satisified with the work of his attorney.  JL 487 claim dismissed and affirmed without any discussion other than it was “conclusory.”
  3. Lin Shi v Alexandratos 2016 NY Slip Op 01560 [137 AD3d 451]  March 3, 2016  Appellate Division, First Department.  In a residential contract of sale downpayment case, the JL 487 claim against the escrow holder was dismissed after contemplation of the escrow terms, and a finding that the escrow agent acted correctly in accordance.

 

Legal malpractice litigation is all about mistakes, significant mistakes, made by attorneys.  The loss of a legal malpractice case via an unopposed motion to dismiss ranks high on the irony scale.  Thus, Goss v DiMarco  2016 NY Slip Op 08506  Decided on December 21, 2016  Appellate Division, Second Department is instructive on two levels.  First, don’t allow motions to be submitted without opposition; second, apply the proper procedure once it happens.

“In July 2009, the plaintiff commenced this action, inter alia, to recover damages for legal malpractice against, among others, Gary Salatto (hereinafter the defendant). The defendant moved pursuant to CPLR 3211(a)(5) and (7) to dismiss the fourth and fifth causes of action asserted against him. In an order dated December 7, 2009, the Supreme Court granted the defendant’s motion, which was unopposed. The court’s decision contained a directive to “settle order,” but the defendant failed to settle the order in compliance with 22 NYCRR 202.48(a). Thereafter, the plaintiff moved pursuant to 22 NYCRR 202.48(b) to deem the defendant’s prior motion abandoned, and the defendant cross-moved for an extension of time to settle the order dated December 7, 2009. In an order dated October 10, 2014, the court denied the plaintiff’s motion and granted the defendant’s cross motion.

The plaintiff failed to submit papers to the Supreme Court in opposition to the defendant’s motion pursuant to CPLR 3211(a)(5) and (7) to dismiss the fourth and fifth causes of action. Since no appeal lies from an order or judgment granted upon the default of the appealing party (see CPLR 5511; Morgan Stanley Mtge. Loan Trust [2007-8XS] v Harding, 141 AD3d 511), the appeal from the order dated December 7, 2009, must be dismissed (see T. Mina Supply, Inc. v Clemente Bros. Contr. Corp., 139 AD3d 1038; Lillian H. Assoc., LLC v Halal, 137 AD3d 873, 874; Yuan v Kaplan, 129 AD3d 714; HCA Equip. Fin., LLC v Mastrantone, 118 AD3d 850, 851).

Furthermore, the Supreme Court providently exercised its discretion in denying the plaintiff’s motion to deem the defendant’s prior motion abandoned, and in granting the defendant’s cross motion for an extension of time to settle the order dated December 7, 2009 (see Campbell v Campbell, 107 AD3d 929, 930; Matter of Loeffler v New York State Dept. of Envtl. Conservation, 37 AD3d 470, 471; Delahanty v DeGuire, 280 AD2d 638, 639).”

Judiciary Law § 487 is (perhaps) the oldest statute in existence here in New York.  It descends from the first Statute of Westminster, which was adopted by the Parliament summoned by King Edward I of England in 1275.  It has been in effect from the founding of our country.  The statute reads:

“Misconduct by Attorneys

An attorney or counselor who:

Is guilty of any deceit of collusion, or consents to any deceit or collusion, with intent to deceive the court or any party, or,

  1. Wilfully delays his client’s suit with a view to his own gain, or wilfully receives amy money or allowance for or on account of any money he has not laid out, or becomes answerable for,

is guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action.”

We plan to review the 30 JL § 487 cases decided in 2016.  Here are the first three (by date):

  1.  Melcher v Greenberg Traurig LLP  2016 NY Slip Op 00274 [135 AD3d 547]  January 19, 2016  Appellate Division, First Department

This is likely the most important JL 487 case of the year, and it was decided first.  The Appellate Division, First Department determined that a JL 487 case may be brought in a separate action, rather than in the specific action where the deceit is alleged to have taken place.   This practice is not “claim-splitting” even when the question of deceit was raised in the underlying case.  The central question is whether the JL 487 claim seeks to “collaterally attack any prior adverse judgment”  In Melcher the court determined that no collateral attack was shown.

2.   Klein v Rieff,  2016 NY Slip Op 00482 [135 AD3d 910]  January 27, 2016  Appellate Division, Second Department where the AD reversed the dismissal of the JL 487 claim and reinstated it.  The claim was that an attorney knowingly submitted a witness statement containing material misrepresentations and thereafter knowingly submitted false affirmations and false affidavits. The attorney was unable (on summary judgment) to show that no damages were suffered.

3.  O’Neal v Muchnick Golieb & Golieb, P.C. 2016 NY Slip Op 30268(U) February 11, 2016 Supreme Court, New York County Docket Number: 154898/2013 Judge: Shlomo S. Hagler  Here the supreme court judge determined that factual evidence of “chronic and extreme pattern of legal delinquency” was required.  As Professor Anita Bernstein recently cataloged in her comprehensive Outside Counsel column, the First Department has inserted this particular phrase, although none of the other Appellate Divisions agree, and the phrase nowhere appears in the statute.  She asks:

“Yet while all the adjectives in the statute are either neutral or plaintiff-favoring, one court—the Appellate Division, First Department—has written adjectival criteria that make it hard for plaintiffs to win. There’s more: First Department cases say that plaintiffs must show a “pattern” of attorney misconduct, and assert that redress for this wrong must be “not lightly given.”

These hurdles do not appear anywhere in the statute. Judiciary Law §487 codifies a crime and declares a right of action for what it calls “the party injured,” a capacious category. Intent to deceive a party to litigation suffices for liability, no repetition or pattern needed. Section 487 omits defenses, excuses, and mitigating conditions that make life easier for defendants.

“Chronic, extreme,” “egregious.” Redress for injured people “not lightly given.” The “pattern” criterion. Where did the First Department’s discouraging-to-plaintiffs words come from?”

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.”