Argue about “duty” and “privity” as much as you wish, once an attorney agrees to undertake a task, they can be held responsible for not performing.  While the “privity” bar is quite high, in Nilazra, Inc. v Karakus, Inc.  2016 NY Slip Op 01302 [136 AD3d 994]  February 24, 2016  Appellate Division, Second Department the attorney voluntarily gave up that protection.

“The plaintiff commenced the instant action to recover damages arising from a sales tax lien that accrued after it purchased a restaurant from the defendant Karakus, Inc. (hereinafter the seller). The defendant/third-party plaintiff, Nellie Levitis, also known as Nelly Levitis (hereinafter Levitis), represented the plaintiff as the purchaser, and the defendant/third-party defendant, Erik Ikhilov, represented the seller. Tax Law § 1141 (c) requires that at least 10 days prior to the transfer of a business, the purchaser must file a notification of sale, transfer, or assignment in bulk (hereinafter the notification) with the New York State Department of Taxation and Finance (hereinafter the Department). The failure to timely file the notification results in the seller’s sales tax liabilities attaching to the purchaser (see Tax Law § 1141 [c]; Randazzo v Nelson, 128 AD3d 935 [2015]; Yiouti Rest. v Sotiriou, 151 AD2d 744, 745 [1989]).

Levitis alleges that Ikhilov had a preexisting relationship with the plaintiff’s principal, Emir Huner, and that he referred Huner to her to perform legal services in relation to the purchase of the restaurant. Levitis further alleges that Ikhilov assured her and her client that he would timely file the notification with the Department, and would hold the amount of the purchase price in escrow to pay any sales tax determined to be owed by the seller. In addition, Levitis alleges that Ikhilov promised to prepare, and in fact did prepare, all of the other documentation, including the contract of sale, riders, and schedules necessary to consummate the sale of the restaurant. Ikhilov did not file the notification with the Department until the closing date. As a result of the late filing, the seller’s tax liabilities in the amount of $83,333.33 attached to the purchaser. The total purchase price of the restaurant was $90,000.

The plaintiff thereafter commenced the main action against, among others, its attorney Levitis alleging, among other things, legal malpractice arising from her failure to verify that the notification had been timely filed by Ikhilov. Levitis commenced a third-party action seeking contribution and indemnification against Ikhilov alleging, among other things, that he had voluntarily assumed a duty to timely file the notification. Ikhilov moved pursuant to CPLR 3211 (a) (7) to dismiss the third-party complaint. The Supreme Court denied the motion.

The Supreme Court properly determined that the third-party complaint, as supplemented by Levitis’s affidavit, sufficiently pleaded a cause of action to recover damages for negligence, as it alleged, inter alia, that Ikhilov voluntarily assumed Levitis’s duty, as the attorney for the purchaser, to timely file the notification with the Department, and breached that duty (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 594 [2005]; see also Schwartz v Greenfield, Stein & Weisinger, 90 Misc 2d 882 [Sup Ct, Queens County 1977]; cf. Council Commerce Corp. v Schwartz, Sachs & Kamhi, 144 AD2d 422, 424 [1988]).”

This was the order of events in 135 Bowery LLC v Sofer  2016 NY Slip Op 31012(U)  June 2, 2016 Supreme Court, New York County  Docket Number: 108020/2011  Judge: O. Peter Sherwood.

“This is one of two cases based on the same set of facts. Steven Seitzman and Judith Scitzman (the Seitzmans) are the sole members of 135 Bowery, LLC ( 135 Bowery). 135 Bowery owned the property located at 135 Bowery, New York, New York (the Property). In 2007, the plaintiffs sold the Property with the assistance of their attorney, Alan Young (Young, now deceased), a partner at Lindenbaum & Young, to fund the Seitzmans’ retirement. Plaintiffs claim that Young diverted the proceeds of the sale, sent some of it to entities he controlled, used other monies to buy real property for his own benefit, and lied to the Seitzmans about the status of their investments. ”

“Steven Seitzman (Stcven) and Judith Seitzman (Judith) are owners of 135 Bowery Street, LLC. In April of 2007, they hired attorney Alan Young to represent them in connection with the sale of the Property. Young counseled them in the attempt of an United States Internal Revenue Code § 1031 exchange (by which taxes would be deferred if the proceeds are invested in other. similar, real estate within a specified time after the sale). Liebman was the exchange trustee. The sale of the building closed on December 28, 2007. At the closing, plaintiffs received net proceeds of $4,513,711. This sum. was deposited in the LY IOLA Account and eventually $4,672.553.64 was transferred to Liebman, the Section 1031 Exchange Trustee (Steven aff at ii 10-12, NYSCEF Doc Nos. 106, 114, 115, J 19).

On January 3, 2008, Young sent Liebman a letter instructing him lo transfer $3,500,000 to LY to be used for down payments on the purchase of two parcels of .land in Sullivan County, New York (NYSCEF Doc. No. 116). Young attached unsigned draft contracts which purportedly provided a basis for the transfer (id.). One contract was for an 83 .19 acre parcel (the “83 Acre Property,” id). The other was for a single family home (the “Mosquera Property,” id). Young was listed as counsel for the seller on both contracts (id.). Patrick Lucas, an associate at LY, appears on the draft contracts as representing the purchaser in both transactions (id.; Robert tr., NYSCEF Doc. No. 112, p.26). 10717 is named in the contract as the seller of the 83 Acre Property, with provision for Petri signing on behalf of that entity. According to the Sullivan County Tax Map and Records System, the 83 Acre Property was owned by a George Bagely (NYSCEF Doc. No. 117). Liebman transferred $3,500,000 to the LY IOLA account that day (NYSCEF Doc No. 118). ”

“Where the complaint against an attorney alleges breach of fiduciary duty, fraud, aiding and abetting fraud, and negligent misrepresentation, and the claims are all predicated on the same allegations and seek identical relief to the legal malpractice claim, the former claims should be dismissed as redundant of the malpractice claim (see Ulico Casualty Co. v Wilson. Elser, Moskowitz. Edelman & Dicker, 56 AD3d 1, 14 (1st Dept 2008) dismissing breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duly and tortious interference with contractual relations claims as duplicative of the malpractice cause of action]; Nevelson v Carro. Spanbock, Kaster & Cuiffo, 290 AD2d 399, 400 [I st Dept 2002][ dismissing claims for breach of contract and breach of fiduciary duty as those claims were “predicated on the same allegations and seek relief identical to that sought in the malpractice cause of action”j Sitar v Sitar, 50 AD3d 667, 670 [2d Dept 2008] affirming dismissal of causes of action alleging fraudulent misrepresentation and negligent misrepresentations “insomuch as those causes of action arise from the same facts as the cause of action alleging legal malpractice and do not allege distinct damages”j; and Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 39 [1st Dept 1998] [breach of contract and fraudulent misrepresentation claims dismissed as redundant of malpractice claim I).

As is discussed below, the plaintif’s motion for summary judgment on the legal malpractice claim must be granted against Young and LY. It must be denied as against Robert and LYPC. “

From this decision, it seems there is little difference, hence much duplication.  Duplication in the legal malpractice world means dismissal of causes of action, which is what happened here.  Justice Edmead bought none of defendant (counterclaimant’s) arguments.  She dismissed the cause of action in Brinen & Assoc. v Krippendorff  2016 NY Slip Op 31803(U)  September 29, 2016
Supreme Court, New York County  Docket Number: 653485/2014.

“This action arises from an agreement between Plaintiff Brinen & Associates, LLC (“Plaintiff), a law firm, and Defendant Kaihan Krippendorff (“Defendant”), who retained Plaintiff for representation in certain transactional matters pursuant to an engagement letter (the “Agreement”). Plaintiff moves pursuant to CPLR 321 l(e) to dismiss Defendant’s sixth counterclaim for breach of fiduciary duty, arguing that the counterclaim duplicates Defendant’s fifth counterclaim for breach of contract (see NYSCEF 129 [“Second Amended Answer”]). ”

“Under CPLR 321 l(a)(7), a cause of action for breach of fiduciary duty whose allegations are merely duplicative of a breach of contract claim cam10t stand (William Kaufinan Org., Ltd v Graham & James LLP, 269 AD2d 171, 173 [1st Dept 2000], accord Weight v Day, 134 AD3d 806, 808-09 [2d Dept 2015] (affirming dismissal of breach of contract cause of action as duplicative of the causes of action alleging accounting malpractice and breach of fiduciary duty); see also Joyce v Thompson Wigdor & Gilly LLP, 2008 WL 2329227, 36 Media L Rep 2030 [SDNY June 3, 2008] (overlapping claims of negligence, breach of contract, breach of fiduciary duty, negligent misrepresentation, or fraudulent misrepresentation premised on the same facts and seeking identical relief as a claim for legal malpractice are generally dismissed as duplicative [collecting cases])). Conversely, both causes of action may co-exist where a claim of breach of fiduciary duty rests on a duty separate and distinct from the breach of contract (Savage Records Group, NV v Jones, 247 AD2d 274, 274-275 [1st Dept], Iv denied 92 NY2d 804 [1998] (when parties have . entered into a contract, unless a party can show a separate duty, “independent of the mere contract obligation,” no fiduciary relationship is established); compare Mandelblatt v Devon Stores, Inc., 132 AD2d 162, 163 [lst Dept 1987] (breach of fiduciary duty for disparaging the employer was found to be separate and distinct from the former employee’s alleged failure to perform his duties under the contract) with William Kaufman Org, 269 AD2d at 173 (“[h]ere, there is no such distinction. Indeed, the cause of action for breach of contract refers … to the unethical conduct described in the … breach of fiduciary duty”); see also MBIA Ins. Corp. v Countrywide Home Loans, Inc., 87 AD3d 287, 293 [1st Dept 2011] (“[u]nlike a misrepresentation of future intent to perform, a misrepresentation of present facts is collateral to the contract … and therefore involves a separate breach of duty”); Brooks v Key Trust Co. Nat. Ass’n,26 AD3d 628, 809 NYS2d 270, 272-73 (3d Dept 2006) (in order to survive a motion to dismiss, a claim for breach of fiduciary duty must “set[ ] forth allegations that, apart from the terms of the contract, the parties created a relationship of higher trust than would arise from , [their contracts] alone” [emphasis added])). ”

“However, though an attorney-client relationship is unique and may create duties independent of the contract, the focus for the purposes of analyzing the claims’ overlap must be on the “essence of the claims” – in other words, the manner in which the duties were alleged to have been violated, and the alleged harm flowing from any violation (Johnson v Proskauer Rose LLP, 129 AD3d 59, 70 [1st Dept 2015]). Claims are duplicative where they arise from the same facts and seek the same damages for each alleged breach (Amcan Holdings, Inc. v Can. Imperial Bank of Commerce, 70 AD3d 423, 426 [1st Dept 2010]; see e.g., Chowaiki, 115 AD3d at 600-01 (dismissing duplicative claim because it was premised upon the same facts and sought identical damages, return of the excessive fees paid); Shaub and Williams, L.L.P. v Augme Tech., Inc., 13 CIV. 1101GBD,2014 WL 625390, at *3 [SDNY Feb. 14, 2014] (“Defendant’s breach of fiduciary duty and breach of implied duty of goog faith a:nd fair dealing counterclaims arise out of the same set of alleged excessive billing practices [and seek the same damages] as Defendant’s breach of contract counterclaim); Morgan, Lewis & Bockius LLP v IBuyDigital. com, Inc., 14 Misc 3d 1224(A) [Sup Ct NY County 2007] (counterclaim alleging that law firm breached its fiduciary duty by failing to abide by engagement letter’s express promise duplicated breach of contract counterclaim premised on the same letter)). Evert the presence of distinct fraud and nonfraud components that seemingly differentiate claims does not preclude dismissal when the claims allege “virtually identical” facts, theories, and damages (NYAHSA Services, Inc. v People Care Inc., 141 AD3d 785 [3d Dept 2016]). There is no appreciable difference between the disputed causes of action here. The breach of contract claim seeks damages pursuant to improper and fraudulent billing, misappropriation of a retainer, “conflict of interest-ridden advice,” and misrepresentation of skills, experience, and ability (Amended Answer ii 63). In nearly identical language, including allegations of fraud, the breach of fiduciary duty counterclaim seeks damages pursuant to “fraudulent conduct by failing to disclose … a conflict of interest,” fraudulent billing, and retainer malfeasance (Amended  Answer ¶ 67). “

Generally speaking, the in pari delicto defense comes up in accounting malpractice cases, where it is alleged that the corporation, which may have benefited from the wrongful conduct not detected by the accountants, is unable to sue the accountants.  Here, in Stokoe v Marcum & Kliegman LLP
2016 NY Slip Op 00587 [135 AD3d 645]  January 28, 2016  Appellate Division, First Department the defense fails.

“In this accounting malpractice action alleging that defendants failed to uncover fraudulent activity by plaintiffs’ insolvents’ investment manager, the motion court correctly declined to apply the doctrine of in pari delicto to bar the action; contrary to defendants’ understanding of the order on appeal, the doctrine is applicable to accounting malpractice claims (see Kirschner v KPMG LLP, 15 NY3d 446 [2010]).

The allegations by these plaintiffs in another action and in a Securities and Exchange Commission complaint, did not constitute documentary evidence conclusively demonstrating that the investment manager, as agent of the funds in liquidation, engaged in wrongful conduct that was not completely adverse to the interests of the funds (Concord Capital Mgt., LLC v Bank of America., N.A., 102 AD3d 406 [1st Dept 2013], lv denied 21 NY3d 851 [2013]). The pleading addressed in the dismissal motion alleged that the malefactors acted in the interest of the wronged entity as well as in their own personal interest, and is distinguishable from defendants’ attempt on the instant pre-answer dismissal motion to refute the allegations here with those in other pleadings. Moreover, the other pleading by the same plaintiffs is not clearly a conclusive admission. We note that New York requires complete adversity in order to fall within the exception to the imputation rule of the in pari delicto doctrine, and that New York law governs here based on the choice of law provision in the parties’ engagement letters.”

American Sec. Ins. Co. v Church of God of St. Albans  2015 NY Slip Op 06699 [131 AD3d 903]  September 2, 2015  Appellate Division, Second Department explains the outer limits of professional responsibility for an architect.  Entering into a contract with the client does not necessarily give rise to general tort liability to others (similar to the privity requirement in legal malpractice), and in this case, the architect is not responsible to the next door neighbor.

“The plaintiff Michael R. Toppin was the owner of a building located at 223-05 Hempstead Avenue in Queens (hereinafter 223-05). The plaintiff Toppin & Toppin, Attorneys at Law, was a commercial tenant operating a law firm in the building at 223-05. The adjacent property, 223-07 Hempstead Avenue, was owned by the defendant Church of God of St. Albans (hereinafter the Church). In 2001, the Church hired the defendant Harold E. Gebhard as design architect for a project involving demolition of the portion of the existing building that belonged to the Church, and the construction of a new, two-story building at that site. Gebhard prepared plans for the excavation and construction of the new church building, which plans also called for excavating part of the adjacent property, at 223-05, and included drawings for the underpinning that was to go beneath the building on the adjacent property. The defendant Mike’s Contracting Building and Development Corp. (hereinafter Mike’s Contracting) was the contractor hired to implement the plans. Excavation of the site was performed in June or July of 2009, during the course of which the plaintiffs’ building at 223-05 sustained damage that rendered it unstable and at risk of collapse, and led to the issuance of a full vacate order by the New York City Department of Buildings, on September 25, 2009, directing the plaintiffs to vacate their property.

The plaintiffs commenced this action to recover damages for injury to property against the Church, Gebhard, and various contractors hired by the Church, alleging violations of New York City Building Code (Administrative Code of City of NY, tit 28, ch 7) § BC 3309.4 and alleging common-law negligence, among other things. The defendants asserted cross claims for indemnification and/or contribution.

Contrary to Gebhard’s contention, section 3309.4, like its predecessor Administrative Code § 27-1031 (b) (1), does impose absolute liability upon the “person who causes” an excavation to be made (492 Kings Realty, LLC v 506 Kings, LLC, 105 AD3d 991, 995 [2013]; see Yenem Corp. v 281 Broadway Holdings, 18 NY3d 481, 489 [2012]; Coronet Props. Co. v L/M Second Ave., 166 AD2d 242, 243 [1990]). However, we agree with Gebhard that the Supreme Court erred in finding him absolutely liable pursuant to section 3309.4. Gebhard made a prima facie showing that he could not be held liable pursuant to that section by establishing that he was neither the person who made the decision to excavate nor the contractor who carried out the physical excavation work (see Coronet Props. Co. v L/M Second Ave., 166 AD2d at 243; Rosenstock v Laue, 140 App Div 467, 470 [1910]; cf. 87 Chambers, LLC v 77 Reade, LLC, 122 AD3d 540 [2014]). In opposition to this prima facie showing, the plaintiffs failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

Gebhard also made a prima facie showing of his entitlement to summary judgment dismissing the negligence cause of action. Gebhard’s contractual obligations to the Church do not give rise to tort liability in favor of the plaintiffs, as his contract with the owner did not specifically impose any duties with respect to the excavation phase of the project and expressly stated that Gebhard did not have control over, and was not responsible for, the construction means and methods or the safety precautions taken in connection with the work (see 87 Chambers, LLC v 77 Reade, LLC, 122 AD3d 540, 541 [2014]). In opposition, the plaintiffs failed to raise a triable issue of fact, as Gebhard’s involvement in discussions related to the means and methods to be employed in the excavation, and his general responsibilities to visit the site during construction to monitor compliance with the contract, do not raise an issue of fact as to whether he entirely displaced the owner’s duty to maintain the premises (see id. at 541). The plaintiffs allege no other basis for imposing tort liability on Gebhard. Accordingly, the Supreme Court should have granted Gebhard’s motion for summary judgment dismissing the complaint insofar as asserted against him, and denied that branch of the plaintiffs’ motion which was for summary judgment on the issue of liability insofar as asserted against him.”

It is theoretically possible for plaintiff to win summary judgment in a negligence case; theoretically possible but very very rare.  Benitez v United Homes of N.Y., LLC  2016 NY Slip Op 06153
Decided on September 27, 2016 Appellate Division, First Department is that rare case in which Plaintiff wins partial summary judgment against defendant-attorney on a legal malpractice cause of action.

“The bank made a prima facie showing that the law firm departed from the standard of care in connection with the closing of a residential real estate mortgage loan to plaintiff by, among other things, failing to advise that the subject property lacked a certificate of occupancy, failing to advise of the risk of funding the loan under these circumstances, and failing to confirm that plaintiff contributed 3% of her own funds toward closing, a condition of the loan (see generally AmBase Corp. v Davis, Polk & Wardwell, 8 NY3d 428, 434 [2007]). The motion court properly considered the affidavit of the bank’s legal expert concerning the duty of care an attorney owes to a mortgage-lender client (see Suppiah v Kalish, 76 AD3d 829, 832 [1st Dept 2010], appeal withdrawn 16 NY3d 796 [2011]; Merlin Biomed Asset Mgt., LLC v Wolf Block Schorr & Solis-Cohen LLP, 23 AD3d 243 [1st Dept 2005]). The bank’s closer, who was responsible for ensuring that the closing documents were in order, clearly had “knowledge of the facts” and therefore was qualified to submit an affidavit in support of the bank’s summary judgment motion (CPLR 3212[b]). The closer’s lack of knowledge concerning the underwriting process is irrelevant to the legal malpractice claim.

In opposition, the law firm, which did not rebut the expert’s opinion with an expert opinion of its own, failed to raise a triable issue of fact (see Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 141 [1st Dept 2013], lv denied 22 NY3d 855 [2013]).”

ACE Sec. Corp., Home Equity Loan Trust, Series 2006-SL2 v DB Structured Prods., Inc.  2016 NY Slip Op 26105 [52 Misc 3d 343]  March 29, 2016  Friedman, J. is an extremely complicated residential mortgage-securities breach of contract case, the details of which are not particularly germane to legal malpractice considerations.  What is interesting, however, is the discussion of CPLR 205(a):

“CPLR 205 (a) provides:

“New action by plaintiff. If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff, or, if the plaintiff dies, and the cause of action survives, his or her executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action and that service upon defendant is effected within such six-month period.”

From the decision:

Reliance Ins. Co. v PolyVision Corp. (9 NY3d 52 [2007]) provides the most comprehensive recent guidance by the Court of Appeals as to the circumstances in which a plaintiff may avail itself of CPLR 205 (a) to avoid the bar of the statute of limitations, where a different but related plaintiff filed the original action within the statute of limitations, and the action was dismissed due to a defect in the original plaintiff’s capacity or standing. In Reliance, the Court of Appeals answered the following certified question from the Second Circuit: “Does New York CPLR § 205(a) allow a corporation to refile an action within six months when a previous, timely-filed action has mistakenly been commenced in the name of a different, related corporate entity, and has been dismissed for naming the wrong plaintiff?” (Id. at 56.)

In holding that CPLR 205 (a) was unavailable to the parent corporation of the original plaintiff, the Court of Appeals endorsed the reasoning of the Federal District Court that

“ '[t]he common thread running through cases applying CPLR 205 in cases where the error in the dismissed action lies only in the “identity” of the plaintiff, is the fact that it is the same person or entity whose rights are sought to be vindicated in both actions.’ . . . ‘[T]he plaintiff in the new lawsuit may appear in a different capacity, such as a duly appointed administrator, but the identity of the individual on whose behalf redress is sought, [must] remain[ ] the same.’ ” (Id. at 57, quoting 390 F Supp 2d 269, 273 [ED NY 2005].)

Summarizing the text of CPLR 205 (a), the Reliance Court “note[d] that the benefit provided by the section is explicitly, and exclusively, bestowed on ‘the plaintiff’ who prosecuted the initial action.” (Id.) The Court also noted that George v Mt. Sinai Hosp. (47 NY2d 170, 179 [1979]) permitted a new action to proceed under CPLR 205 (a) where the new action was filed by an administrator after dismissal of a prior action that had been improperly commenced in a decedent’s name after her death. (Reliance, 9 NY3d at 57.) Distinguishing George, the{**52 Misc 3d at 348}Reliance Court stated: “Outside of this representative context, we have not read ‘the plaintiff’ to include an individual or entity other than the original plaintiff.” (Id.) As the Court of Appeals inGeorge explained and Reliance reaffirmed:

“Usually, of course, the fact that one party commenced an action which is subsequently dismissed, will not serve to justify application of [CPLR 205 (a)] so as to support a later action by a different claimant. Where, however, as here, the claim is the same, and the subsequent claimant is acting as the representative of the named plaintiff in the prior action,” 205 (a) is applicable. (George, 47 NY2d at 179; Reliance, 9 NY3d at 57 [quoting the statement from George that CPLR 205 (a) will not “usually” apply to an action commenced by a different party after dismissal of the first action].)”

Caravello v One Mgt. Group, LLC  2015 NY Slip Op 07000 [131 AD3d 1191]  September 30, 2015 Appellate Division, Second Department is the rare legal malpractice case that survives a CPLR 3211 attack on a fraud or an aiding and abetting fraud claim.  The decision is worthwhile reading for its definition of the elements of the two claims.

“The complaint alleges that the defendants acted in concert, as part of a mortgage foreclosure rescue scheme, to deprive the plaintiffs of the net proceeds of the sale of their home at a closing which took place in February 2008. The defendant Elena R. Gelman was the attorney who represented the plaintiffs at the closing. The plaintiffs asserted causes of action against Gelman alleging, inter alia, legal malpractice and fraud. Gelman moved, inter alia, pursuant to CPLR 3211 (a) (7) to dismiss the sixth cause of action, which alleged fraud, insofar as asserted against her, and so much of the seventh cause of action as alleged fraud insofar as asserted against her, or in the alternative, pursuant to CPLR 3212 for summary judgment dismissing the complaint insofar as asserted against her. The Supreme Court denied those branches of Gelman’s motion.”

“To state a cause of action sounding in fraud, a plaintiff must allege that “(1) the defendant made a representation or a material omission of fact which was false and the defendant knew to be false, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely [*2]upon it, (3) there was justifiable reliance on the misrepresentation or material omission, and (4) injury” (McDonnell v Bradley, 109 AD3d at 592-593 [internal quotation marks omitted]; see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]; Pace v Raisman & Assoc., Esqs., LLP, 95 AD3d 1185, 1188-1189 [2012]). To plead a cause of action to recover damages for aiding and abetting fraud, the complaint “must allege the existence of [the] underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud” (Winkler v Battery Trading, Inc., 89 AD3d 1016, 1017 [2011]). Moreover, pursuant to CPLR 3016 (b), where a cause of action is based upon fraud or aiding and abetting fraud, the “circumstances constituting the wrong” must be “stated in detail.”

 

Plaintiff wanted to have an extension built and contacted with the architect.  Four years later the NYC Department of Buildings hoisted a red flag, and the architect worked on fixing the problem.  A lawsuit against others commenced and he was added later.  When did the statute of limitations commence and was the action timely?

Bronstein v Omega Constr. Group, Inc.  2016 NY Slip Op 02951 [138 AD3d 906]  April 20, 2016  Appellate Division, Second Department discusses how it all works.

“In 2006, the plaintiffs entered into a contract with the defendant architect, Michael T. Cetera, inter alia, to prepare and file plans for the construction of an extension to their residence. Cetera filed the plans, which were approved by the New York City Department of Buildings (hereinafter the DOB). Cetera subsequently advised the DOB in a letter dated May 28, 2008 that he was withdrawing responsibility for conducting controlled inspections for the project. Cetera allegedly had no further involvement with the project until the plaintiffs notified him in September 2010 that the DOB had audited the filed plans and had determined that certain errors had been made in the calculation of elevations and floor area. Cetera allegedly rendered additional services, including research and analysis of relevant zoning provisions, the performance of further calculations, and the proposal of possible solutions, in an effort to remedy the problems. There is no indication in the record that these alleged communications and corresponding efforts extended beyond November 2010. The plaintiffs subsequently commenced this action in connection with the project against various individuals and entities who had been involved in its construction. In August 2013, they moved for leave to amend their complaint to add Cetera as a defendant, alleging, inter alia, that he had committed professional negligence in the services he rendered under the parties’ contract. Following the granting of the motion for leave to amend, and the filing and service of the amended complaint, Cetera moved pursuant to CPLR 3211 (a) to dismiss the amended complaint insofar as asserted against him on the ground that it was time-barred under CPLR 214 (6). The Supreme Court denied the motion, finding that the parties’ submissions raised a question of fact regarding whether the applicable limitations period had been tolled pursuant to the doctrine of continuous representation.

Regardless of whether they are framed as claims sounding in contract or tort, [*2]allegations of professional malpractice, other than medical malpractice, are governed by a three-year statute of limitations (see CPLR 214 [6];”

“Contrary to Cetera’s contentions, in response to his prima facie showing that the action was commenced against him more than three years after his withdrawal, the plaintiffs succeeded in raising a question of fact as to whether the continuous representation doctrine is applicable so as to toll the running of the three-year statute of limitations. Under the circumstances, the evidence of continuing communications between the parties, and of efforts by Cetera to remedy the alleged errors or deficiencies in the filed plans, supported the denial of Cetera’s motion to dismiss the amended complaint insofar as asserted against him (see Regency Club at Wallkill, LLC v Appel Design Group, P.A., 112 AD3d 603, 607 [2013]; Pitta v William Leggio Architects, 259 AD2d 681 [1999]; Greater Johnstown City School Dist. v Cataldo & Waters, Architects, 159 AD2d 784, 786-787 [1990]). Mastro, J.P., Dillon, Hinds-Radix and Maltese, JJ., concur.”

 

Supreme Court, Nassau County answered yes to the question.  This tragic story pits brother against brother, with the innocent and the guilty tormented alike.

From the decision in Galasso, Langione, & Botter, LLP v Galasso  2016 NY Slip Op 51308(U)
Decided on September 19, 2016  Supreme Court, Nassau County  DeStefano, J.:

“In 1993, the Firm hired Peter’s brother, Anthony Galasso (“Anthony”), as a “gofer”. Within a few years, Anthony became the Firm’s office manager and bookkeeper, “responsible for all accounting and financial aspects” therefor (Affidavit in Support at ¶ 4 [Motion Seq. No. 20]).”

“In or around 1990, the Firm started banking at EAB Bank. In 2001, EAB Bank “became” Citibank (Ex “17” at pp 32, 96 [Motion Seq. No. 21]). As office manager and bookkeeper, Anthony undertook certain banking duties for the Firm. He would go to the bank to make deposits, sign checks on the Firm’s operating accounts and attend to other banking matters.[FN3] As such, Anthony “got to know” Steve Reinhardt (“Reinhardt”), a bank Vice President, and his assistant, Annie Jeter (“Jeter”), and became the “face” of the Firm at the bank (Affidavit in Opposition at ¶ 6 [Motion Seq. No. 21]).

In February 2002, Reinhardt left Citibank and became a Senior Vice President and Group Director at Signature Bank (“Signature”).[FN4] He thereafter met with Peter and Anthony and asked the Firm to transfer its accounts from Citibank to Signature (Affidavit in Opposition at ¶ 8 [Motion Seq. No. 21]). In 2002, the Firm transferred its banking business from Citibank to Signature. Anthony was in favor of moving the Firm’s accounts because he thought Reinhardt was a “nice guy” and that it was “[m]ore of the loyalty that comes with just being friendly with somebody for 10 years” (Ex. “36” at p 67 [Motion Seq. No. 21]).”

“The account applications submitted by Anthony to Signature (not including the Botter accounts), designated Anthony as an authorized signatory on the Firm’s operating accounts but not on the IOLA account. Anthony was also designated as the “primary contact” for the Firm on the operating accounts but not the IOLA account (Exs. “18”, “19”, “22” [Motion Seq. No. 21]). Each of the account applications designated a post office box as the address in which Signature was to mail its monthly statements and, further, each application required the Firm to confirm that it had received a copy of, and agreed to certain terms and conditions of, the Signature Business Account Agreement and Disclosures with respect to the IOLA and operating accounts (Affirmation in Opposition to Motion at ¶ 14 [Motion Seq. No. 21]). This was indicated by a checkmark in the appropriate box on the accounts’ applications. In addition to the three authorized accounts, Anthony opened and maintained “sham” accounts at Signature Bank [*3]without the Firm’s authorization or knowledge.[FN5] Peter and Langione contend that they never signed any of the bank documents that were submitted to Signature for the authorized accounts and that they were forged by Anthony along with the sham account applications [FN6] (Affirmation in Opposition at ¶ 20 [Motion Seq. No. 20]).”

“According to Peter, both he and Langione executed the Baron escrow application in order to open the Baron escrow account because Anthony purportedly advised Peter that “Signature required that [Langione] be a designated signator on the Baron Escrow Account” (Affirmation in Support of Motion at ¶ 35 [Motion Seq. No. 6]).[FN10] The “original” Baron escrow account application was not produced in this litigation because it was supposedly destroyed by Anthony.[FN11] In its stead, Anthony allegedly substituted a forged Baron escrow account application. The allegedly forged application submitted to Signature allowed internet transfers, listed Post Office Box 721 in Mineola, New York as the address to where bank statements were to be mailed, and designated Anthony as an authorized signatory and primary contact on the account. Reinhardt, Signature’s Executive Vice President, testified that the Baron account application should have been rejected because it violated Signature’s rules that govern the establishment of attorney escrow accounts. Amongst other things, such rules prohibit non-attorneys from being authorized signatories on a law firm’s attorney escrow account (Affirmation in Support at ¶ 29 [Motion Seq. No. 21]).”

“The second cause of action asserts a claim of unjust enrichment against the Firm and individual Defendants Peter, Langione and Botter. The claim for unjust enrichment is predicated upon alleged misuse of the Baron escrow funds which the “escrow agents have either retained or [*43]disbursed” and “which said defendants refuse to pay to Plaintiffs, and which in equity and good conscience ought not to be retained” by the Firm (see discussion supra).

The branch of the motion seeking dismissal of the unjust enrichment claim, insofar as asserted against Peter, Langione, and the Firm, is denied given this court’s order granting judgment on the Barons’ unjust enrichment claim insofar as asserted against them (see discussion supra). The motion is also denied with respect to Botter inasmuch as the submissions of the Firm Defendants failed toprima facie establish that Botter did not receive, or benefit from, directly or indirectly, any funds stolen from the Baron escrow account.

The Firm seeks dismissal of the third cause of action (conspiracy) on the ground that the Barons cannot establish the elements of the underlying fraud claim. Peter Galasso’s affidavit submitted in support of the motion for summary judgment sets forth with specific detail the manner in which Anthony perpetrated the fraud as well as the fact that Peter, Langione and Botter were unaware of what was transpiring. Given the Firm Defendants’ unopposed assertions that they did not have knowledge of the fraud, and there being no evidence to the contrary, the conspiracy to commit fraud claim must be dismissed (see Nissan Motor Acceptance Corp. v Scialpi, 94 AD3d 1067 [2d Dept 2012]).

The branch of the Firm Defendants’ motion seeking dismissal of the fourth cause of action – the Barons’ claim for conversion, is denied with respect to the Firm, Peter, Langione and Anthony inasmuch as the court has granted judgment in favor of the Barons on their conversion claim against these Defendants (see discussion supra). It is also denied insofar as asserted against Botter inasmuch as the Firm Defendants’ submissions failed to prima facie establish that Botter did not receive and refuse to return upon demand any of the fraudulently transferred Baron escrow funds.

The branch of the Firm Defendants’ motion seeking summary judgment dismissing the fifth cause of action, predicated upon Peter’s gross negligence and malfeasance in hiring and retaining Anthony and clothing him with authority to exercise control over the Baron escrow funds, “without adequate supervision or control”, is denied (Dolphin Holdings, Ltd. v Gander & White Shipping, Inc., 122 AD3d 901[2d Dept 2014]; Internationale Nederlanden (U.S.) Capital Corp. v Bankers Trust Co., 261 AD2d 117 [1st Dept 1999]) (Ex “E” at ¶ 65 [Motion Seq. No. 6]).

Regarding the sixth cause of action sounding in legal malpractice, for a defendant to succeed on a motion for summary judgment, evidence must be presented in admissible form establishing that the plaintiff is unable to prove at least one of the essential elements (Verdi v Jacoby & Meyers, LLP, 92 AD3d 771, 772 [2d Dept 2012]). Here, the Firm’s submissions fail to make such a showing and, thus, the Firm’s motion with regard to the sixth cause of action is denied.”