The conduct is not easily explainable.  A law firm is hired to become escrow agent for a real estate venture, and to earn fees while preparing and filing mortgages.  Inexplicably, the law firm simply stops filing the mortgages.  The result is predictable.

TSR Group, LLC v Levitin  2016 NY Slip Op 31322(U)  July 13, 2016  Supreme Court, New York County  Docket Number: 651356/2015  Judge: Eileen A. Rakower.  The judge explains breach of fiduciary duty in the escrow holding situation.

“This action arises from a business venture between plaintiff, TSR Group, LLC (“TSR” or “plaintiff’) and non-parties Stuart Bienenstock, Judah Bloch, and Ariel Gantz, involving the acquisition, renovation, stabilization, and conversion of commercial real estate in New Jersey into residential condominiums. Plaintiff alleges that defendants Jeffrey Levitin, Esq., and Levitin & Associates, P.C. (collectively, “defendants”) released from escrow approximately $2.1 million of plaintiff’s funds and delivered such funds to defendants’ other clients or third parties without plaintiff’s authorization and without ensuring that mortgages over certain properties were recorded on behalf of plaintiff equal to the full amount of plaintiff’s loan and investment. Plaintiff asserts causes of action for breach of fiduciary duty, breach of contract, fraud, negligent misrepresentation, conversion, legal malpractice, conspiracy, aiding and abetting tortious conduct, failure to return property following bailment, negligence, and accounting.”

“An escrow is generally defined as a written instrument entrusted by a grantor to a third party agent or trustee who, in accordance with instructions, subsequently delivers the instrument to the grantee once certain conditions are met. See 99 Commercial St., Inc. v. Goldberg, 811 F. Supp. 900, 905 (S.D.N.Y. 1993). Although the strict definition limits the subject of escrow to written instruments, money deposited with a third person and to be delivered to the beneficiary upon the happening of an event or the performance of a condition may also be treated as an escrow, with the same rules of other escrow agreements applying. 55 N.Y. Jur. 2d Escrows§ 2; Falk v. Goodman, 7 N.Y.2d 87 (1959); Matter of Burton, 200 A.D.2d 324, 327 (1st Dept. 1994) (“When parties to a real estate transaction agree that the lawyer of one party or another will hold money in escrow it is not either party’s money to disburse at will.”). No precise form of words is necessary to constitute an escrow; conversely, calling a transaction an escrow does not make it one. Farago v. Burke, 262 N.Y. 229, 233 (1933). An escrow agreement requires: (a) an agreement as to the subject matter and delivery of the instrument or funds; (b) a third-party depositary; ( c) delivery of the instrument or funds to a third party depositary, to be held conditioned upon the performance of some act or occurrence of some event; and (d) relinquishment of the instrument or funds by the grantor. See Menkis v. Whitestone Sav. & Loan Ass ‘n, 78 Misc. 2d 329, 330-31 (Nassau Cnty. Dist. Ct. 197 4 ). An escrow agreement does not have to be in writing. Russell v. Demandville Mortgage Corp., 815 N.Y.S.2d 496 (Kings Cnty. Sup. Ct. 2006). Generally, whether an escrow has been created depends on the intention of the parties, which is a question of fact. Clark v. Gifford, 1833 WL 3077 (N.Y. Sup. Ct. 1833). An escrow agent has contractual duty to comply with the escrow agreement, and additionally becomes a trustee of anyone with a beneficial interest in the trust with the duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed. Takayama v. Schaefer, 240 A.D.2d 21, 25, 669 N.Y.S.2d 656, 659 (1998) (internal citations and quotations omitted); Animalfeeds Int’! Inc. v. Banco Espirito Santo E Comercial De Lisboa, 420 N.Y.S.2d 954, 957 (Sup. Ct. 1979) (“An escrow agreement, while imposing a fiduciary relationship, and assuming some of the characteristics of a trust, is in essence a contractual undertaking[.]”); Grinblat v. Taubenblat, 107 A.D.2d 735, 736 (2d Dept. 1985) (escrow agent is charged with duty not to deliver escrow funds except upon strict compliance with conditions imposed and is subject to damages for his failure to so act). The purpose of an escrow is to assure the carrying out of an obligation already contracted for and in furtherance of the obligation the promisor deposits money, goods, or documents to an escrow agent who agrees to part with it only on a specified condition. Nat ‘l Union Fire Ins. Co. Pittsburgh, Pa. v. Proskauer Rose Goetz & Mendelsohn, 634 N.Y.S.2d 609, 614 (Sup. Ct. 1994), ajf’d sub nom. Nat’! Union Fire Ins. Co. of Pittsburgh, Pennsylvania v. Proskauer, Rose Goetz & Mendelsohn, 227 A.D.2d 106 (1st Dept. 1996). Upon delivery of the subject of the escrow to the escrow agent, “the escrow agent becomes the fiduciary of both parties and owes them the highest kind of loyalty.” Muscara v. Lamberti, 133 A.D.2d 362, 363 (2d Dept. 1987). ”

“As noted above, it is well settled that an escrow agent owes the parties to the transaction a fiduciary duty. Greenapple v. Capital One, NA., 92 A.D.3d 548, 549 (1st Dept. 2012); Talansky v. Schulman, 2 A.D.3d 355, 359 (1st Dept. 2003). As a fiduciary, the escrow agent has a strict obligation to protect the rights of the parties for whom the agent acts as escrowee. Grinblat v. Taubenblat, 107 A.D.2d 735, 736 (2d Dept. 1985). An escrow agent “can be held liable for breach of the escrow agreement and breach of fiduciary duty as escrowee.” Takayama v. Schaefer, 240 A.D.2d 21, 25 (2d Dept. 1998) (internal citations omitted). “

One of the unique elements of legal malpractice is the requirement of privity.  Privity of contract (or representation) is an ancient concept, which states that only those in direct contract may be held responsible for harm.  It is the opposite of generalized tort liability.  Familiar to law students, privity giving way to generalized tort liability can be seen clearly in the product liability world.  For example, a kid who was injured in old washer/dryers was unable to sue the manufacturer for a long time because they lacked privity of contract with the seller/distributor/manufacturer.  That gradually changed to tort liability for a dangerous product.

In Bloostein v Morrison Cohen LLP   2016 NY Slip Op 31309(U)  July 11, 2016  Supreme Court, New York County Docket Number: 651242/2012  Judge: Anil C. Singh we see the same issue with the law firm which issued an opinion letter upon which the investors relied.  None had a direct privity relationship with the law firm.

“The third-party complaint also seeks contribution from Brown Rudnick. There is no dispute that Brown Rudnick did not have direct privity with the plaintiff investors. However, Morrison Cohen claims that Brown Rudnick breached its duty of care to the plaintiff investors and ultimately did have a relationship approaching privity in issuing an Opinion Letter which contained false representations of what the default trigger rating would be. Exhibit E. Morrison Cohen cites to Millennium I’mport, LLC v Reed Smith LLP, 104 AD3d 190, 194 (1st Dept 2013) which held that, “[i]t is well settled that attorneys may be liable for their negligence both to those with whom they have actual privity of contract and to those with whom the relationship is ‘so close as to approach that of privity. It also cites to Prudential Ins. Co. v Dewey, 80 N.Y. 2d 383-85 (1992), where, in the context of opinion letters, the Court of Appeals has held that a relationship “approaching privity” exists between the drafting attorney and a non-client recipient where there is: “(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.” In Prudential, the court found that the relationship between lender and the law firm representing borrower was sufficiently close to support liability for law firm’s alleged negligent creation of an opinion letter regarding the effect of restructuring of loan transaction and the transmission of that letter to the creditor for its own use. In particular, the court found that the law firm knew that letter was to be used by lender in deciding whether to permit debt restructuring, the lender unquestionably relied on the opinion letter in agreeing to that restructuring, and the law firm addressed and sent the opinion letter directly to lender. Similarly, here, Brown Rudnick was aware that its Opinion Letter was to be used for the purpose of the Transaction. It also addressed and directly sent the Opinion Letter to each of the investors. The Letter also states at page 34 that, “this Opinion may not be relied upon except with respect to the consequences discussed herein” and “this Opinion may be relied upon and used by the parties listed in Schedule A”. Schedule A includes the plaintiff investors. Brown Rudnick contends that Morrison Cohen does not set forth sufficient facts tending to show that by issuing the Opinion Letter, the investors were caused to execute the transaction documents containing the revised rating trigger. However, in order to state a claim for contribution, Morrison Cohen need only allege that Brown Rudnick’s tortious conduct contributed to the injury alleged by the investors – not that Brown Rudnick’s conduct was the sole cause of the injury. Schauer v Joyce, 54 N.Y. 2d 1, 5 (1981). Therefore, Morrison Cohen’s claims for contribution against Stonebridge are dismissed. Brown Rudnick’s motion to dismiss the claims based on contribution is denied. “

Last week we looked at the statute of limitations in legal malpractice and how that interacted with CPLR 203 which allowed a counterclaim as an offset.  Lewis, Brisbois, Bisgaard & Smith, LLP v Law Firm of Howard Mann  2016 NY Slip Op 05487  Decided on July 13, 2016
Appellate Division, Second Department also has a claim for Judiciary Law 487 which survived the motion.  We (anecdotally) think there is a trend towards more consideration of these JL 487 claims in the past year.

“The ninth counterclaim and the fourth cause of action in the third-party complaint, alleging a violation of Judiciary Law § 487, stated cognizable claims and, thus, the Supreme Court did not err in declining to direct that they be dismissed pursuant to CPLR 3211(a)(7) (see Palmieri v Biggiani, 108 AD3d 604; Sabalza v Salgado, 85 AD3d 436; Izko Sportswear Co., Inc. v Flaum, 25 AD3d 534; cf. Schiller v Bender, Burrows & Rosenthal, LLP, 116 AD3d 756). For the same reason, the court also properly denied dismissal of the seventh counterclaim and the second cause of action in the third-party complaint, which alleged that the plaintiff and the third-party defendants improperly withheld portions of the defendants’ litigation file in the underlying action (see Matter of Sage Realty Corp. v Proskauer, Rose Goetz & Mendelsohn, 91 NY2d 30).”

Law firms traditionally wait three years and a day before suing for unpaid legal fees, and fall into the gap between the three year statute for a feared legal malpractice counterclaim and the six year statute for contract claims.  So was the case in Lewis, Brisbois, Bisgaard & Smith, LLP v Law Firm of Howard Mann  2016 NY Slip Op 05487  Decided on July 13, 2016  Appellate Division, Second Department.  The statute of limitations for legal malpractice ran out on December 29, 2012.  The fee action was commenced in January, 2013.  However, that is not the end of the question.  CPLR 203[d] applies, and permits the counterclaim while it limits the amount of recovery to an offset only.

“The Supreme Court properly denied those branches of the motion of the plaintiff and the third-party defendants (hereinafter collectively the appellants) which were pursuant to CPLR 3211(a)(5) to dismiss, as time-barred, the second, fourth, fifth, sixth, and eighth counterclaims, as well as the first and third causes of action in the third-party complaint, all of which allege legal malpractice, breach of contract, or breach of fiduciary duty, as well as the ninth counterclaim and the fourth cause of action in the third-party complaint, which allege a violation of Judiciary Law § 487. “[C]laims and defenses that arise out of the same transaction as a claim asserted in the complaint are not barred by the Statute of Limitations, even though an independent action by defendant might have been time-barred at the time the action was commenced” (Bloomfield v Bloomfield, 97 NY2d 188, 193; see CPLR 203[d]). In the instant matter, the subject counterclaims and third-party causes of action all arise from the transactions and occurrences upon which the complaint depends. Accordingly, they are not time-barred to the extent of the demand in the complaint (see CPLR 203[d]). Since the appellants’ motion did not address the applicability of CPLR 203(d), the appellants did not establish their entitlement to dismissal pursuant to CPLR 3211(a)(5).

However, the Supreme Court should have granted that branch of the appellants’ motion which was to dismiss the second, fourth, fifth, and eighth counterclaims and the third cause of action in the third-party complaint pursuant to CPLR 3211(a)(7). Those claims are each duplicative of the sixth counterclaim and the first cause of action in the third-party complaint, which alleged legal malpractice, as they arise from the same set of facts and do not allege any distinct damages (see Comprehensive Mental Assessment & Med. Care, P.C. v Gusrae Kaplan Nusbaum, PLLC, 130 AD3d 670, 672; Palmieri v Biggiani, 108 AD3d 604, 608; Soni v Pryor, 102 AD3d 856).”

Judiciary Law § 487 is an ancient statute, emanating from long-ago England centuries before Brexit.  In Charles Deng Acupuncture, P.C. v Titan Ins. Co.  2016 NY Slip Op 26211  Decided on June 30, 2016  Civil Court Of The City Of New York, Kings County  Montelione, J. we see (what appears to us) a unique and completely new application of the statute to litigation.

Deng is a no-fault first-party no-fault benefits case, which are very common in Civil Court, and often end up in the Appellate Term.  Put succinctly, health providers are in a constant battle with auto insurance companies over payment, which requires a somewhat complicated billing/denial/examination under oath process.

Here is the pay-off paragraph, which discusses whether a transcript of a no-show is hearsay and whether it may be a business record exception to the hearsay rule.

“When the issue involves EUOs, defendant must prove that its EUO requests were timely mailed and that plaintiff’s assignor failed to appear for same. See Crescent Radiology, PLLC v. American Transit Ins. Co., 31 Misc 3d 134(A), 2011 NY Slip Op. 50622(U) (App Term 9th & 10th Jud. Dists. 2011); Crotona Heights Medical, P.C. v. Farm Family Casualty Ins. Co., 27 Misc [*2]3d. 134(A) (App Term 2d, 11th & 13th Jud. Dists. 2010); Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co., 35 AD3d 720 (2d Dept. 2006). “Such a showing is established by affidavit on motion for summary judgment and by live testimony at trial (see generally Great Wall, 16 Misc. id at 25; Power Acupuncture P.C. v. State Farm Mut. Auto Ins. Co., 11 Misc 3d 1065, 816 N.Y.S.2d 700, 2006 NY Slip Op 50393[U] [Civ. Ct, King’s County 2006]; Roberts Physical Therapy, P.C. v. State Farm Mut. Auto Ins. Co., 14 Misc 3d 1230(A), 836 N.Y.S.2d 495, 2006 NY Slip Op 52565[U] [Civ-Ct, Kings County 2006]; AVA Acupuncture P.C. v. ELCO Administrative Services Co., 10 Misc 3d 1079(A), 814 N.Y.S.2d 889, 2006 NY Slip Op 50158[U] [Civ Ct, Kings County 2006].” See New Era Massage Therapy PC v. Progressive Cas. Ins. Co., 2009 NY Misc. LEXIS 2554, 242 N.Y.L.J. 2 (NY Sup. Ct. 2009).”

“This court must now consider whether the EUO transcripts, some of which are electronically signed, meet the requirements of the business exception to the hearsay rule under CPLR 4518 (a). Here, whether in or out of court, an attorney is an officer of the court (22 NYCRR § 700.1[a]) and is subject to discipline and severe sanctions if s/he misleads the court (Judiciary Law § 487, Appendix, Rules of Professional Conduct Rule 3.3).”

Continuous representation can bring in a firm long after the case has begun.  One example is an attorney who is retained to handle a case, and then takes the case to a new firm with him. The new firm, under proper circumstances, can be held liable to the client.

In Passeri v Tomlins  2016 NY Slip Op 05423  Decided on July 7, 2016  Appellate Division, Third Department we see an example where the law firm successfully vacates a default judgment.  Will it get out of the case?  That answer is yet to come.

“In December 2006, plaintiff retained defendant Ronald R. Tomlins to represent him in an action seeking to establish access rights to property in Columbia County. Following a February 2010 nonjury trial, Supreme Court dismissed plaintiff’s claim; a subsequent appeal filed by Tomlins on plaintiff’s behalf, in August 2010, was ultimately not perfected. In June 2012, defendant Klein Varble & Associates, P.C. (hereinafter KVA) hired Tomlins as an associate. Plaintiff commenced this legal malpractice action against Tomlins and KVA thereafter in July 2013, alleging that, as a result of Tomlins’ negligent representation, certain access rights that plaintiff sought to establish were instead extinguished, rendering his property landlocked and valueless. As to KVA, plaintiff alleged that Tomlins’ representation was continuous until approximately December 2012, and that KVA was thus jointly liable as Tomlins’ employer.

Plaintiff’s process server personally served Tomlins and KVA on separate occasions via[*2]two office employees at the KVA office. Plaintiff additionally served defendants by mail and, after receiving no answer, moved for a default judgment in February 2014, which Supreme Court entered in March 2014. Tomlins appeared at the subsequent inquest on damages and represented that he was also appearing on behalf of KVA. Judgment against defendants was entered thereafter in August 2014. KVA moved to vacate the default judgment in February 2015, alleging that the officers of KVA did not actually receive copies of the complaint and summons and that Tomlins had not made them aware of the malpractice claim. Supreme Court denied KVA’s motion, finding that KVA had failed to provide a reasonable excuse and that its failure to appear was due to “institutional shortcomings.” KVA appeals.”

“As to whether KVA demonstrated the existence of a meritorious defense, we note that “the quantum of proof needed to prevail on a CPLR 5015 (a) (1) motion is less than that required when opposing a summary judgment motion” (Abel v Estate of Collins, 73 AD3d 1423, 1425 [2010]; see Dodge v Commander, 18 AD3d 943, 945 [2005]). Central to this claim is the existence of an attorney-client relationship between Tomlins and plaintiff that was continuous with his earlier representation (see generally Deep v Boies, 121 AD3d 1316, 1318 [2014], lv denied 25 NY3d 903 [2015]; Corless v Mazza, 295 AD2d 848, 848-849 [2002]), and which existed during the period of his employment with KVA (see Huffner v Ziff, Weiermiller, Hayden & Mustico, LLP, 55 AD3d 1009, 1011 [2008]; C.K. Indus. Corp. v C.M. Indus. Corp., 213 AD2d [*3]846, 847-848 [1995]). The retainer agreement was between plaintiff and Tomlins only, “with respect to rights and obligations pertaining [to] a certain private road.” Plaintiff’s checks were made out to Tomlins individually, with the last check written in November 2010. Tomlins and Klein both state that KVA was not formed until March 2012; after Tomlins joined the firm in June 2012 he claims to have met with plaintiff “once or twice, as a courtesy,” at the physical offices of KVA, to assist him, without compensation, “with his efforts to secure a building permit.” Klein states that KVA did not have a retainer agreement with plaintiff, which he would have insisted upon, had he known of any representation, and that KVA had received no fees from plaintiff. Here, we find that KVA met its burden to set forth sufficient facts “to make a prima facie showing of legal merit” in its defense (Chase Manhattan Auto. Fin. Corp. v Allstate Ins. Co., 272 AD2d 772, 774 [2000] [internal quotation marks and citation omitted]; see Bilodeau-Redeye v Preferred Mut. Ins. Co., 38 AD3d 1277, 1277 [2007]; Clark v MGM Textiles Indus., 307 AD2d 520, 521-522 [2003]).

In sum, our review of the record reveals sufficient facts supporting a reasonable excuse and a meritorious defense. Thus, in recognition of the “strong preference for deciding cases on their merits” (Wade v Village of Whitehall, 46 AD3d 1302, 1303 [2007]), we find that KVA’s motion to vacate the default judgment should have been granted.”

Plaintiff is married to a former movie star, and late in life she seeks to revoke an irrevocable trust.  The money in the trust was hers prior to marriage, and in the transaction plaintiff nets $2 Million rather than $50,000.  He sues nevertheless.

Gallet, Dreyer & Berkey, LLP v Basile  2016 NY Slip Op 05332 Decided on July 5, 2016
Appellate Division, First Department is an example of how the courts obsessively search through the details of legal malpractice cases to determine whether the “but for” or “case within a case” elements is proven.

“As a signatory to the settlement, Basile certainly had the right to be fully informed of the facts and provided with appropriate advice by his attorney before agreeing to its terms, and we cannot conclude as a matter of law on this record that the law firm’s advice to Basile was complete and free of incorrect information. However, nothing in Basile’s submissions shows that but for that claimed negligence, he “would not have sustained actual and ascertainable damages” (Nomura, 26 NY3d at 50 [internal quotation marks omitted]).

The irrevocable trust was created and funded with Holm’s assets before Basile’s marriage to Holm. Basile had no current interest in the trust’s assets at the time of the settlement; he had, at best, a potential interest in those assets if the trust were to be set aside and the assets became part of Holm’s estate, entitling Basile to an elective share. Similarly, the claims addressed in the stipulation regarding other, non-trust assets also concerned property that belonged to Holm alone, and Basile had no present possessory right to them. Notwithstanding Basile’s residuary interest in Holm’s eventual estate, and the possibility that if Holm reacquired property that was previously transferred she would gift him a present interest, he had no established right to make any disposition of that property, or to claim ownership of any portion of that property, while she was alive. His lack of a present possessory interest in the property at issue severely restricts any rights to claim that the law firm’s alleged failures proximately caused him to experience a financial loss in relation to those properties.

More importantly, Basile has not presented an evidentiary showing supporting a claim to “actual and ascertainable damages,” as Nomura requires (26 NY3d at 50 [internal quotation marks omitted]). In cases presenting a valid claim of legal malpractice, the claimed “actual and ascertainable damages” have been clearly calculable (see e.g. Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438 [2007]). In contrast, summary judgment dismissing the legal malpractice claim has been granted where the asserted damages are vague, unclear, or speculative (see Bellinson Law, LLC v Iannucci, 102 AD3d 563, 563 [1st Dept 2013]). Here, Basile essentially speculates that the information he lacked would have provided him with better leverage in negotiations, but he fails to show exactly how, if counsel had properly informed and advised him, the outcome of the litigation would have been more favorable to him. This is particularly so since the settlement netted him a distribution in excess of $2,000,000, as compared to the $25,000 he would have received under the trust alone, in the absence of the stipulation. The submissions simply do not justify a conclusion that Basile would have achieved a more favorable result in the absence of counsel’s claimed mistakes.”

Board of Mgrs. of 325 Fifth Ave. Condominium v Continental Residential Holdings LLC 2016 NY Slip Op 31230(U)  June 27, 2016  Supreme Court, New York County  Docket Number: 154764/12  Judge: Kelly A. O’Neill Levy is a very dense luxury high rise construction case arising from a building on 5th Avenue in Manhattan.  Justice O’Neill Levy briskly takes on a number of motion sequences involving a caption that takes up the entire page.  Interestingly, the case started with a summons with notice, which is a weak branch upon to rest this weak balcony case.

For our niche point of view, all the claims against the attorneys were dismissed as duplicitive of the legal malpractice claim.

“Plaintiff The Board of Managers of 325 Fifth Avenue Condominium (plaintiff) is an association of condominium apartment owners and is responsible for managing the condominium’s affairs. This is an action to recover damages for alleged construction defects, including: the balconies, the lack of vertical fire stops, loose support for the suspended piping in the mechanical room, missing or improperly installed floor and deck mounted vibration isolation systems, and improper design of the concrete floor slab in the mechanical penthouse. Prior to commencing this lawsuit, in exchange for the sum of$900,000.00, on May 17,2011, plaintiff executed a release of its balcony claims against the sponsor defendants. Plaintiff has also sued; the Board’s former counsel, Wolf Haldenstein for legal malpractice, the Cantor Seinuk defendants, as the engineer of record during the construction of the building, and FS Project Management, which was retained in 2009 by the then-sponsor controlled Board to investigate the balconies and to supervise replacement of the building’s glass panels and reinstall the balcony rails. The defendants have cross-claimed against each other. The complaint sets forth a total of 16 causes of action. The first and second causes of action against the sponsor defendants are for breach of contract. The third cause of action against all of the defendants is for breach of fiduciary duty. The fourth cause of action against all of the defendants is for fraud. The fifth cause of action against all of the defendants is for constructive fraud. The sixth cause of action against the sponsor defendants is for fraudulent inducement of the release. The seventh cause of action against Cantor Seinuk is for aiding and abetting the fraudulent inducement of the release. The eighth cause of action against FS Project Management is for aiding and abetting fraudulent inducement of the release. The ninth cause of action against FS Project Management is for breach of contract. The tenth cause of action against FS Project Management is for fraud. The eleventh cause of action against FS Project Management is for breach of fiduciary duty. The twelfth cause of action against FS Project Management is for breach of contract. The thirteenth cause of action against non-movant Basonas Construction Corp. is for breach of contract. The fourteenth cause of action against Wolf Haldenstein is for legal malpractice. The fifteenth cause of action against the sponsor defendants is for a declaratory judgment. The sixteenth, and final cause of action, against all of the defendants is for civil conspiracy. ”

“The breach of fiduciary duty, fraud, and constructive fraud claims, based upon Wolf Haldenstein’ s alleged failure to abide by general professional standards, must be dismissed, as they are all merely redundant of the legal malpractice claim. The alleged breaches “arose out of the same facts as the legal malpractice claim and did not involve any damages that were separate and distinct from those generated by the alleged malpractice” (Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 143 [I st Dept 2013]). Plaintiffs fail to plead their causes of action for fraud with sufficient specificity (CPLR 3016 [b]). No additional promise or duty on the part of Wolf Haldenstein is alleged which would extend beyond the duty a law firm owes its client. Nor is a fraud claim supported by plaintiffs conclusory allegations that Wolf Haldenstein was engaged in a scheme to deceive. Those allegations merely evidence plaintiffs’ dissatisfaction with the sum of money they received for executing the release. In addition, New York does not recognize a conspiracy to commit a tort as a separate cause of action (Brackett v Griswold, I 12 NY 454, 467 [1889]).

Finally, punitive damages are not available in an ordinary legal malpractice case (Walker v Sheldon, 10 NY2d 401, 405 [1961]). The pleading elements required to state a claim for punitive damages as an additional and exemplary remedy when the claim arises from a breach of contract are: (I) defendant’s conduct must be actionable as an independent tort; (2) the tortious conduct must be of an egregious nature; (3) the egregious conduct must be directed to plaintiff; and (4) it must be part ofa pattern directed at the public generally (New York Univ. v Continental Ins. Co., 87 NY2d 308, 316 [1995]). Clearly, the conduct alleged against Wolf Haldenstein is neither egregious, nor directed at the public generally. Therefore, Wolf Haldenstein’s motion, pursuant to CPLR 3211 (a) (7), for an order dismissing the third, fourth, fifth and sixteenth causes of action, and dismissing the claim for punitive damages (motion sequence number 002), must be granted. “

Loans were given and mortgages taken.  The mortgages were no properly recorded after closing. Some time passed, and the borrowers stopped paying.  An easy solution, no?  In this case, not an easy solution.  All of the claims discussed in this appeal are time barred.

Yarbro v Wells Fargo Bank, N.A.  2016 NY Slip Op 05236  Decided on June 30, 2016
Appellate Division, First Department shows how the passage of time works against the litigant.

“Contrary to plaintiffs’ contention, the breach of contract causes of action accrued at the time of the breach, not on the date of discovery of the breach (Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399 [1993]), and the six-year statute of limitations applicable thereto had run before plaintiffs commenced this action. The negligence claims, which allege a failure to properly record certain mortgages, are governed by CPLR 214(4), a three-year statute of limitations (see First Am. Tit. Ins. Co. of New York v Fiserve Fulfillment Servs., Inc., 2008 WL 282019, *2, 2008 US Dist LEXIS 7344, *6 [SD NY 2008]). “[A]ccrual time is measured from the day [the] actionable injury occur[red], even [though] the aggrieved party [was] then ignorant of the wrong or injury'” (Nothnagle Home Sec. Corp. v Bruckner, Tillet, Rossi, Cahill & Assoc., 125 AD3d 1503, 1504 [4th Dept 2015], lv denied 25 NY3d 909 [2015] [quoting McCoy v Feinman, 99 NY2d 295, 301 [2002]). The mortgages at issue were recorded in 2007; this action [*2]was not commenced until 2014.

Plaintiffs’ attempt to extend the statute of limitations by equitable tolling is unsupported by any non-conclusory allegation that they were “actively misled” by any of the defendants (see Shared Communications Servs. of ESR, Inc. v Goldman, Sachs & Co., 38 AD3d 325, 325 [1st Dept 2007] [internal quotation marks omitted]). Nor do plaintiffs allege any facts that would support their “continued representation” claim.

The legal malpractice claim, which accrued at the time the mortgages were recorded after closing (Benedict v Estate of Noumair, 289 AD2d 71 [1st Dept 2001]) and is governed by a three-year statute of limitations (CPLR 214[6]), and the unjust enrichment claim, which accrued “upon the occurrence of the alleged wrongful act giving rise to restitution” (Kaufman v Cohen, 307 AD2d 113, 127 [1st Dept 2003]) and is governed by a six-year statute of limitations (CPLR 213[1]); see also Maya NY, LLC v Hagler, 106 AD3d 583, 585 [1st Dept 2013]), are time barred.”

In a dense (actually very dense) opinion, the First Department has determined that under certain circumstances, your attorneys are fee to discuss your case amongst themselves, and may do so in an air of confidentiality…they need not tell you what they discussed.

Stock v Schnader Harrison Segal & Lewis LLP   2016 NY Slip Op 05247  Decided on June 30, 2016  Appellate Division, First Department  Friedman, J., J. is the situation where the attorneys may have committed malpractice to the tune of $5 million, but then are called to testify to their actions in a securities arbitration.  When the subpoena comes, discussions ensue.  Are the conversations discoverable?

“The primary issue on this appeal is whether attorneys who have sought the advice of their law firm’s in-house general counsel on their ethical obligations in representing a firm client may successfully invoke attorney-client privilege to resist the client’s demand for the disclosure of communications seeking or giving such advice. We hold that such communications are not subject to disclosure to the client under the fiduciary exception to the attorney-client privilege (recognized in Hoopes v Carota, 142 AD2d 906 [3d Dept 1988], affd 74 NY2d 716 [1989]) because, for purposes of the in-firm consultation on the ethical issue, the attorneys seeking the general counsel’s advice, as well as the firm itself, were the general counsel’s ” real clients'” (United States v Jicarilla Apache Nation, 564 US 162, 172 [2011] [Apache Nation], quoting Riggs Natl. Bank of Washington, D.C. v Zimmer, 355 A2d 709, 711-712 [Del Ch 1976]). Further, we decline to adopt the “current client exception,” under which a number of courts of other jurisdictions (see e.g. Bank Brussels Lambert v Credit Lyonnais [Suisse] S.A., 220 F Supp 2d 283 [SD NY 2002]) have held a former client entitled to disclosure by a law firm of any in-firm communications relating to the client that took place while the firm was representing that client. Because we also find unavailing the former client’s remaining arguments for compelling the law firm and one of its attorneys to disclose the in-firm attorney-client communications in question, we reverse the order appealed from and deny the motion to compel.”

“In 2008, the defendant law firm, Schnader Harrison Segal & Lewis LLP (SHS & L), through the managing partner of its New York City office, defendant M. Christine Carty, Esq., represented plaintiff Keith Stock in the negotiation of his separation agreement from his former employer, MasterCard International. Unbeknownst to plaintiff during the negotiation of the separation agreement, his termination by MasterCard triggered the acceleration of the ending dates of the exercise periods of certain stock options granted to him under MasterCard’s Long-Term Incentive Plan (LTIP). Specifically, the termination of plaintiff’s employment caused the exercise periods of his vested stock options under the LTIP to shrink from 10 years to between 90 and 120 days. Although SHS & L negotiated a delay of the date of plaintiff’s termination for the purpose of allowing additional stock options to vest, the firm did not negotiate an extension of the truncated exercise periods of the vested options.

In January 2009, plaintiff learned from Morgan Stanley Smith Barney (MSSB), the administrator of the MasterCard LTIP, that all of his vested stock options, which allegedly had been worth more than $5 million in aggregate, had already expired under the terms of the LTIP as a result of the termination of his employment. Plaintiff thereupon consulted with SHS & L concerning possible remedies for this loss. Plaintiff, represented by SHS & L, subsequently commenced a lawsuit in federal court against MasterCard and an arbitration proceeding before the Financial Industry Regulatory Authority (FINRA) against MSSB. The SHS & L attorneys who [*3]represented plaintiff in these litigations were Theodore Hecht, Esq., and Cynthia Murray, Esq.[FN1]

On January 8, 2011, 11 days before the hearing of plaintiff’s arbitral proceeding against MSSB was scheduled to begin, MSSB’s counsel gave notice that it intended to call Carty to testify as a fact witness at the arbitration [FN2]. This development prompted Carty, Hecht and Murray to seek legal advice from SHS & L’s in-house general counsel, Wilbur Kipnes, Esq [FN3]. The subject on which Carty, Hecht and Murray sought Kipnes’s advice was their and the firm’s ethical obligations, in light of MSSB’s demand for Carty’s testimony, under the lawyer-as-witness rule (see Rules of Professional Conduct [22 NYCRR 1200.0] [RPC] rule 3.7)[FN4]. Kipnes never worked [*4]on any matter for plaintiff, and plaintiff was not billed for any of the time he devoted to the consultations with Carty and Hecht.”

“Plaintiff does not take issue with the right of SHS & L and Carty to invoke attorney-client privilege with respect to the January 2011 emails as against the rest of the world. Plaintiff contends, however, that these documents cannot be withheld from him, on the ground that the communications in question took place while the firm was still representing him and related to that representation. Plaintiff’s primary reliance in seeking to obtain the January 2011 emails is on a doctrine known as the fiduciary exception to the attorney-client privilege. Disagreeing with plaintiff and Supreme Court, we find that the fiduciary exception does not apply to the January 2011 emails.”

“The interests of SHS & L and its attorneys in adhering to their ethical obligations did not necessarily coincide with plaintiff’s interest in successfully and efficiently prosecuting the arbitration against MSSB. For example, an opinion by SHS & L’s in-house counsel that the firm should withdraw from representing plaintiff would have protected the professional interests of the firm and its attorneys but would not have directly advanced plaintiff’s claims in the arbitration or the federal court action. Indeed, the firm’s withdrawal from the representation likely would have significantly delayed the resolution of plaintiff’s claims and increased the expense of the arbitration. Any benefit to plaintiff from his attorneys’ adherence to their ethical [*9]obligations as a result of the consultation with the in-house counsel would have been indirect and incidental (cf. Riggs, 355 A2d at 713 [ordering disclosure of the trustee’s attorney-client communications to the trust beneficiaries, who were “not simply incidental beneficiaries who chance to gain from the professional services rendered”])[FN9]. Thus, because the purpose of the consultation with Kipnes — for whose time, to reiterate, plaintiff was not billed — was to ensure that the attorneys and the firm understood and adhered to their ethical obligations as legal professionals, the attorneys and the firm, not plaintiff, were the “real clients” in this consultation.

We also reject plaintiff’s argument that the January 2011 emails are necessarily subject to the fiduciary exception because his relationship with SHS & L had not yet reached the stage of actual hostility as of the time of those communications. The considerations that support sustaining SHS & L’s invocation of attorney-client privilege as to these communications are not diminished by the fact that, when the communications took place, neither plaintiff nor SHS & L was threatening to sue the other. The protection afforded by the attorney-client privilege encourages lawyers to seek advice concerning their ethical responsibilities and potential liabilities in a timely manner so as to minimize any damage to the client from any conflict or error. Much of this benefit — to both lawyers and clients — would be lost if the attorney-client privilege could be invoked by a lawyer who sought legal advice to protect his or her own interests only for consultations that took place after the lawyer or the client had openly taken a position adverse to the other.”