Legal malpractice litigation gets a bad name when critics can point to cases such as Lipin v Hunt
2016 NY Slip Op 01746  Decided on March 10, 2016  Appellate Division, First Department. More like Moby Dick than reasoned litigation, Plaintiff ends up prevented from starting any new cases about her father’s estate.  How did the litigants get here?

“The Supreme Court properly dismissed the complaint without leave to replead. In relevant part, the court properly dismissed claims against defendant Danske Bank as barred by res judicata (Matter of Josey v Goord, 9 NY3d 386, 389-390 (2007]; Marinelli Assoc. v Helmsley-Noyes Co., 265 AD2d 1, 5-6 [1st Dept 2000]; see also Smith v Russell Sage Coll., 54 NY2d 185, 192 [1981]). Plaintiff has repeatedly unsuccessfully litigated, or could have litigated, the claims she asserts against Danske Bank, which relate to the disputed coin collection and administration of her father’s estate (see Lipin v Hunt, __ F Supp 2d __, 2015 WL 1344406, *2, 2015 US Dist LEXIS 35700, *7-9 [SD NY 2015]).

The Supreme Court also properly dismissed claims against Judge Mazziotti on res judicata grounds. Plaintiff previously sued Mazziotti in Maine, and her suit was dismissed because her claims were based on actions Mazziotti had taken in his judicial capacity, for which he was “absolutely immune from suit” (Lipin v Ellis, __ F Supp2d __, 2007 WL 2198876, *9, 2007 US Dist LEXIS 54489, *32 [D Me July 26, 2007], affd __ F Supp2d __, 2007 WL 2701493, 2007 US Dist LEXIS 67417 [D Me Sept. 10, 2007], affd Lipin v Ellis, __ F3d __, 2008 US App LEXIS 28002 [1st Cir 2008]; see also Rosenstein v State of New York, 37 AD3d 208 [1st Dept 2007]). Plaintiff’s claims in the instant suit similarly arise from Mazziotti’s conduct as a judge who presided over proceedings regarding her deceased father’s estate in Maine.

The court properly dismissed claims alleging a violation of Judiciary Law § 487 and related attorney misconduct against defendant attorneys Mark. K. Anesh, David A. Berger, and Berger’s firm Allegaert Berger & Vogel LLP, who represented various defendants in prior suits brought by plaintiff, because plaintiff’s allegations were based on statements that were [*2]”absolutely privileged,” i.e., they were made in the course of judicial proceedings, and were material and pertinent to the issue to be resolved in those proceedings (Bisogno v Borsa, 101 AD3d 780, 781 [2d Dept 2012]). To the extent that plaintiff challenges dismissal of her claims alleging that Anesh violated criminal laws, those claims were properly dismissed for lack of standing, since “the district attorney [] generally retains sole authority to prosecute such criminal activity (Kinberg v Kinberg, 48 AD3d 387, 387 [1st Dept 2008], lv denied 11 NY3d 702 [2008]). The same is true to the extent that she asserts claims against Francis J. Earley, counsel for Danske Bank, who is not a named defendant in the action.

In light of defendants’ timely pre-answer motions to dismiss, plaintiff was not entitled to default judgments against any defendants (see CPLR 3012[a]; CPLR 3211[f]).

Finally, in light of plaintiff’s seemingly endless pursuit of the same frivolous claims in numerous courts, the court properly enjoined her from commencing any further actions without prior court approval (Bikman v 595 Broadway Assoc., 88 AD3d 455 [1st Dept 2011], lv denied 21 NY3d 856 [2013]; Jones v Maples, 286 AD2d 639 [1st Dept 2001], lv dismissed 97 NY2d 716 [2002]; see alsoLipin v Hunt, __ F Supp 2d __, 2015 WL 1344406, *1 n 1, *11, 2015 US Dist LEXIS 35700, *2-5 n 1, *35-36 [SD NY 2015] [listing over 10 suits commenced by plaintiff relating to her late father’s estate or its administration]).

OK, the title to this blog entry is a tad cynical, but what other course might plaintiffs in this case have had.  They purchased a residential property on Clinton Street in Brooklyn.  Let’s assume its a town house in Brooklyn Heights, and they spent, perhaps $ 5 million.  Then they discover that the prior seller had encumbered the property with a conservation easement in favor of a third party. That probably meant that they could not build an extension on the town house.  The seller lied! Their attorney did not pick up on the problem.  What to do?

Schottland v Brown Harris Stevens Brooklyn, LLC  2016 NY Slip Op 01823  Decided on March 16, 2016  Appellate Division, Second Department tells us that while it is difficult to sue the attorney, and the court will dig deep to reason out why/how the attorney might not be responsible, there are appropriate defendants left in the case.

“In 2010, the plaintiffs purchased a residential property located on Clinton Street in Brooklyn. After the sale, they discovered that the sellers had previously encumbered the property with a conservation easement in favor of a third party. The plaintiffs then commenced this action against, among others, their own attorney and the sellers, inter alia, to recover damages for legal malpractice. They moved for summary judgment on their cause of action alleging legal malpractice, and the Supreme Court denied the motion.”

“In order to sustain a legal malpractice cause of action, a plaintiff must prove “that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’ and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442, quoting McCoy v Feinman, 99 NY2d 295, 301; see Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY3d 40, 49-50; Dombrowski v Bulson, 19 NY3d 347, 350). “To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 442; see Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY3d at 50; Greene v Sager, 78 AD3d 777, 778).”

But, from the companion case: “This action arises out of the sale in 2010 of a residential property located on Clinton Street in Brooklyn, by the defendants third-party plaintiffs, Jenny Netzer and Carol R. Nezter (hereinafter together the sellers), to the plaintiffs. The deed for the property delivered to the plaintiffs contained a covenant against grantor’s acts, pursuant to which the sellers asserted that they had not done anything to encumber the property in any way (cf. Real Property Law § 253[6]). The deed did not acknowledge the existence of a conservation easement on the property which the sellers had previously executed in favor of a third party. The plaintiffs subsequently commenced this action against, among others, the sellers. The only cause of action remaining against the sellers alleges breach of the covenant against grantor’s acts set forth in the sellers’ deed to the plaintiffs (see Schottland v Brown Harris Stevens Brooklyn, LLC, 107 AD3d 684).

The sellers commenced a third-party action against the third-party defendant, Timothy M. Costello, the attorney who represented them with regard to the sale of the subject property and who drafted the deed. The third-party complaint asserted causes of action to recover from Costello any sum which the plaintiffs may recover against them in the main action on theories of common-law contribution and indemnification. Costello moved to dismiss the third-party complaint pursuant to CPLR 3211(a), and the Supreme Court denied the motion.”

“”[P]urely economic loss resulting from a breach of contract does not constitute injury to property’ within the meaning of New York’s contribution statute” (Board of Educ. of Hudson City School Dist. v Sargent, Webster, Crenshaw & Folley, 71 NY2d 21, 26, quoting CPLR 1401). CPLR 1401 does not apply to a breach of contract cause of action where the only potential liability to the plaintiff is for the contractual benefit of the bargain (see Sommer v Federal Signal Corp., 79 NY2d 540, 557; Board of Educ. of Hudson City School Dist. v Sargent, Webster, Crenshaw & Folley, 71 NY2d at 28; Sound Refrig. & A.C., Inc. v All City Testing & Balancing Corp., 84 AD3d 1349, 1350). In the main action, the plaintiffs’ potential recovery against the sellers is limited to the purely economic loss, if any, resulting from the sellers’ alleged breach of the covenant against grantor’s acts by encumbering the property with a conservation easement (see McGuckin v Milbank, 152 NY 297, 302; 487 Elmwood v Hassett, 161 AD2d 1171; Nuzzo v Thornwood Acres B, 18 AD2d 1000). Consequently, the sellers cannot maintain a cause of action against Costello for contribution (see Children’s Corner Learning Ctr. v A. Miranda Contr. Corp., 64 AD3d 318, 324; Trump Vil. Section 3 v New York State Hous. Fin. Agency, 307 AD2d 891, 897; Rothberg v Reichelt, 270 AD2d 760, 762).

Common-law or implied indemnification ” permits one who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages it paid to the injured party'” (Tiffany at Westbury Condominium v Marelli Dev. Corp., 40 AD3d 1073, 1077, quoting 17 Vista Fee Assoc. v Teachers Ins. & Annuity Assn. of Am., 259 AD2d 75, 80; see Bivona v Danna & Assoc., P.C., 123 AD3d 956, 957; Bedessee Imports, Inc. v Cook, Hall & Hyde, Inc., 45 AD3d 792, 796). However, in this case, any potential liability of the sellers in the main action would be the result of their own affirmative act of encumbering the property with a conservation easement in 2002, rather than Costello’s alleged negligent drafting of the deed. Since the sellers do not allege that Costello played any role in the conveyance of the conservation easement, which is the basis for their potential liability, the third-party complaint does not adequately plead a cause of action for common-law indemnification against him.

Finally, despite the sellers’ assertions to the contrary, the third-party complaint seeks recovery against Costello upon a theory sounding largely in legal malpractice. To the extent that it does, Costello demonstrated that any claim for legal malpractice would be time-barred by the expiration of the applicable statute of limitations (see CPLR 214[6]).”

This case is puzzling. Manhattan Sports Rests. of Am., LLC v Lieu  2016 NY Slip Op 01617
Decided on March 8, 2016  Appellate Division, First Department First, the attorneys.  Both plaintiff’s and defendant’s law firms are unusual for a case of this type.  Second, the facts are bizarre.

“Order, Supreme Court, New York County (Peter H. Moulton, J.), entered September 11, 2014, which, to the extent appealed from as limited by the briefs, denied defendant’s motion to dismiss the causes of action for tortious interference with business relations, trespass to land, trespass to chattels, violation of the New York City Human Rights Law, and fraud, and granted the motion as to the causes of action for conversion and violation of Judiciary Law § 487, unanimously affirmed, without costs.  Even more interesting is the comments made by an attorney and the Court’s dismissal of the JL cause of action.

The complaint states a cause of action for tortious interference with economic relations by alleging a course of conduct on defendant’s part that seemed designed to sabotage plaintiff’s restaurant business, which had come about through a sublease with nonparty RCSH, LLC, and that defendant’s alleged conduct was a significant factor in plaintiff’s decision to terminate the sublease (see e.g. Amaranth LLC v J.P. Morgan Chase & Co., 71 AD3d 40, 47 [1st Dept 2009], lv dismissed in part, denied in part 14 NY3d 736 [2010]).

The complaint states causes of action for trespass to land and trespass to chattels, arising, in part, from defendant’s conduct in preventing plaintiff from moving out of the premises, since that led to the spoiling of certain perishable items (see “J. Doe No. 1” v CBS Broadcasting Inc., 24 AD3d 215 [1st Dept 2005]). However, these allegations do not state a conversion claim since it is not alleged that defendant exercised dominion and control over the perishables (see Colavito v New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 [2006]).

“Defendant’s alleged statement that she did not want “ghetto people from the Bronx” congregating in a sports bar in the building is sufficient to support a claim for violation of New York City Human Rights Law, as is her alleged prohibition against black employees taking breaks outside the premises (see Administrative Code of City of NY § 8-107[5][b][2]).

The Judiciary Law § 487 claim was correctly dismissed since, although defendant is an attorney, her affidavits were those of a fact witness, not counsel (see e.g. Oakes v Muka, 56 [*2]AD3d 1057, 1058 [3d Dept 2008]).”

Legal malpractice is the child of medical malpractice.  It seems that attorneys (long, long ago) helped forge the concept of professional responsibility for poor medical care, well before the same analysis was applied to legal care.  Long ago the quality of medical care varied widely between communities, and the “locality rule” was applied, so that courts measured the work of a doctor against a standard of local medical care.  The worry for doctors was that a rural physician would have his/her work unfairly compared to that of  a “big-city” doctor.

In legal malpractice, it can be fairly said that there is one standard for all of New York.  Doviak v Finkelstein & Partners, LLP  2016 NY Slip Op 01636  Decided on March 9, 2016  Appellate Division, Second Department is an example.

“During the trial of the underlying injury action, the personal injury defendants extended settlement offers in the sums of $4 million, $8 million, $9.25 million, and $10 million, respectively, each of which the plaintiffs declined upon the defendants’ advice. On the evening after the parties had rested, and prior to summations, the personal injury defendants extended a written settlement offer in the sum of $12 million, along with a structured settlement plan which would yield greater sums if invested as proposed (hereinafter the $12 million offer).

Yatto, who represented the plaintiffs at trial, testified that he communicated the $12 million offer to the plaintiffs and handed Mrs. Doviak the written document containing the offer (hereinafter the offer document) to review but that, the following morning, Mrs. Doviak explicitly rejected the $12 million offer and handed the offer document back to him. The plaintiffs, on the other hand, testified that they were never informed of the $12 million offer and that, had they been informed of it, they would have accepted it.

The jury in the personal injury action returned a verdict in favor of the plaintiffs in the sum of approximately $3.7 million. The defendants successfully sought additur from the Supreme Court, Ulster County, which increased the verdict to the sum of approximately $6.8 million. In November 2007, after the successful additur motion, the plaintiffs discharged the defendants and engaged successor counsel. Successor counsel obtained further additur from the Appellate Division, Third Department, for a total verdict in the sum of approximately $9.3 million (see Doviak v Lowe’s Home Ctrs., Inc., 63 AD3d 1348).

The plaintiffs thereafter commenced this action against the defendants, alleging, inter alia, that the defendants committed legal malpractice by failing to communicate the $12 million offer to them. The plaintiffs also alleged a variety of other legal errors and sought, inter alia, a finding that they had discharged the defendants for cause and that, accordingly, the defendants were not entitled to recover fees in the personal injury action.”

“The plaintiffs contend that, in evaluating the proffered testimony of their proposed expert on legal malpractice (hereinafter the malpractice expert), the Supreme Court improperly applied the “locality rule.” This is the concept that the quality of a professional’s work must be measured against that of professionals from a locality of comparable size, which is often applied to expert testimony regarding medical care (see Restatement [Second] of Torts: Undertaking in Profession or Trade § 299A, Comment g). The plaintiffs are correct that, in general, this rule does not apply to the work of legal professionals. The record, however, does not demonstrate that the court applied the locality rule.”

The facts behind Financial Servs. Veh. Trust v Saad  2016 NY Slip Op 01637   Decided on March 9, 2016 Appellate Division, Second Department are tragic.  Saad strikes two pedestrians and kills both.  He had leased a car, and since this was one of the few motor vehicle accidents that involved “grave injury” the commercial lessor was in the case.  The case settled for $ 1,150,000 (a smallish number) and both GEICO and the lessor put in the money.  GEICO, however, did not defend Saad and he had to retain additional counsel.  He then turned to GEICO to repay.  GEICO would not.  Note the all important privity and “American Rule” issues .

“Contrary to GEICO’s contention, GEICO was liable to Saad for breach of contract based on GEICO’s refusal to defend Saad in the main action against him for contractual indemnification arising out the underlying wrongful death action (see GMM Realty, LLC v St. Paul Fire & Mar. Ins. Co., 129 AD3d 909; Allianz Ins. Co v Lerner, 416 F3d 109 [2d Cir]; Tokio Marine & Fire Ins. Co. v Grodin, 2006 WL 3054321, 2006 US Dist LEXIS 78146 [SD NY, No. 05 Civ. 9153 (DLC)]). The Supreme Court erred, however, to the extent that it directed GEICO to reimburse Saad for those attorneys’ fees incurred by Saad in the third-party action. The law “is well established that an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy” (New York Univ. v Continental Ins. Co., 87 NY2d 308, 324; see West 56th St. Assoc. v Greater N.Y. Mut. Ins. Co., 250 AD2d 109, 114).

With respect to those attorneys’ fees incurred by Saad in defending the main action, the Supreme Court erred in failing to limit Saad’s recovery to those attorneys’ fees paid by him. Attorneys’ fees paid by Saad’s father’s business, the third-party defendant Mayer J. Saad, M.D., P.C., are not recoverable by Saad (see Cardo v Board of Mgrs., Jefferson Vil. Condo 3, 67 AD3d 945). On its motion, GEICO submitted, inter alia, transcripts of Saad’s deposition testimony, in which he testified that Mayer J. Saad, M.D., P.C., paid a substantial amount of the attorneys’ fees at issue. In opposition, Saad failed to present any appropriate documentation or evidence demonstrating his right to recover those expenses which he did not personally pay (see Gadani v DeBrino Caulking Assoc., Inc., 124 AD3d 1123; Cardo v Board of Mgrs., Jefferson Vil. Condo 3, 67 AD3d 945).

The Supreme Court properly awarded GEICO summary judgment dismissing the causes of action in the third-party complaint to recover damages for alleged tortious conduct. GEICO established as a matter of law that it did not act in bad faith, since its conduct, under the circumstances, did not constitute a gross disregard of Saad’s interests (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454).

The Supreme Court also properly awarded summary judgment dismissing the third-party complaint insofar as asserted against the O’Connor defendants and the Bellavia defendants, as the record demonstrated that Saad was unable to establish that any alleged legal malpractice on the part of those defendants caused him actual and ascertainable damages (see Barouh v Law Offs. of Jason L. Abelove, 131 AD3d 988; Lovino, Inc. v Lavallee Law Offs., 96 AD3d 910; Boone v Bender, 74 AD3d 1111). “Conclusory allegations of damages or injuries predicated on speculation cannot suffice for a malpractice action” (Holschauer v Fisher, 5 AD3d 553, 554).”

All too often in legal malpractice cases Courts seem willing, even eager, to dismiss at the CPLR 3211 stage.  We think, based upon anecdotal evidence, that the percentage of legal malpractice cases dismissed on this motion exceeds that of all other types of cases.  Leading Ins. Group Ins. Co., Ltd. v Friedman LLP  2016 NY Slip Op 30375(U)  March 3, 2016  Supreme Court, New York County  Docket Number: 651049/15  Judge: Saliann Scarpulla, an accounting malpractice case illustrates a comprehensive and thorough analysis of the complaint and an appropriate finding that in a complex professional negligence case much expert testimony is required, ruling out dismissal in lieu of an answer.

“Pursuant to an engagementl etter (“Engagement Letter”), dated October 24, 2012, Friedman agreed to perform an independent audit of LIGUSB ‘s Statutory Financial Statements for the year ending in December 21, 2012. In pertinent part, the Engagement Letter stated that: Friedman would “plan and perform the audit to obtain reasonable assurance about whether financial statements are free from material misstatement;” “[t]he objective of [the] audit is the expression of an opinion about whether [LIG’s] financial statements are fairly presented, in all material respects, in conformity with accounting practices prescribed or permitted by the [NYDFS];” and the “audit [would] be conducted in accordance with auditing standards generally accepted in the United States of America.” The Engagement Letter also contained the following qualifications, that: LIG”[was] responsible for establishing and maintaining internal controls, including monitoring ongoing activities;” “[b]ecause of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because [Friedman would] not perform a detailed examination of all transactions, there [was] a risk that material misstatements may exist and not be detected by [Friedman], even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards;” and the “audit is not designed to provide assurance on internal control or to identify deficiencies in internal control.”

” In approximately October 2013, “NYDFS advised LIG that red flags existed in LIG’s loss reserve estimates in its recent financial statements and required that LIG engage an independent external actuary to conduct a peer review of LI G’s internal actuary’s findings at LIG’s own expense.” LIG complied and, in approximately February 2014, “LIG discovered that its carried loss reserves were inadequate, contrary to what Friedman had concluded and reported in connection with its audit.” According to LIG, because its prior loss reserves were considerably understated, it had “to take immediate action to increase its reserves by approximately $37,000,000” and to “take aggressive and immediate measures to increase and improve its related internal controls and procedures.” LIG alleges that, as a result of Friedman’s failure to detect the errors in LIGUSB’s Statutory Financial Statements, LIG suffered a number of negative consequences, including: “the imposition by the NYDFS of an order dated March 7, 2014 restricting LIGUSB from issuing new policies and writing new business,” causing a loss of income greater than $69,600,000 for 2014; having “to pay numerous professionals and consultants to advise and assist LIG in connection with the regulatory action;” having “to secure an emergency $45,000,000 capital contribution from its parent company in order to cure the surplus impairment and avoid being forced into liquidation by the NYDFS” and, thereby, “incur[ring] increased and additional accounting-related fees;” and being required to pay for NYDFS’s “own full financial an~ actuarial audit of LIGUSB’s 2012 and 2013 financial statements.” According to LIG, “even though Friedman was still engaged as a CPA, financial advisor and independent auditor for LIG, Friedman was uncooperative and evasive in responding to demands from the NYDFS, as well as requests from LIG to assist with the NYDFS investigation and examination.” LIG alleges that “Friedman’s conduct only served to impede and undermine LIG’s efforts to rebuild its damaged credibility with the NYDFS.”

“To state a claim for professional negligence, the complaint must allege “that there was a departure from accepted standards of practice and that the departure was a proximate cause of the injury.” D.D. Hamilton Textiles v Estate of Mate, 269 AD2d 214, 215 (I st Dept 2000). Here, Friedman contends that the complaint fails to specify how Friedman allegedly deviated from acceptable standards of practice. In particular, it points to the allegation that a subsequent, independent actuary identified certain “red flags” that Friedman “inexplicably failed to identify,” without identifying those red flags or describing what Friedman should have done differently. However, the complaint contains numerous allegation detailing the ways in which LIG believes Friedman deviated from professional standards of care, including that it failed to comply with GAAS and SAP by, among other things, failing to implement appropriate and adequate audit procedure to verify the accuracy of the Statutory Financial Statements. See complaint, ilil 6, 37-41, 57, 59-63, 98-101. Moreover, this is a pre-answer motion to dismiss. Therefore, LIG need not “pro[ ve] that there was a departure from accepted standards of practice,” but rather, it need only make the necessary allegations. See D.D. Hamilton Textiles, 269 AD2d at 214- 215 (finding, in the context of a motion for summary judgment, that plaintiffs failed to prove defendant accountant’s work fell below applicable standards of care); see also EEC I, Inc., 5 NY3d at 19. Ultimately, LIG alleges that Friedman failed to identify deficiencies with LI G’s loss reserves; whether this failure “was [due to] a departure from professional accounting standards … is a question that requires expert evidence for its resolution.” Berg v Eisner LLP, 94 AD3d 496, 496 (1st Dept 2012) (reversing dismissal). Friedman also argues that “[p]laintiffs’ hypothetical causal chain and their gross speculation as to what Plaintiffs and /NY)DFS could or would have done, is … insufficient as a matter of law to satisfy the proximate causation element.” Friedman argues that this is particularly so because damages are attributable to LIG’s own failure to maintain adequate loss reserves. Friedman argues that LIG merely speculates about losses suffered and improperly seeks to recover consequential damages, including $69,600,000 in lost new business. Nothing in the complaint warrants dismissal at this early stage. LIG alleges that, “[b]ased ori Friedman’s audit and opinion … LIG found no reason to make adjustments to its estimated loss reserves, its methods and procedures for establishing its loss reserves, or other related business conduct.” In addition, LIG alleges that, because of Friedman’s clean audit, “LIG’s discovery of the understated reserves was belated, [and it] was forced to make emergency adjustments to correct the understated loss reserves,” which caused it to incur additional costs and suffer “significant regulatory action by the NYDFS.” As such, “[t]he complaint sufficiently asserts that ‘but for”‘ Friedman’s failure to identify the understated Joss reserves, LIG would have been able to take corrective actions sooner and would have avoided incurring costs in connections with its emergency measures. Fielding v Kupferman, 65 AD3d 437, 442 (1st Dept 2009) (finding proximate cause sufficiently alleged where plaintiff alleges that “he would not have incurred the tax liability that resulted from the withdrawal of funds from his retirement account,” but for defendants’ incorrect advice). “