We deal in this area every day, but still are surprised by how attorneys deal with each other, and the penalties and sanctions they open themselves up to in what appears in hindsight to be merely foolish litigation.  Here in Neroni v Follender  2016 NY Slip Op 01527  Decided on March 3, 2016
Appellate Division, Third Department one attorney was suspended, sanctioned, made to pay attorney fees to the opponent, lost the right to continue bringing certain actions and lost her case.

“In 2007, defendant Jonathan S. Follender (hereinafter Follender) and his law firm, defendant Jonathan S. Follender, P.C. (hereinafter the law firm), commenced a breach of contract action on behalf of clients of the law firm against clients of plaintiff [FN1]. The action culminated in a default judgment against plaintiff’s clients and an award of sanctions for frivolous conduct against plaintiff; both determinations were affirmed by this Court (M & C Bros., Inc. v Torum, 101 AD3d 1329, 1330 [2012], appeal dismissed 21 NY3d 898 [2013]). Plaintiff then commenced this action against Follender, the law firm and the law firm’s clients in the breach of contract action, alleging that Follender and the law firm committed fraud upon the court in that action and a subsequent special proceeding to enforce the judgment, that the clients colluded with Follender and the law firm to commit fraud, deceit and collusion in violation of Judicial Law § 487, and that defendants committed defamation. Defendants moved [*2]to dismiss the complaint and sought sanctions and an order to preclude plaintiff from bringing further litigation against them. In December 2013, after extensive motion practice and correspondence, Supreme Court dismissed plaintiff’s complaint with prejudice, sanctioned plaintiff in the amount of $2,000 for frivolous conduct and awarded injunctive relief to defendants, as well as counsel fees and costs. Plaintiff then moved for recusal and to renew and/or reargue the December 2013 order, and defendants cross-moved for, among other things, a determination of the amount of counsel fees and costs. In April 2014, the court denied plaintiff’s motion and partially granted the cross motion by, among other things, setting the amount of counsel fees and costs awarded in the December 2013 order at $8,470. Plaintiff appeals from both orders.

Initially, and contrary to plaintiff’s contention, Supreme Court was not deprived of authority to consider defendants’ motion to dismiss on the ground that the notice of motion was personally served by Follender. Although CPLR 2103 (a) requires service to be made by a person who is not a party to the action, a violation of this provision “is a mere irregularity which does not vitiate service” where, as here, no resulting prejudice is shown (Matter of Conti v Clyne, 120 AD3d 884, 886 [2014] [internal quotation marks and citations omitted], lv denied 23 NY3d 908 [2014]; see CPLR 2001). Turning to the merits, the court correctly dismissed the complaint. The first two of the four causes of action alleging fraud upon the court were barred by collateral estoppel, as they merely repeated allegations that had already been fully litigated in the prior breach of contract action and its appeal (see Ryan v New York Tel. Co., 62 NY2d 494, 502 [1984]; see also Matter of Capoccia, 272 AD2d 838, 847 [2000], lv dismissed 95 NY2d 887 [2000]). Additionally, as the court found, none of the causes of action alleging fraud upon the court met the requirement that a cause of action based on fraud must be supported by “detailed factual allegations” (Boyle v Burkich, 245 AD2d 609, 610 [1997]; see CPLR 3016 [b]). Even when liberally construed, plaintiff’s vague allegations failed to include specific facts demonstrating that defendants’ representations were intentional, were calculated to deceive the court or were part of an “unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter” (CDR Créances S.A.S. v Cohen, 23 NY3d 307, 321 [2014] [internal quotation marks and citation omitted]).”

“In view of plaintiff’s history of repeatedly raising the same frivolous issues in the current case and the previously-mentioned breach of contract action, and of having been sanctioned for this behavior, Supreme Court did not err in enjoining her from bringing any further litigation against defendants without court permission (see Bell v New York Higher Educ. Assistance Corp., 250 AD2d 496, 496 [1998], appeal dismissed 92 NY2d 876 [1998], appeal and lv [*3]dismissed 93 NY2d 920 [1999]; Braten v Finkelstein, 235 AD2d 513, 514 [1997]). For the same reasons, the court did not abuse its discretion in determining that an award of sanctions was appropriate (see Matter of De Ruzzio v De Ruzzio, 287 AD2d 896, 896-897 [2001]; Matter of Jemzura v Mugglin, 207 AD2d 645, 646-647 [1994],appeal dismissed 84 NY2d 977 [1994])[FN2]. Contrary to plaintiff’s claim, she was afforded the requisite notice of the basis for a potential award of sanctions and a reasonable opportunity to be heard; defendants’ notice of motion requested sanctions for plaintiff’s frivolous conduct, and — after a considerable delay in which she sought adjournments and raised various other arguments — plaintiff responded to the request in her opposing affidavit (see Shields v Carbone, 99 AD3d 1100, 1101-1102 [2012]).

Supreme Court also properly awarded counsel fees and costs pursuant to CPLR 8303-a based upon its determination that plaintiff knew or should have known that her claims lacked merit (see Smullens v MacVean, 183 AD2d 1105, 1107-1108 [1992], lv dismissed 85 NY2d 995 [1992]; Patane v Griffin, 164 AD2d 192, 196-197 [1990], lvs denied 77 NY2d 810 [1991]), and the amount of the award was properly based upon defendants’ showing of the hours expended and the reasonableness of the law firm’s hourly rate (see Matter of Gamache v Steinhaus, 7 AD3d 525, 527 [2004]). Contrary to plaintiff’s contention, no formal evidentiary hearing on the amount of the award was required, as plaintiff was afforded an appropriate opportunity to be heard when the court directed defendants to submit an affidavit detailing the amount of their counsel fees and costs and provided plaintiff with an opportunity to submit an opposing affidavit (see Grasso v Mathew, 187 AD2d 758, 758 [1992]). We further note that plaintiff’s opposing affidavit included no request for an evidentiary hearing on the amount of the award.”
Footnote 1: Plaintiff’s clients were initially represented by plaintiff’s husband, former attorney Frederick J. Neroni, prior to 2011 (see Matter of Neroni, 86 AD3d 710, 711 [2011], appeal dismissed and lv denied 17 NY3d 851 [2011]).

Footnote 2: During the pendency of this appeal, plaintiff was suspended from the practice of law for two years for frivolous conduct in several cases, including the previously maintained action for breach of contract (Matter of Neroni, 135 AD3d 97, 101 [2015]).

We sometimes stray into professional liability other than that of legal malpractice, and today we look at Dormitory Auth. of the State of N.Y. v Samson Constr. Co.  2016 NY Slip Op 01546
Decided on March 3, 2016  Appellate Division, First Department.  The City of New York decided to build a state-of-the-art forensic lab for the Medical Examiner.  It decided to use the Dormitory Authority of the State of New York to manage the construction.  From there things went really bad. What liability might the architect face?  In this case, potential tort liability, which is rare.

“In or about May 2002, when Samson began driving piles as part of the foundation work, the adjacent Bellevue building, known as the C & D building, began to settle. The settling of the building continued while the foundation work continued. By March 2004, the C & D Building had settled eight inches in some areas, leading to a delay of the project by more than 18 months. Other structures adjacent to the project site, including sidewalks, roadbeds, sewers, and water systems, also sustained damage due to the settlement during the foundation work. The cost of fixing the damage to the project site and the adjacent properties was approximately $37 million. Perkins ultimately completed its work on the project in February 2007.

The motion court erred in dismissing the breach of contract claim against Perkins. Although Perkins made a prima facie showing that the City is not a third-party beneficiary of the contract because it is not named in the contract, the City raised an issue of fact whether it is an [*2]intended third-party beneficiary of the contract (see MK W. St. Co. v Meridien Hotels, 184 AD2d 312 [1st Dept 1992]). The contract expressly states that a City agency will operate the DNA laboratory, and the City retained control over various aspects of the project, including participation in and approval of the design of the building, the budget for the project, the selection of contractors, including Perkins, and the construction of the building.

The motion court, however, correctly determined that DASNY may proceed with its negligence claim. Perkins, as architect, may be subject to tort liability based on a failure to exercise due care in the performance of its duties. In making this determination, the court is to look at the nature of the injury and whether the plaintiff is merely seeking the benefit of its agreement. Where the plaintiff is merely seeking the benefit of its agreement, it is limited to a contract claim (Sommer v Federal Signal Corp., 79 NY2d 540, 551-552 [1992]).

Where, however, “the particular project . . . is so affected with the public interest that the failure to perform competently can have catastrophic consequences,” a professional may be subject to tort liability as well (Trustees of Columbia Univ. in City of N.Y. v Gwathmey Siegel & Assoc. Architects, 192 AD2d 151, 154 [1st Dept 1993]). Indeed, “[t]his is one of the most significant elements in determining whether the nature of the type of services rendered gives rise to a duty of reasonable care independent of the contract itself” (id., citing Sommer v Federal Signal Corp., 79 NY2d 540, 553 [1992]). As the Court explained in Sommer, “[I]t is policy, not the parties’ contract, that gives rise to a duty of care” (79 NY2d at 552). The “nature of the injury, the manner in which the injury occurred and the resulting harm” are also considered (id., citing Bellevue S. Assoc. v HRH Constr. Corp., 78 NY2d 282, 293—295 [1991] [Court rejected plaintiff’s attempt to ground in tort a claim that defendants supplied defective floor tiles, noting that the injury (delamination of tiles) was not personal injury or property damage, there was no abrupt, cataclysmic occurrence, and the injury was simply replacement cost of the product]).

Here, there is a factual question whether Perkins assumed an independent legal duty as an architect to perform its work in a manner consistent with the generally accepted standard of professional care in its industry. DASNY alleges that Perkins’s failure to adhere to professional standards of care by not conducting an adequate site investigation and/or providing an adequate foundation design appropriate to the existing site conditions violated the relevant standard of professional care, resulting in increased costs for the project and additional costs of $37 million to remediate the damage caused by the failure to comply with those professional standards. The damage included damage to the sidewalks, roadbeds, sewers, and water systems located near a major medical center in Manhattan. There are issues of fact whether the project was so affected with the public interest that Perkins’s failure to comply with the relevant professional standards could result in catastrophic consequences (Trustees of Columbia Univ., 192 AD2d at 154).”

Defense attorneys in legal malpractice cases typically raise several arguments against plaintiff.  One is that plaintiff had multiple attorneys which they posit indicates lack of merit or rigor in the case.  Another argument is that plaintiff is just monday-morning-quarterbacking, or whatever simile they choose.  Sadly, sometimes they are correct, and Hyman v Schwartz   2016 NY Slip Op 01529 and 2016 NY Slip Op 01526, both decided on March 3, 2016  Appellate Division, Third Department are poster children for defendants’ arguments.

Ms. Hyman had an unfortunate experience at Cornell which led to extensive litigation, all of which turned out badly for her.  As the AD reports: “Defendant Arthur Schwartz, an attorney, represented plaintiff in two unsuccessful matters (Matter of Hyman v Cornell Univ., 82 AD3d 1309 [2011]; Hyman v Cornell Univ., 834 F Supp 2d 77 [ND NY 2011], affd 485 Fed Appx 465 [2d Cir 2012], cert denied ___ US ___, 133 S Ct 1268 [2013]). Plaintiff then commenced an action against Schwartz and defendant Schwartz, Lichten & Bright, PC, his former law firm, as well as defendants Stuart Lichten and Daniel Bright, Schwartz’s former partners. Ultimately, and as is relevant here, the complaint against Lichten and Bright was dismissed for a lack of personal jurisdiction, and plaintiff’s legal malpractice cause of action against Schwartz and the law firm was dismissed for failure to state a cause of action (Hyman v Schwartz, 114 AD3d 1110, 1110-1112 [2014], lv dismissed 24 NY3d [*2]930 [2014]).[FN1]

Thereafter, plaintiff commenced this action, again alleging legal malpractice and breach of contract by defendants based on the same events. Supreme Court thereafter granted a motion by Schwartz and the law firm dismissing the complaint against them. Subsequently, Lichten and Bright moved to dismiss the complaint and plaintiff moved, among other things, for leave to amend the complaint. Supreme Court granted the motion to dismiss the complaint against Lichten and Bright and denied plaintiff’s motion. Plaintiff now appeals from both orders, and we affirm.

Although plaintiff’s previous dismissal for a failure to state a cause of action was not on the merits and, therefore, has no res judicata effect (see generally Maitland v Trojan Elec. & Mach. Co., 65 NY2d 614, 615-616 [1985]), plaintiff’s complaint suffers a similar defect as her previous complaint. Even when viewed in the light most favorable to plaintiff and granting her the benefit of every reasonable inference, plaintiff fails to allege facts that could support a reasonable conclusion that Schwartz or the law firm’s alleged negligence were a but-for cause of the failure of plaintiff’s underlying claims (see Hyman v Schwartz, 114 AD3d at 1112; Siwiec v Rawlins, 103 AD3d 703, 704 [2013]). Plaintiff’s breach of contract claim is duplicative of the malpractice claim because it arises from the same factual allegations, and it is therefore subject to dismissal (see Hyman v Burgess, 125 AD3d 1213, 1215 [2015]). Otherwise, to state a viable malpractice cause of action against Lichten and Bright, plaintiff was required to allege facts sufficient to support a conclusion that an attorney-client relationship was established (see generally Sucese v Kirsch, 199 AD2d 718, 719 [1993]). Plaintiff alleged facts directly to the contrary, stating that Lichten and Bright refused her requests for legal representation. Accordingly, plaintiff’s complaint was properly dismissed.”

As an example of suing too fast, Chapman v Faustin  2016 NY Slip Op 30321(U)  February 23, 2016  Supreme Court, New York County  Docket Number: 157736/15  Judge: Cynthia S. Kern stands out.  The basics are that Plaintiff hired defendant to be his accountant and run the shop.  Defendant allowed a 32 acre parcel of land to be taken away for the failure to pay taxes.  Instead of taking a breath and sizing up the situation, Plaintiff sued Faustin for a small portion of the damages in Small Claims Court and received $ 2500.  He turned around and sued for a lot more.  Bad choice.

“In the instant action, this court finds that the amended complaint must be dismissed on  the basis of res judicata. The doctrine of res judicala, or claim preclusion, “provides that as to the parties in a litigation and those in privity with them, a judgment on the merits by a court of competent jurisdiction is conclusive of the issues of fact and questions of law necessarily decided therein in any subsequent action.” Singleton Mgt. v. C’ompere. 243 A.D.2d 213, 215 (1st Dept 1998 ). This doctrine is applied when the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first.” Id. Further, even if certain claims were not litigated in the prior action, claims brought later will be barred by res judicata if they “could have been asserted in the first action and [plaintiff] had a full and fair opportunity to litigate those claims in that action.” Santiago v. New  York Board of Health, 81 A.D.3d 179, 181 ( 1st Dept 2004). This court finds that the amended complaint is barred by the doctrine of res julhcata on the grounds that plaintiff Chapman could have asserted the claims in this action against defendant Faustin in the small claims action but failed to do so and the claims in this action are  essentially identical to the claim put forth in the small claims action. In the small claims action, plaintiff sought damages against Faustin for failing to provide proper accounting services which allegedly resulted in plaintiffs’ loss of the subject premises. Here, plaintiff Chapman again seeks to recover against Faustin and Faustin PC for failing to provide proper accounting services which allegedly resulted in plaintiffs loss of the subject premises. Although plaintiffs’ amended complaint asserts many causes of action and purports to assert new theories of liability against defendants based on the alleged existence of a joint venture partnership and other actions taken by defendants, the crux of each of plaintiffs’ claims against defendants is that they failed to render proper accounting services to the plaintiff resulting in the loss of the subject premises. Thus, the amended complaint is barred by the doctrine of res judicata. Indeed, the doctrine of res judicata holds that “once a claim is brought to a final conclusion all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.'” O’Brien v. City of Syracuse, 54 N.Y.2d 353. 354 (1981).”[W]hen alternative theories are available to recover what is essentially the same relief for harm arising out of the same or related facts such as would constitute a single “factual grouping’, the circumstance that the theories involve materially different elements of proof will not justify presenting the claim by two different actions”, O ‘Brian, 54 N.Y.2d at 357. “

“But for” proximate cause is the black hole of legal malpractice and in a way, of all litigation.  The question of whether a mistakes really makes a difference is central to the entire legal system.  Did you look away from the road for a second?  Yes.  Did it make a difference?  Did you overstate the qualities of a product?  A little, but did it make a difference?  The same is true of legal malpractice. Did you delay and fail to file a notice of appeal on time?  Yes, but appellant could not have won anyway!

Women’s Integrated Network, Inc. v Anderson Kill P.C.  2016 NY Slip Op 01428  Decided on March 1, 2016 Appellate Division, First Department illustrates the last example.

“Plaintiff is a small provider of medical services to women seeking treatment for infertility. In 2008, an employee commenced a stock option action against plaintiff. At the time, plaintiff maintained comprehensive employment practices liability insurance with its primary carrier, U.S. Specialty Insurance Co. The insurance carrier refused to defend plaintiff in the underlying stock option action, upon which plaintiff commenced a declaratory judgment action against its carrier, seeking a declaration that its carrier had a duty to defend and indemnify plaintiff in the underlying stock option action. The carrier moved the declaratory judgment action to a federal district court. Meanwhile, in 2009, the employee and plaintiff settled the stock option action. Subsequently, the district court granted the carrier’s motion for a judgment on the pleadings in the declaratory judgment action, upon a finding that the settlement and defense costs were not insurable losses under the policy.

Rather than appealing the district court’s determination, counsel for plaintiff, defendants herein, moved for reconsideration of the dismissal motion. When the district court denied the reconsideration motion, plaintiff procured new counsel, which filed an appeal to the Second Circuit, which dismissed the appeal as untimely made. In 2013, plaintiff commenced this legal malpractice action against defendant and two of its attorneys. Supreme Court granted defendants’ pre-answer motion to dismiss the complaint. We now affirm

Defendants candidly concede that their failure to file a timely notice of appeal from the federal district court’s order granting the insurer’s motion for judgment on the pleadings in plaintiff’s declaratory judgment action against the insurer constituted a breach of their duty (see Darby & Darby v VSI Intl., 95 NY2d 308, 313 [2000]; see also Ocean Ships, Inc. v Stiles, 315 F3d 111, 117 [2d Cir 2002]). However, because plaintiff did not show that defendants’ negligence was a proximate cause of plaintiff’s losses, the motion court correctly dismissed this legal malpractice action (Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 9 [1st Dept 2008], lv denied 12 NY3d 715 [2009]). Plaintiff failed to establish that its insurance contract covered the loss for which plaintiff sought coverage in the federal court declaratory judgment action (see Roundabout Theatre Co. v Continental Cas. Co., 302 AD2d 1, 6 [1st Dept 2002]). As the district court and the motion court found, plaintiff’s settlement of its former employee’s stock option action, which gave rise to the declaratory judgment action, is not a “Loss” as defined by the policy; the policy states in plain language that “Loss” does not include “payments for stock option or stock appreciation rights.”

Completing our review of the 2015 Judiciary Law§ 487 cases, Tooker v Schwartzberg  2015 NY Slip Op 31620(U)  August 17, 2015  Supreme Court, Suffolk County  Docket Number: 9463/14
allows Judge Paul J. Baisley to set forth the basic rules of Judiciary Law §487 as well as Fraud upon the Court.

First:  the conclusion:  “ORDERED that the Court finds that the actions of plaintiff Marie Guerrera Tooker in commencing and continuing the instant action when the lack of Legal or factual basis was apparent, should. have been apparent, or was brought to the attention of plaintiff, is frivolous within the meaning of22 NYCRR §130-1.1, and the Court hereby awards the moving defendants costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney’s fees resulting from such frivolous conduct; and it is further ORDERED that a hearing will be held before the undersigned on August 27, 2015 at 11 :00 a.m. to determine the amount of costs to be imposed on plaintiff pursuant to 22 NYCRR § 130-1.1. ”

Then the rules:  “Other than her conclusory allegations, however, plaintiff has set forth no facts to establish that the movants, or any of the defendants, committed a fraud on the Court or violated Judiciary Law §487 in connection with the foreclosure action. With regard to the former, the Court of Appeals recently held that:

“in order to demonstrate fraud on the court, the non-offending party must establish by clear and convincing evidence that the offending ‘party has acted knowingly in an attempt to hinder the fact finder’s fair adjudication of the case and his adversary’s defense of the action” [citations omitted). A court must be persuaded that the fraudulent conduct, which may include proof of fabrication of evidence, perjury, and falsification of documents concerns ‘issues that are central to the truth-finding process’ [citation omitted]. Essentially, fraud upon the court requires a showing ‘that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party’s claim or defense'” [citations omitted] (CDR Creances S.A.S v Cohen, 23 NY3d 307 [2014]).

As to the latter, Judiciary Law §487 provides that “An attorney or counselor who: 1. Is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party … [i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action.” The plaintiff has the burden of pleading and proving that the attorney, whether in a physical appearance or by any oral or written statement communicated to the Court or any party, intended to deceive the Court or that party (Dupree v Voorhees, I 02 AD3d 912 [2d Dept 2013]; Amalfitano v Rosenberg, 533 F3d 117 [2d Cir 2008]). “

To be truthful, its son v. mom in one part of the case and son v. mom’s attorneys in the Judiciary Law 487 case.  It’s sort of a tragedy.  Mom had a medical malpractice case for bad breast reduction, and the case was started.  While the case was going Dad died in a small plane-instruction negligence case.  It appears he was flying with an instructor and crashed.  In the med mal case there was a loss of consortium claim which devolved to the estate and son had a part.  The wrongful death claim also had a recovery for son.  He obtained his funds but was unhappy about the annuity and payout.  Does he have a claim against the attorneys?  No.  In Sutch v Sutch-Lenz  2015 NY Slip Op 04692 [129 AD3d 1137]  June 4, 2015 Appellate Division, Third Department  the court writes

“We affirm. There is no question that a legal malpractice claim requires—in the first instance—”the existence of an attorney-client relationship” (Arnold v Devane, 123 AD3d 1202, 1203 [2014]). Plaintiff does not contend, and the record does not otherwise reflect, that he had a contractual relationship with defendants. Rather, plaintiff argues that because defendants represented Sutch-Lenz in her capacity as the administrator of decedent’s estate in both the medical malpractice and wrongful death actions and plaintiff, in turn, is a beneficiary of decedent’s estate, it necessarily follows that defendants were duty bound to represent plaintiff’s best interests in the context of those two actions. The flaw in plaintiff’s argument on this point is that “[i]n New York, a third party, without privity, cannot maintain a claim against an attorney in professional negligence, absent fraud, collusion, malicious acts or other special circumstances” (Estate of Schneider v Finmann, 15 NY3d 306, 308-309 [2010] [internal quotation marks and citation omitted]; accord Zinnanti v 513 Woodward Ave. Realty, LLC, 105 AD3d 736, 737 [2013]; cf. Leff v Fulbright & Jaworski, L.L.P., 78 AD3d 531, 532 [2010], lv denied 17 NY3d 705 [2011]). Although a limited exception has been carved out with respect to an action brought by the personal representative of an estate, “strict privity remains a bar against beneficiaries’ and other third-party individuals’ estate planning malpractice claims absent fraud or other circumstances” (Estate of Schneider v Finmann, 15 NY3d at 310; see Leff v Fulbright & Jaworski, L.L.P., 78 AD3d at 532).

[*3] Here, even affording plaintiff’s complaint a liberal construction, accepting the allegations contained therein as true and granting plaintiff the benefit of every favorable inference (see Snyder v Brown Chiari, LLP, 116 AD3d 1116, 1117 [2014]), the pleading is devoid of the requisite allegations of fraud, collusion, malicious acts or other special circumstances necessary to maintain plaintiff’s legal malpractice claim against defendants. At best, plaintiff has alleged a generalized dissatisfaction with the terms of the structured settlement that he received in the context of the wrongful death action—the terms of which were subject to Snyder’s review in his capacity as plaintiff’s guardian ad litem and the payout provisions of which, according to Supreme Court, plaintiff subsequently and successfully renegotiated. Plaintiff further alleges that he did not receive his share of the award made with respect to decedent’s derivative claim in the medical malpractice action. Such allegations are insufficient to establish that plaintiff had an attorney-client relationship with defendants or to otherwise place him “within the ambit of the exception to the privity requirement” (Fredriksen v Fredriksen, 30 AD3d 370, 372 [2006]; see Estate of Schneider v Finmann, 15 NY3d at 309-310; Conti v Polizzotto, 243 AD2d 672, 672-673 [1997]). Absent an attorney-client relationship, plaintiff’s legal malpractice claim was properly dismissed.

Moreover, even assuming that such a relationship existed, those same allegations fall short of demonstrating, among other things, that defendants failed to exercise the ordinary reasonable skill and knowledge commonly possessed by members of the legal community (see Hinsdale v Weiermiller, 126 AD3d 1103, 1104 [2015]). Simply put, even assuming that defendants indeed played a role in the selection and purchase of the subject annuities, the mere fact that plaintiff did not get more of his money “up front” does not constitute legal malpractice. To the extent that plaintiff contends that he did not receive his share of the proceeds from the medical malpractice action, we need note only that it was the responsibility of Sutch-Lenz, in her capacity as decedent’s administrator, to collect estate assets and distribute them accordingly (see generally Matter of Manning, 244 App Div 9, 12-13 [1935], affd sub nom. Matter of Dunbar & Sullivan Dredging Co. v Fidelity & Deposit Co., 268 NY 690 [1935]; Matter of Scheuer, 94 Misc 2d 538, 543 [Sur Ct, NY County 1978]; Matter of Blaszkiewicz, 33 Misc 2d 884, 885 [Sur Ct, Richmond County 1962]). Therefore, plaintiff’s quarrel on this point lies with Sutch-Lenz, not defendants. We reach a similar conclusion with respect to plaintiff’s demand for an accounting (see SCPA 2205).”

 

Accounting malpractice, a sister to attorney malpractice has many of the same principles and doctrines as does legal malpractice.  Interestingly, accounting malpractice has more of an episodic rhythm of yearly tax filings.  A specialized set of statute of limitations rules applies to the tax year filings. Here, however, the accounting firm was sued for its failure to supervise, detect and indeed actually do the accounting work on the regular books of a chemical company.

Lobel Chem. Corp. v Petitto  2016 NY Slip Op 30273(U)  February 16, 2016  Supreme Court, New York County  Docket Number: 653226/14  Judge: Kelly A. O’Neill Levy tells us that continuing representation is applicable in accounting malpractice.

“The first amended complaint (complaint) alleges that, in 1991, pursuant to an oral agreement, plaintiff, Lobel Chemical Corporation (Lobel or the Company) retained RSSMC to: 1) supervise Lobel’ s bookkeeper; 2) oversee the bookkeeping and accounting issues concerning its business and finances; and 3) prepare Lobel’s tax returns and represent the Company at tax audits. Petitto, a certified public accountant employed by RSSMC, provided accounting services for Lobel from the inception of the parties’ relationship (Anesh aff, exhibit A,~ 7).
In 2004, Lobel’s longtime bookkeeper retired and Petitto recommended that the Company
hire nonparty Meredith Conyers (Conyers), Lobel’s assistant bookkeeper, to fill the vacant
position. Petitto also recommended that the Company install specialized accounting software
(Peachtree) to assist Conyers in the preparation of reports for general accounting and tax
preparation purposes (id., ~~ 13-15).
According to plaintiff, it was Petitto’s responsibility to train Conyers in the use of
Peachtree and to review the income and expense statements, bank statements, and bank
reconciliations that Conyers provided (id.,~ 16). However, the complaint alleges that Petitto
allowed Conyers to create a non-Peachtree methodology for listing uncleared checks and
performing cash reconciliations, despite the fact that Peachtree had a built-in cash reconciliation
report (id., ~ 17).
Lobel contends that Petitto failed to address obvious discrepancies between Conyers’s
monthly reconciliations and monthly bank statements and he failed to detect that Conyers’s
monthly bank reconciliations did not balance (id., ~~ 18, 19). Because Conyers realized that
Petitto was not reviewing her monthly reports, in November and December 2005, she forged the
Company’s signature on three checks made payable to herself. After the checks cleared, they
were either omitted or deleted from Peachtree (id.,~ 21 ). These omissions were not detected
and, thereafter, between 2006 and 2013 Conyers forged checks, payable to herself, for more than
$500,000. ”

“The complaint alleges that, even though Petitto visited the Company’s offices on a monthly basis, he failed to question: 1) checks that were missing from the statements; 2) carry forward balances that did not match the ending balance from the prior month; 3) checks listed on the bank statement that did not appear in the Peachtree check register; and 4) he failed to reconcile the Peachtree balance with the bank balance (id., ,-i,-i 24, 26). In 2011, Steven Lobel, the Company president, began questioning discrepancies between his own estimates of the Company’s gross profits and documents that Petitto was reviewing to determine operating expenses. Petitto explained that the discrepancies could be easily explained by simple adjustments between payables and receivables for a few items (Steven Lobel aff, ,-i 14). However, in 2012, when the Company reported a large, unexpected loss, Steven Lobel asked his sister, Rhona Lobel, the Company’s vice president, to look into the finances. Rhona Lobel began to monitor the Company’s cash flow more closely and in January 2014, she discovered Conyers’s embezzlement (id., ,-i 16, 17). In May 2014, Conyers was indicted on two counts of grand larceny and 43 counts of forgery. She pied guilty in April 2015. ”

“The relevant statute of limitations is CPLR 214 (6), which provides that an action for non-medical professional malpractice must be commenced within three years of the date of accrual. “A claim accrues when the malpractice is committed, not when the client discovers it” (Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1, 7-8 [2007]). However, the continuous representation doctrine tolls the statute of limitations in circumstances where the continuous representation is “in connection with the specific matter directly in dispute, and not merely the continuation of a general professional relationship” (Ackerman v Price Waterhouse, 252 AD2d 179, 205 [1st Dept 1998]). “The continuous representation … doctrine[] recognize[s] that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered” (Williamson, 9 NY3d at 9 [internal citation and quotation marks omitted]). “[P]laintiffs [have] the burden of demonstrating that the continuous representation doctrine applie[ s ], or at least there [is] an issue of fact with respect thereto” (CLP Leasing Co., LP v Nessen, 12 AD3d 226, 227 [I5t Dept 2004]). Here, defendants contend that plaintiff used RSSMC’s services for annual tax preparation and auditing services, which constitute separate and discrete services for each year, and thus the application of the continuous representation doctrine is precluded (see Booth v Kriegel, 36 AD3d 312, 315 [1st Dept 2006] [where a professional advises a client in a series of discrete and severable transactions, the performance of services in each successive transaction does not toll the running of the statute of limitations]). According to defendants, all of Lobel’s claims that accrued prior to October 2011 are time-barred . However, in this case, Lobel has alleged evidentiary facts sufficient to establish that the accounting malpractice cause of action falls within the continuous representation exception to the statute of limitations. “

When a retail establishement (say, a restaurant) is sold, there is a well-known problem of sales tax.  Some will definitely be owed to the government, at least that amount since the last quarterly payment.  There may also be unpaid sales tax liability.  A well-settled procedure is set down in statute, and if followed allows the purchaser to take the restaurant without any potential sales tax liability.  If it is not followed, the purchaser will become liable for all of the unpaid sales tax.  East to follow, no?  Well, this issue comes up time and time again.  Here is an example found in Nilazra, Inc. v Karakus, Inc.  2016 NY Slip Op 01302  Decided on February 24, 2016  Appellate Division, Second Department.

“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; Yiouti Rest. v Sotiriou, 151 AD2d 744, 745).

Levitis alleges that Ikhilov had a pre-existing 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 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; see also Schwartz v Greenfield, Stein & Weisinger, 90 Misc 2d 882 [Sup Ct, Queens County]; cf. Council Commere Corp. v. Schwartz, Sachs & Kami, 144 AD2d 422, 424).

Contrary to Ikhilov’s contentions, Levitis sufficiently pleaded causes of action seeking both contribution and indemnification (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d at 595; McDermott v City of New York, 50 NY2d 211, 217; see also Mitchell v New York Hosp., 61 NY2d 208, 218; Cohn v Lionel Corp., 21 NY2d 559, 563).

Ikhilov’s evidentiary submissions did not show that the material facts claimed by Levitis to be facts were not facts at all and that no significant dispute exists regarding them (see Rabos v R & R Bagels & Bakery, Inc., 100 AD3d at 851-852; see also Guggenheimer v Ginzburg, 43 NY2d at 274-275).”

Was it Mark Twain who said that if you represent yourself, you have a fool for a client?  Perhaps Abraham Lincoln?  No matter…The Appellate Division implicitly said so today, and dismissed a legal malpractice and Judiciary Law § 487 claim made by a lawyer who, they implied, ought to have known better than to say he was satisfied with his attorney’s work.

Katz v Essner  2016 NY Slip Op 01268  Decided on February 23, 2016  Appellate Division, First Department  held “Even if defendants’ alleged acts or omissions rose to the level of negligence, plaintiff’s allegations in support of his legal malpractice claim and Judiciary Law claims remain conclusory, speculative and contradicted by the documentary evidence submitted on the motion to dismiss (see Schloss v Steinberg, 100 AD3d 476 [1st Dept 2012]). Plaintiff failed to show that he was actually injured by defendants’ alleged neglect, or meet the “case within a case” requirement, demonstrating that “but for” defendants’ conduct he would have obtained a better settlement (see Warshaw Burstein Cohen Schlesinger & Kuh, LLP v Longmire, 106 AD3d 536 [1st Dept 2013], lv dismissed 21 NY3d 1059 [2013] [internal quotation marks omitted]).

Furthermore, in response to questions from defendant Essner, plaintiff stated on the record of the stipulation of settlement that he was satisfied with the services that defendants provided. Under the circumstances presented, including that plaintiff is an attorney, the motion court properly dismissed the complaint (see Harvey v Greenberg, 82 AD3d 683 [1st Dept 2011]).”