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). “

Is Judiciary Law § 487 a favorite flavor in litigation right now?  It sometimes seems that with its general acceptance under Amalfitano  some people throw it in to an otherwise unremarkable case, somewhat willy-nilly.  Shi v Alexandratos is an example. 2016 NY Slip Op 01560 Decided on March 3, 2016 Appellate Division, First Department.  Here, buyer in a real estate transaction loses the down-payment, and tries to recoup from the attorney escrow agent.

“The residential contract of sale entered into between plaintiff and defendants Panagis Alexandratos and Carol Alexandratos provided that, if plaintiff did not receive a commitment for a first mortgage loan from an institutional lender on or before the “Commitment Date,” he “may cancel this contract by giving Notice to Seller within 5 business days after the Commitment Date.” It is undisputed that plaintiff failed to give the Alexandratoses notice of cancellation within five business days after the date on which the extension period he had requested and been granted expired. Plaintiff’s argument that the mortgage contingency clauses of the contract constituted a condition precedent to his purchase of the Alexandratoses’ house is belied by the contract language and by plaintiff’s own conduct in requesting an extension of the mortgage contingency date before the initial 60-day “Commitment Date” term expired (see Regal Realty Servs., LLC v 2590 Frisby, LLC, 62 AD3d 498 [1st Dept 2009]).

Plaintiff’s equitable restitution cause of action is barred by the existence of the contract of sale (see IIG Capital LLC v Archipelago, L.L.C., 36 AD3d 401, 404-405 [1st Dept 2007]).

Plaintiff’s causes of action against defendant Triades for breach of fiduciary duty and violation of Judiciary Law § 487 were correctly dismissed since documentary evidence established that Triades, as escrow agent, handled the down payment in accordance with the contract’s escrow terms (see Carter Fin. Corp. v Atlantic Med. Mgt., 268 AD2d 233 [1st Dept 2000], lv denied 94 NY2d 764 [2000]). We have considered plaintiff’s remaining arguments and find them unavailing.”

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]).

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.”