Professional is hired to examine accounts.  In this case it was a CPA who was hired to look into a situation in which there was unexpected cash flow for a Municipality.  The CPA reviewed some documents and said he could find nothing.  Is that the end of the story?  What happens when it’s discovered that $400,000 is missing, and the bookkeeper is the main suspect?

Town of Kinderhook v Vona  2016 NY Slip Op 01232  Decided on February 18, 2016  Appellate Division, Third Department tells us that “limited retainers” may not be as limited as defendant expects.

“Pegeen Mulligan-Moore served as plaintiff’s bookkeeper from 2002 until 2010. Douglas McGivney was plaintiff’s Supervisor during that period and, in 2008, learned that plaintiff was experiencing cash flow problems and that Mulligan-Moore had deposited a large personal check into plaintiff’s bank account. He accordingly contacted defendant Leonard W. Vona, a certified public accountant and certified fraud examiner, and asked Vona to look into the situation. No written agreement was reached as to the nature and extent of Vona’s services, but an accountant in his employ reviewed documents provided by plaintiff, and a December 2008 report found no cause for suspicion with regard to the check or any other payments made on plaintiff’s behalf by Mulligan-Moore from January 2007 to August 2008. Vona was compensated for having produced the report and subsequently did consulting work for plaintiff.

Mulligan-Moore was replaced after McGivney left office, after which it became clear that she had falsified the records provided to Vona and had embezzled over $400,000 from[*2]plaintiff from 2007 onward ^[FN1]. Plaintiff commenced this action in 2011, asserting that Vona and related entities breached the terms of their contract with plaintiff and were professionally negligent in failing to uncover the malfeasance of Mulligan-Moore. Vona and defendant Fraud Auditing, Inc. (hereinafter collectively referred to as defendants) served an answer and, following discovery, moved for summary judgment dismissing the complaint against them. Supreme Court denied the motion, and this appeal ensued.”

“Defendants argue that plaintiff did not retain them to perform an audit and that, as a result, they cannot be held liable for failing to properly perform one. They further argue that, even if they were engaged by plaintiff, their failures were not the proximate cause of its damages.

Vona specifically testified that he was not engaged to perform an audit, as an audit of town finances was not within his practice area and plaintiff did not wish to expend the sums necessary for a thorough investigation. Vona was plainly engaged to do something, however, as he tasked a subordinate with examining records provided by plaintiff to determine if there were overt problems and he billed plaintiff for a “review of [plaintiff’s] checking account.” He ultimately issued a written report reflecting that he had been hired “to examine documents and records of [plaintiff] for the direct purpose of offering opinions regarding those documents,” finding that there was nothing suspicious in those documents, and making various recommendations as to improved procedures. Defendants submitted the affidavit of a certified public accountant who categorized this work as a limited assignment to make findings based on documents provided by plaintiff, and opined that defendants had no duty to obtain the original banking documents in this non-audit because they had no authority to do so. He further opined that the losses incurred by plaintiff stemmed from the absence of internal controls over finances rather than any failings on the part of defendants, although he notably failed to explain how defendants’ “alleged failure to detect and report the [fraud] was not a proximate cause of the damages allegedly sustained by plaintiff[]” (C.P. Ward, Inc. v Deloitte & Touche LLP, 74 AD3d 1828, 1830 [2010]; see Collins v Esserman & Pelter, 256 AD2d 754, 757 [1998]).

Even accepting that the foregoing made out a prima facie case for summary judgment, material questions of fact were raised by plaintiff with the affidavit of accounting professor Eric [*3]Lewis ^[FN2]. Lewis made the obvious point that it was impossible for an accountant to perform work for a client without being engaged in some manner, and stated that examining financial records to determine whether funds were being handled improperly was an “audit-level service.” He further opined that, regardless of whether defendants were hired to conduct an audit or a less intensive service, they deviated from professional standards by failing to conduct a thorough investigation or otherwise explaining to plaintiff that the original banking records were essential to performing one. The deceptions of Mulligan-Moore would have been discovered had defendants acted according to professional accounting standards and obtained the original, unaltered banking records, and Lewis opined that defendants’ departure from those standards allowed the embezzlement to continue. Accordingly, Supreme Court properly denied that part of the motion seeking summary judgment on the accounting malpractice claim (seeC.P. Ward, Inc. v Deloitte & Touche LLP, 74 AD3d at 1830-1831; Cumis Ins. Socy. v Tooke, 293 AD2d at 798-799).”

Shaffer v Gilberg   2015 NY Slip Op 00865 [125 AD3d 632]  February 4, 2015  Appellate Division, Second Department shows you how deadly matrimonial litigation can get.  Wife suddenly produces notes for all the money that her parents gave to the couple, and claims that she owes the parents $ 629,000 or so, and that husband has to pay back half.  Husband is understandably shocked.  Did the lawyers commit a violation of JL § 487?

“The plaintiff, who was a party to a highly contentious matrimonial action, contested the authenticity of 30 separate promissory notes and loans submitted by the wife in that action and reflected as liabilities in her net worth statement. The notes indicated that the wife owed her father, Gerald N. Gilberg, her mother, Frances Gilberg, and her mother and father’s corporations, The Gilberg Organization, Inc., and TGA of Palm Beach, Inc. (hereinafter collectively the Gilberg defendants), in excess of $446,000 which, with added interest, amounted to more than $669,000. The plaintiff maintained that each of the 30 loans had actually been a gift from his in-laws to him and his wife and their family during the course of a 12-year period. The plaintiff theorized that the wife and her parents were improperly attempting to reduce the marital estate in order to also reduce the plaintiff’s share of the marital estate.

[*2] In the matrimonial action, the plaintiff submitted documents which cast into doubt the authenticity of the notes. Shortly after the plaintiff submitted these documents, the wife’s attorney, James J. Nolletti, a partner with Collier, Halpern, Newberg, Nolletti & Bock, LLP (hereinafter together the Collier defendants), withdrew the attorney certification to the wife’s net worth statement.

Eventually, the plaintiff and his wife were able to reach a settlement agreement. As part of the agreement, the wife took responsibility for any debts in her name or guaranteed by her and the plaintiff was awarded a distributive award from the marital estate.”

“The Supreme Court properly directed the dismissal of the sixth cause of action, asserted against the Collier defendants, which alleged a violation of Judiciary Law § 487, which “requires, among other things, an act of deceit by an attorney, with intent to deceive the court or any party” (Curry v Dollard, 52 AD3d 642, 644 [2008]). The plaintiff’s allegations regarding an act of deceit or intent to deceive are conclusory and factually insufficient. In any event, the evidentiary material the Collier defendants submitted in support of their motion disproved the plaintiff’s allegations (see Siskin v Cassar, 122 AD3d at 717; Maksimiak v Schwartzapfel Novick Truhowsky Marcus, P.C., 82 AD3d 652, 652 [2011]; Curry v Dollard, 52 AD3d at 644; Lazich v Vittoria & Parker, 189 AD2d 753, 754 [1993]).”

Judiciary Law § 487 is the attorney deceit statute, of ancient origin.  It permits treble damages arising from attorney deceit, yet is rarely granted.  Savitt v Greenberg Traurig, LLP  2015 NY Slip Op 02003 [126 AD3d 506]  March 12, 2015 Appellate Division, First Department is one example.  The Court recognizes that something went on, but determines that whatever it was, it was not serious enough to consider.

“The motion court properly dismissed the Judiciary Law § 487 claims since the complaint “fails to show either a deceit that reaches the level of egregious conduct or a chronic and extreme pattern of behavior on the part of” the defendant attorneys (see Wailes v Tel Networks USA, LLC, 116 AD3d 625, 625-626 [1st Dept 2014]; Herschman v Kern, Augustine, Conroy & Schoppman, 113 AD3d 520 [1st Dept 2014]). The complaint alleges only bare legal conclusions that the defendant attorneys, who jointly represented plaintiffs and defendants Janis and Designs in a prior lawsuit, acted with the requisite intent to deceive. Specifically, there are no factual allegations from which to infer that the attorneys knew that their advice to plaintiffs that there were no meritorious claims they could have asserted against Janis and Designs in the prior lawsuit, was false, and thus, that they knowingly and intentionally misled plaintiffs into releasing Janis and Designs from all claims in the course of settling that lawsuit (Callaghan v Goldsweig, 7 AD3d 361, 362 [1st Dept 2004]).”

Savitt v Greenberg Traurig, LLP    2015 NY Slip Op 02003 [126 AD3d 506]  March 12, 2015
Appellate Division, First Department is an example of the general way in which the Appellate Division and the various Supreme Courts treat Judiciary Law §487 claims,  which are not “lightly given.”  A brisk dismissal with the reason that the deceit described is not strong enough.

“The motion court properly dismissed the Judiciary Law § 487 claims since the complaint “fails to show either a deceit that reaches the level of egregious conduct or a chronic and extreme pattern of behavior on the part of” the defendant attorneys (see Wailes v Tel Networks USA, LLC, 116 AD3d 625, 625-626 [1st Dept 2014]; Herschman v Kern, Augustine, Conroy & Schoppman, 113 AD3d 520 [1st Dept 2014]). The complaint alleges only bare legal conclusions that the defendant attorneys, who jointly represented plaintiffs and defendants Janis and Designs in a prior lawsuit, acted with the requisite intent to deceive. Specifically, there are no factual allegations from which to infer that the attorneys knew that their advice to plaintiffs that there were no meritorious claims they could have asserted against Janis and Designs in the prior lawsuit, was false, and thus, that they knowingly and intentionally misled plaintiffs into releasing Janis and Designs from all claims in the course of settling that lawsuit (Callaghan v Goldsweig, 7 AD3d 361, 362 [1st Dept 2004]).”

One of the four elements in legal malpractice is “ascertainable damages.”  They are more easily provable in some settings than in others.  Custody and matrimonial economic damages are very hard to demonstrate, as Miazga v Assaf  2016 NY Slip Op 01025  Decided on February 11, 2016
Appellate Division, Third Department shows us.

“Plaintiff retained defendants in January 2011 to represent him in a custody proceeding and, thereafter, in a divorce action. In April 2012, after a breakdown in the parties’ relationship, defendant Michael D. Assaf requested that defendants be relieved as plaintiff’s counsel and, after a hearing, the application to withdraw was granted. Plaintiff proceeded pro se in his divorce action and custody proceeding and, thereafter, commenced this action against defendants. In his complaint, plaintiff alleges, among other things, nine causes of action with respect to defendants’ representation, including, among other things, breach of a fiduciary duty, legal malpractice, defamation and breach of contract. Defendants asserted a counterclaim for, among other things, unpaid legal fees. Defendants moved for summary judgment dismissing the complaint, which plaintiff opposed. Plaintiff also cross-moved seeking partial judgment on the issue of liability for the disclosure of an allegedly privileged confidential email, among other things. Supreme Court granted defendants’ motion for summary judgment with respect to plaintiff’s claims of legal malpractice and breach of a fiduciary duty, [*2]fraud, defamation and failure to communicate, but denied the motion regarding plaintiff’s breach of contract claim with respect to defendants’ billing rates. Supreme Court also denied plaintiff’s cross motion. Plaintiff then moved to reargue and/or renew, in addition to moving for Supreme Court’s recusal. Supreme Court denied plaintiff’s motion, adhering to its original order. Plaintiff now appeals from both orders,^[FN1] and defendants cross-appeal from that part of Supreme Court’s order as denied their motion for summary judgment dismissing the complaint ^[FN2]. We affirm both orders.”

“Here, defendants have sufficiently demonstrated that plaintiff was unable to prove actual and ascertainable damages relating to Assaf’s representation. Specifically, in the affirmation in support of the motion for summary judgment, defense counsel points out that, despite repeated requests, plaintiff never produced evidence supporting the damages that he specified in his bill of particulars and, therefore, failed to show that any such losses occurred. As such, we agree that defendants carried their burden of producing competent evidence sufficient to shift the burden to plaintiff to raise a triable issue of fact. For his part, plaintiff claims that he incurred damages including, but not limited to, $55,000 in fees to defendants, payment of experts, $20,000 in expenses, an unspecified amount of lost income and the amount of money “expended to overcome [defendants’] actions.” However, absent any proof of same in the record, these statements remain speculative assertions, which are insufficient to defeat a motion for summary judgment (see Place v Grand Union Co., 184 AD2d 817, 817 [1992])^[FN5]. Thus, plaintiff failed to meet his shifted burden.

Further, setting aside plaintiff’s inability to raise an issue of fact with respect to the element of damages, summary judgment remains an appropriate remedy here inasmuch as plaintiff is also unable to sufficiently demonstrate that he would have been successful on the merits of his underlying action. In support of his opposition, plaintiff provided an affirmation by an expert, who stated that it is “arguable” that the custody matter would have been resolved more quickly had depositions occurred earlier. However, the expert could not state that plaintiff would have been ultimately successful. Thus, because plaintiff failed to produce evidence suggesting that, but for Assaf’s actions or inaction, the underlying matrimonial litigation would have resulted in a more favorable outcome (see Marchell v Littman, 107 AD3d 1082, 1084 [2013], lv denied 22 NY3d 856 [2013]; Sevey v Friedlander, 83 AD3d at 1227), Supreme Court properly granted defendants’ motion for summary judgment with respect to plaintiff’s legal malpractice claim.

The statute of limitations for legal malpractice is three years under CPLR 214(6).  That statute may be tolled during the period of continuous representation.  Continuous representation, for social policy reasons, tolls the running of the statute so that a client is not required to sue the attorney while the representation continues on, allowing for the attorney to perhaps fix the mistake.  There must be a continuing relationship of trust and confidence between the client and the attorney with a common understanding that more work is expected in the case.

So, when does the continuing representation end?  Often, on the day that  a substitution and change of counsel is filed.  Sometimes the date of the end of the relationship is not so clear. O.K. Petroleum Intl., Ltd. v Palmieri & Castiglione, LLP  2016 NY Slip Op 00945  Decided on February 10, 2016  Appellate Division, Second Department is a case where plaintiff missed the mark by three days.  Just as in Aaron v. Roemer, filing of the consent to change attorney (in Aaron issuing of the order granting withdrawal) was not the operative date.  That date was 9 days earlier.

“Contrary to the plaintiffs’ contentions, the Supreme Court properly granted that branch of the defendant’s motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice as untimely (see Farage v Ehrenberg, 124 AD3d 159, 164; Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d 1037, 1038; Rupolo v Fish, 87 AD3d 684, 685; Piliero v Adler & Stavros, 282 AD2d 511, 512). The defendant demonstrated that the alleged legal malpractice occurred more than three years before this action was commenced on June 11, 2012, through evidence showing that the plaintiffs had substituted counsel by June 3, 2009 (see CPLR 214[6]; Rupolo v Fish, 87 AD3d at 685). In opposition, the plaintiffs failed to raise a triable issue of fact as to whether the statute of limitations was tolled by the continuous representation doctrine until the formal notice of substitution was executed on June 12, 2009 (see Farage v Ehrenberg, 124 AD3d at 166; Rupolo v Fish,87 AD3d at 685).

Hudson v Hahn Kook Ctr. (USA), Inc.  2016 NY Slip Op 00882  Decided on February 9, 2016
Appellate Division, First Department presents us with an unusual setting for a Judiciary Law 487 claim.  This claim came up within the underlying case, and took place during the withdrawal of the attorney and his claim under Judiciary Law 475 for a charging lien.  Plaintiff countered that the attorney had “abandoned” it, and left it facing motions to dismiss for failures in discovery.  Was the law firm or the client responsible?  We don’t know, but the AD set up a hearing in Supreme Court.  However, it also set up a hearing on whether the law firm was deceitful in withdrawing.

“Order, Supreme Court, New York County (Debra A. James, J.), entered June 4, 2014, which denied nonparty appellant’s (Bernstone) motion to restore the action for the purpose of a hearing, pursuant to Judiciary Law § 475, to determine and fix the amount of its charging lien and, pursuant to Judiciary Law § 487, for treble damages from nonparty respondent (Ressler), unanimously reversed, on the law, without costs, and the motion granted to the extent of remanding the matter for a hearing to determine whether Bernstone is entitled to enforce its charging lien, and, if so, the amount of the lien, and to determine whether Bernstone is entitled to treble damages.

The court erred in summarily denying Bernstone’s motion to determine and fix its charging lien on the ground that Bernstone had abandoned plaintiffs by seeking to withdraw as counsel at a time when there were pending motions to dismiss the complaint for failure to comply with discovery orders (see Klein v Eubank, 87 NY2d 459 [1996]; Uni-Rty Corp. v New York Guangdong Fin., Inc., 126 AD3d 429 [1st Dept 2015]). The record presents issues of fact as to whether Bernstone abandoned plaintiffs or plaintiffs’ own dilatory conduct in seeking new counsel was the sole cause of the dismissal. Plaintiffs signed consents to Bernstone’s withdrawal as counsel, and did not dispute Bernstone’s assertion that the withdrawal was necessitated by disagreements between them and counsel. At the time it sought to withdraw, Bernstone informed the court that there were motions pending, and, according to one of its attorneys at oral argument on February 26, 2013, also informed the court at that time, in an off-the-record exchange, that [*2]these motions were unopposed. Moreover, at the time it withdrew, Bernstone sought and received a stay on plaintiffs’ behalf to give them time to retain new counsel. However, approximately 3½ months after Bernstone was relieved, despite having received three adjournments of the motions, plaintiffs appeared in court without counsel, and the court granted the still unopposed motions.”