“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]).”

O’Neil’s, a defunct restaurant, wanted to move on after the founder’s death.  They hired a law firm which had clients that wanted to take over the space.  The law firm represented both sides, and as one might expect, one side was unhappy with the outcome.  The long-running successful restaurant still owed $ 1.5 million in construction loans and rent.  The deal went sour, and the attorneys were sued, mostly unsuccessfully.

O’Neal v Muchnick Golieb & Golieb, P.C.   2016 NY Slip Op 30268(U)   February 11, 2016   Supreme Court,   New York County Docket Number: 154898/2013 Judge: Shlomo S. Hagler  “Plaintiff Cynthia O’Neal (“plaintiff’ or “O’Neal”), is the widow of Patrick O’Neal, who cofounded the O’Neals’ frn:nily of restaurants in 1964. They first operated The Ginger Man Restaurant at 51 West 64th Street, New York, New York, and afterwards, O’Neals (the “Restaurant”) at49 West 64th Street, New York, New York (the “Premises”), until it’s closing on June 28, 2010. Plaintiff James Enzel (“Enzel”) and Christine O’Neal (“Christine”) were the sole shareholders of The Good Service Company, Inc. (“Good Service” or the “Corporation”), which owned the Restaurant. Plaintiff was at all times a passive shareholder and took no active managerial role in either the Restaurant or the Corporation. Beginning at or about’ February 2008, Enzel, as president of Good Service, retained the Muchnick Firm to provide legal representation to the Corporation in various matters. Defendants represented Good Service in connection with trademark licensor, modifications to financing instruments, in negotiations with New York City for operation of an ~utdoor cafes, and in defending the Corporation in litigation in Supreme Court, New York County. Defendants were also retained to represent Good Service and its shareholders in connection with the closing of the Restaurant and the workoutofthe related debts, which consisted mainly of the outstanding lease payments and a restaurant construction loan. BR Guest Services (“BR”), whose principal Stephen P. Hanson (“Hanson”) was also a client of the Muchnick Firm, agreed to take over the lease of the Premises. Defendants drafted a number of documents in connection with the transfer of the lease from the Good Service to BR. First, they drafted an “Agreement to Release Collateral” which was executed on May 7, 2010, by TD Bank and allowed BR to obtain the space, fixtures and equipment at the Restaurant for a payment of $200,000.00, which reduced Good Service’s outstanding de.bt to TD Bank to $899,697.82. The debt emanated from a 2006 construction and operating loan from Commerce Bank, and Plaintiff was a guarantor of the loan. ”

“On July 30, 2010, BT64th Street, LLC (“BT 64”), the owner of the Premises, commenced an action against plaintiffs and Enzel to collect $878,149.42 in unpaid rent. O’Neal and Enzel retained the Muchnick Firm to defend them in the action, who in turn, arranged for the law firm of Borah, Goldstein, Altschuler, Nahins, Goidel, P.C. (“Borah Goldstein”) to represent them in this matter. Borah Goldstein filed a Notice of Appearance but did not iterpose an answer. On January 19, 2011, BT 64 filed a motion for summary judgment, which was not opposed. O’Neal claims that she was never served with the complaint, and therefore had a “good and meritorious defense” to the action, which was not allegedly raised by defendants. Instead, BT64 obtained a $995,066.03 judgment against plaintiffs. At a post judgment hearing on April 27,2011, the Muchnick Firm once again appeared on behalf of plaintiffs and entered into a so-ordered stipulation that day (“Stipulation”), which stated in part that “[ d]fendants shall not … sell, transfer or otherwise dispose of any of their assets until the judgment in this action is satisfied.” Amended Complaint iii! 67-68, attached as Exhibit “A” to the Motion. ”

“Plaintiff alleges that defendants committed malpractice by: (I) representing both sides during th~ assumption of lease; (2) by not opposing collection actions brought by Landlord BT64th Street and (3) Lender TD Bank; and (4) by advising her to transfer her assets out of her possession to avoid the enforcement of a judgment. Plaintiff alleges that defendants represented both sides of the assumption oflease and favored the other side and did not obtain the best possible price for the assumption oflease. She claims that the fair price for the assumption of lease should have included a discharge of the Restaurant’s outstanding rent and construction loan. She then suffered damages because she was a personal guarantor of the lease and the loan. Plaintiffs valuation of the lease is based on pure speculation and not supported by any facts. Furthermore, there is nothing in the record that shows any negligence by defendants during the assumption of lease process. Even if a conflict of interest existed, “[a] conflict of interest, even [in] violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action.” Schafrann v NV. Famka, Inc., 14 AD3d 363, 364 (!st Dept 2005). Even assuming arguendo that there was a deviation from the accepted standards, plaintiff must establish that the malpractice was the proximate cause of her damages. Her claim that a defunct restaurant, with assets consisting of its fixtures and lease, was worth enough to discharge debts amounting to approximately $1.8 million dollars is incredible and based upon mere speculation and unsupported by an appraisal or any other facts alleged in the four comers of the complaint. Even accepting everything in the complaint and opposition to the motion as true as required in a motion pursuant to CPLR § 3211, the complaint does not state a cause of action of legal malpractice in conjunction with defendants’ actions during the assumption oflease representation. Plaintiff further alleges that defendants committed malpractice in the collection action brought by the landlord to collect unpaid rent of the Corporation under the lease which she personally guaranteed. The landlord was granted summary judgment without any opposition. In addition, plaintiff claims that after the judgment, defendant advised her to transfer her assets out of her possession to avoid collection. Defendants argue that they neither represented plaintiff nor Good Service in the landlord action until after the judgment was entered. Defendants also deny ever having advised plaintiff to avoid the judgment by transferring her assets. At this juncture, the record is incomplete and further discovery. is needed to determine who represented plaintiff and Good Service during this proceeding. Plaintiff also claims that she was damaged as a result of defendants failure to oppose the summary judgment motion in the collection action brought by TD Bank to collect on a loan to Good Service which was guaranteed by plaintiff. However, plaintiff substituted her own attorney in place of defendants. Her new attorney was provided an opportunity to oppose the motion. Despite opposition from.plaintiff’s counsel, the motion was nevertheless granted after considering the merit of plaintiff’s position. Inasmuch as the motion was granted after plaintiff substituted defendants with new counsel, who actually submitted opposition to the motion, the fact the defendants allegedly did not initially oppose the motion cannot be the proximate cause for plaintiff’s damages, if any. “

Judiciary Law §487, which regulates and punishes attorney deceit is a statute which is not “light granted.”  In this case, we see that the mere production of fraudulent documents  may not be enough to hold the producing attorneys under the statute.

Specialized Indus. Servs. Corp. v Carter  2015 NY Slip Op 06912 [131 AD3d 1162]  September 23, 2015 , Appellate Division, Second Department mere waves away the claim.  “Specialized Industrial Services Corp. (hereinafter Specialized), commenced this action against Benjamin E. Carter seeking, inter alia, to recover damages for a violation of Judiciary Law § 487. In its amended complaint, Specialized alleged that at an inquest on damages in a prior action, in which it was the defendant and Carter represented the plaintiff, Carter knowingly introduced fraudulent documents which served as the basis for a judgment entered against it. Specialized further alleged that this was part of a larger scheme consisting of two other lawsuits wherein Carter was involved in the use of fabricated evidence to create or inflate damages.

Carter established his prima facie entitlement to judgment as a matter of law dismissing the complaint by demonstrating that he did not act with any “intent to deceive” (Judiciary Law § 487 [1]; see Gillen v McCarron, 126 AD3d 670, 671 [2015]; Cullin v Spiess, 122 AD3d 792, 793 [2014]; Tenore v Kantrowitz, Goldhamer & Graifman, P.C., 121 AD3d 775 [2014]; Dupree v Voorhees, 102 AD3d 912 [2013]). In opposition to Carter’s prima facie showing, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court properly granted Carter’s motion for summary judgment dismissing the complaint and denied the plaintiff’s cross motion for summary judgment on the issue of liability.”

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]).”