Labor Law Cases which arise from construction accidents often have large numbers attached to them.  After all, people can get really hurt when they fall on a construction site.  So was the situation in Doviak v Lowe’s Home Ctrs., Inc.  2015 NY Slip Op 09333  Decided on December 17, 2015  Appellate Division, Third Department.

The bigger fight came between the largest law firm in New York state and a smaller trial firm in NYC over the trial verdict.  At trial defendants offered $12 Million to settle.  Whether or not plaintiff was adequately informed of the offer, it was turned down.  Eventually the jury awarded only $ 3.7 million.  Finkelstein & Partners successfully moved, post trial for an additional $ 3.1 million, to a total of $ 6.8 million.

Plaintiff then retained the second law firm, and the fight over attorney fees started.  Whether or not the first attorney should get any fees at all depended on whether they were terminated for cause.

“Disagreements about various aspects of the judgment delayed entry thereof until December 2007. Prior thereto, plaintiff had ostensibly stopped communicating with Finkelstein and retained new counsel. After the judgment was entered, plaintiff’s new counsel moved to resettle the judgment, which was granted in part in an order and ensuing amended judgment entered in July 2008. Plaintiff’s new counsel perfected the appeal that had been filed by Finkelstein, and we, among other things, increased damages by $2.5 million (63 AD3d at 1356-1357), making total damages of about $9.3 million. This resulted in additional contingency counsel fees of $707,106.

In the interim, plaintiff, eventually represented by Phillips & Paolicelli, LLP (hereinafter Phillips),^[FN1] commenced a legal malpractice action in Orange County against Finkelstein alleging, among other things, that the trial settlement offer of $12 million had not been communicated by Finkelstein to plaintiff. After an appeal to the Second Department (Doviak v Finkelstein & Partners, LLP, 90 AD3d 696 [2011]), that case moved to a seven-week jury trial, which resulted in the jury finding no legal malpractice by Finkelstein. In addressing a posttrial motion in that action, Supreme Court (Ecker, J.) noted that certain aspects of plaintiff’s allegations that Finkelstein had been discharged for cause had not been decided in the Orange County action and should be heard in connection with the pending fee dispute in the underlying Ulster County action.

Plaintiff then moved in the Ulster County action to, among other things, discharge Finkelstein’s liens in that action. In a thorough written decision, Supreme Court (Work, J.) addressed a host of remaining issues about the disputed fees and disbursements. The court was unpersuaded by plaintiff’s contention that Finkelstein was discharged for cause so as to justify denying Finkelstein any counsel fees. As for the counsel fees of $1,892,760.31 generated from the pre-appeal action, Supreme Court reduced Finkelstein’s fee by $30,000 as sanctions for several errors by Finkelstein that, ultimately, had not adversely affected plaintiff but caused delay and necessitated additional legal work. The court further directed that $40,000 from the pre-appeal counsel fees should be paid to Phillips for its postverdict, pre-appeal legal work. The court thus awarded Finkelstein $1,822,760.31 in counsel fees for pre-appeal legal work and authorized Finkelstein to be reimbursed for its disbursements of $199,126.73. As for the additional counsel fees of $707,106 from the successful appeal, Supreme Court awarded two thirds of such amount to Phillips and one third to Finkelstein ^[FN2]. Plaintiff appeals.

We consider first plaintiff’s argument that Finkelstein should not get any counsel fees because it was discharged for cause. “[A] client has an absolute right, at any time, with or without cause, to terminate the attorney-client relationship by discharging the attorney” (Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 43 [1990]). “If the discharge is with cause, the attorney has no right to compensation or to a retaining lien” (Teichner v W & J Holsteins, 64 NY2d 977, 979 [1985] [citations omitted]). A “for cause” termination must be based on more than “a client’s ‘general dissatisfaction’ with the attorney’s performance” (Wiggins v Kopko, 105 AD3d 1132, 1134 [2013], quoting De Luccia v Village of Monroe, 180 AD2d 897, 899 [1992]) and typically involves a “significant breach of legal duty” such that the client can establish that the “attorney’s conduct constituted a failure to properly represent [the client’s] interests” (Antonmarchi v Consolidated Edison Co. of N.Y., 678 F Supp 2d 235, 241 [SD NY 2010] [internal quotation marks and citations omitted]; see Greenberg v Cross Island Indus., 522 F Supp 2d 463, 467 [ED NY 2007]).

The most serious allegation that could have supported a “for cause” termination — i.e., the purported failure to inform plaintiff of the $12 million settlement offer — was resolved in Finkelstein’s favor during plaintiff’s unsuccessful malpractice action. Plaintiff now relies on a litany of mostly postverdict infirmities by Finkelstein. Supreme Court (Work, J.) fully analyzed each of the purported errors and ethical breaches and we discern no reason to depart from that court’s conclusions. With respect to Finkelstein’s application to Supreme Court (Egan Jr., J.) for its counsel fees without providing adequate notice to plaintiff, the fee request was consistent with the retainer agreement, it was made at a time when plaintiff had apparently ceased communicating with Finkelstein and Supreme Court (Work, J.) found no willfulness by Finkelstein and noted no harm to plaintiff. Given Finkelstein’s extensive legal work in this complex case that culminated in a generally favorable result for plaintiff, this error was insufficient under all the relevant circumstances to serve as a basis to deny Finkelstein any counsel fees, and Supreme Court’s decision to reduce Finkelstein’s fee by $10,000 was within its discretion and an appropriate sanction.

The initial incorrect inclusion in the proposed judgment of a set off for plaintiff’s children’s Social Security disability benefits was eventually corrected and, while the error contributed to the delay in final resolution of the litigation, it was adequately addressed by Supreme Court’s reduction of Finkelstein’s fee by an additional $10,000. The remaining errors have been considered and, to the extent they remained viable after the jury verdict in favor of Finkelstein in plaintiff’s malpractice action, do not rise to the level of a significant breach of Finkelstein’s duty to plaintiff or reveal that Finkelstein failed to properly represent plaintiff’s interest to such an extent as to justify termination for cause. We further agree with Supreme Court that Finkelstein adequately established the amount of its disbursements for which it was entitled to be reimbursed under the retainer.

Nor are we persuaded that Supreme Court erred in the manner in which it divided the counsel fees generated from the additur resulting from the appeal to this Court. An attorney’s “charging lien does not merely give an attorney an enforceable right against the property of another, it gives the attorney an equitable ownership interest in the client’s cause of action” (LMWT Realty Corp. v Davis Agency, 85 NY2d 462, 467 [1995]; see Judiciary Law § 475). Although the retainer provided that it did not cover an appeal, it did specifically cover any [*3]monies that plaintiff received by reason of the action and further provided for a reasonable fee should there be an appeal. Supreme Court noted that Finkelstein successfully developed the record that became the basis for this Court’s additur. Finkelstein also filed a notice of appeal and took steps, including ordering the trial transcript, toward perfecting the appeal. Further, Finkelstein had researched, prepared and presented to the trial court the partially successful motion for, among other things, additur, which provided the foundation — expanded upon by Phillips — for the successful appeal. The relevant language of the retainer as well as the outcome at the trial level were materially different here than in Shaw v Manufacturers Hanover Trust Co. (68 NY2d 172, 175-176 [1986]), a case relied upon by plaintiff. The retainer did not forfeit a fee upon an adverse trial verdict, plaintiff’s trial in the underlying personal injury action did not end adversely to plaintiff, and Finkelstein’s retainer entitled it to a fee based on monies recovered by reason of the claim. Supreme Court’s division of the counsel fees resulting from the appeal was appropriate (see generally Matter of Cohen v Grainger, Tesoriero & Bell, 81 NY2d 655, 658-660 [1993]).

Imagine that Wife owns a co-operative apartment and has some undefined problems there. Litigation ensues, and at a settlement conference her husband, who is not a party, is escorted from the robing room because of disruptive conduct.  Rather than simply remain calm, or fume, husband, who has a rich history of litigating frivolous issues, sues everyone, including the Court attorney.  What should happen?

In Pettus v Mazzola  2015 NY Slip Op 51841(U)  Decided on December 16, 2015  Supreme Court, Bronx County  Thompson, J. applied the traditional pleading rules, which exist in part to winnow the wide open use of litigation for unsuitable cases.

“This proceeding arose as a result of alleged actions that occurred in an action held before Justice John Barone, which was brought by Pettus’ wife. Pettus asserts he was acting as his wife’s attorney in the underlying proceeding, when Quaranta had him removed from the judge’s robing room during a settlement conference for his alleged disruptive behavior. Pettus was not a party to the underlying proceeding.”

“Since Pettus was not a litigant in the underlying action he lacks standing to bring this proceeding, as he had no “injury in fact” and is precluded from adjudicating his claims of injury. (Hill v. Reynolds, 187 AD2d 299, 300 [1st Dept 1992]).

Moreover, Pettus’ petition fails to state a cause of action. With respect to defamation, his petition fails to state with particularity the defamatory words that were spoken. CPLR 3016. With respect to Pettus claim of legal malpractice, “no attorney-client relationship existed between these parties.” Jane St. Co. v. Rosenberg & Estis, P.C., 192 AD2d 451, 451, 597 N.Y.S.2d 17 (1993).

With respect to Pettus’ claims for fraud, deceit, or a scheme to defraud, “a mere recitation of the elements of fraud is insufficient to state a cause of action. (National Union Fire Ins. Co. of Pittsburgh, Pa. v Christopher Assoc., 257 AD2d 1, 9 [1999]). Furthermore, a plaintiff seeking to recover for fraud and misrepresentation is required “to set forth specific and detailed factual allegations that the defendant personally participated in, or had knowledge of any alleged fraud” (Handel v Bruder, 209 AD2d 282, 282-283 [1994]).” Friedman v. Anderson, 23 AD3d 163, 166 [1st Dept 2005]).”

“With respect to petitioner’s claims of a “violation of the Code of Professional Responsibility, as alleged by the plaintiff, does not, in itself, give rise to a private cause of action against an attorney or law firm (Drago v Buonagurio, 46 NY2d 778).” (Weintraub v. Phillips, Nizer, Benjamin, Krim, & Ballon, 172 AD2d 254 [1st Dept 1991]).

With respect to Pettus’ claim of discrimination, racial animus and retaliation, petitioner’s “failure to adequately plead discriminatory animus is similarly fatal to [his] claims of hostile work environment (see Chin v New York City Hous. Auth., 106 AD3d 443, 445 [1st Dept 2013]).” Askin v. Dep’t of Educ. of City of New York, 110 AD3d 621, 622 [1st Dept 2013]).”

The retaining lien, a powerful tool for attorneys to force payment of legal fees, is but one of a number of strategies in the eternal attorney fee dispute world.  MG v RG  2015 NY Slip Op 51851(U)  Decided on December 10, 2015  Supreme Court, Kings County Adams, J. is an example of the lengths to which  litigants will travel in order to get the file.  This trip did not succeed.

Plaintiff is the husband and Defendant the wife in a settled matrimonial.  Now Husband sues his attorney for legal malpractice.

“Defendant’s initial post judgment application filed by his current counsel, Ilasz & Associates on April 21, 2014 sought to compel his prior counsel to turn over defendant’s entire matrimonial file (mot. seq. 4). Contemporaneously with that application, defendant filed a separate legal malpractice action against his prior counsel in the divorce action, the instant non-parties here (RG v Poplawski, Zenon et. al. 4734/14) . By order dated October 1, 2014, this Court denied defendant’s application to compel the release of prior counsel’s matrimonial file, without prejudice to his right to address his request in the context of the pending malpractice action before Hon. Wayne Saitta.

Thereafter, defendant filed an order to show cause to vacate the September 25, 2013 judgment of divorce (mot. seq. 5) alleging defendant’s incapacity at the time of the Court’s allocution. On plaintiff’s default, that application was referred to the Special Refree to hear and determine. While the motion to vacate the divorce judgment (mot. seq. 5) was pending before this Court, defendant moved in the malpractice action to appoint defendant’s sister Dorota Barbara Powroznik as defendant’s guardian pursuant to Mental Hygiene Law §81.18.^[FN2] That application was denied and the entire action was dismissed by Hon. Saitta, without prejudice to commence an Article 81 proceeding (order dated July 9, 2015). Defendant failed to disclose to this Court the July 9, 2015 order issued in the legal malpractice action and at the July 17, 2015 appearance. In light of Hon. Saitta’s order and the instant applications, this Court’s referral order to the Special Referee has since been stayed.”

“Notwithstanding the facial deficiencies in defendant’s subpoenas, the Court takes note that the very documents the defendant now seeks by way of subpoenas are the same documents defendant previously sought to compel and which relief this Court denied prior to the instant motion to vacate the divorce judgment and prior to the dismissal of the action before Hon. Saitta. This Court’s October 2014 order was made without prejudice to defendant’s right to seek same in the context of the legal malpractice action wherein the instant non-parties are the named defendants. Taking judicial notice of the filings in that action, it is clear that since denying defendant’s motion to compel, he has not sought this relief in the other action. The Court finds persuasive, Poplawski’s argument that, under the guise of defendant’s application to vacate the judgment of divorce, defendant is using the instant subpoenas as a vehicle to obtain prior counsel’s matrimonial file.

Lastly, defendant’s lack of capacity during the divorce proceedings is the premise of defendant’s post judgment application to vacate the divorce judgment. Defendant’s counsel has remained steadfast in their position that defendant currently lacks capacity to appear in this action without a guardian and that his current mental state is unchanged from his mental state throughout the divorce action. Thus, the Court finds merit in Poplawski’s argument that defendant’s counsel should not be permitted to seek relief from affirmative legal steps taken on defendant’s behalf (i.e. issuing subpoenas) while at the same time raising the issue of defendant’s competency, which issue remains unresolved.

The Court denies without prejudice to renew on proper papers Poplawski’s request for sanctions pursuant to 22 NYCRR 130.1(c). This section provides that any party or attorney may be awarded “costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney’s fees resulting from frivolous conduct.” The Court finds merit in Poplawski’s request as the technical defects in the subpoenas evidence a patent failure to comply with multiple provisions of the CPLR and, notwithstanding Poplawski’s July 29, 2015 letter request to withdraw the subpoenas, defendant proceeded and in fact filed a contempt application. However, Poplawski’s papers fail to include in any affirmation or supporting documentation the actual expenses and/or reasonable attorney’s fees incurred in connection with the instant applications. As such, the Court has no basis from which to assess an award of sanctions.”

As happens from time to time, outlier Appellate Division decisions give rise to a new rule of law, which sometimes does not make sense.  The question of when a party has to disclose experts is unique in NY law.  Corresponding Federal practice has rigid discovery dates, preclusion if the expert is not disclosed, depositions of the experts, and a host of other rules.  NY practice is far more laissez faire on the entire question of experts.  There is no particular date by which the expert must be disclosed, there is no pre-trial deposition of an expert, no report is mandated, etc.

However, even in the face of CPLR 3101, the Appellate Division, first in the Second Department and then ocassionally elsewhere, suddenly determined that one may not use an expert on a motion for summary judgment unless that expert had been disclosed previously. Construction by Singletree, Inc. v Lowe  2008 NY Slip Op 08287 [55 AD3d 861]  October 28, 2008
Appellate Division, Second Department The doctrinal basis for the decision was, at best, cloudy.

“Contrary to Lowe’s contention, J.C. established its prima facie entitlement to judgment as a matter of law in connection with so much of Lowe’s second cross claim as was to recover compensatory for damages for breach of warranty by establishing that it did not breach any material term set forth in the contract between it and Lowe. In opposition to J.C.’s prima facie showing, Lowe failed to raise a triable issue of fact. The Supreme Court did not improvidently exercise its discretion in declining to consider the affidavits of the purported experts proffered by Lowe, since Lowe failed to identify the experts in pretrial disclosure and served the affidavits after the note of issue and certificate of readiness attesting to the completion of discovery were filed in this matter (see Rodriguez v Sung Hi Kim, 42 AD3d 442, 442-443 [2007]; Wager v Hainline, 29 AD3d 569, 571 [2006]; Gralnik v Brighton Beach Assoc., 3 AD3d 518 [2004]; Concetto v Pedalino, 308 AD2d 470, 470-471 [2003]).

Our dissenting colleague disagrees with this holding, arguing that CPLR 3101 (d) (1) (i) applies only to an expert whom a party intends to call at trial, and ought not have precluded the trial court from considering previously undisclosed expert opinions submitted in opposition to a motion for summary judgment. We note, however, that the purpose of summary judgment is to determine whether there are genuine issues necessitating a trial. As such, “one opposing a motion for summary judgment must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim or must demonstrate acceptable excuse for his failure to meet the requirement of tender in admissible form” (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

As it is undisputed that Lowe failed to identify any experts in pretrial disclosure whom he intended to call to testify at trial concerning whether the work was faulty or the extent of his alleged compensatory damages arising from that breach of warranty, and did not proffer any explanation for such failure, it was not an improvident exercise of discretion for the Supreme Court to have determined that the specific expert opinions set forth in the affidavits submitted in opposition to the motion for summary judgment could not be considered at trial. That circumstance, coupled with Lowe’s failure to demonstrate how the facts set forth in the experts’ affidavits could otherwise be established at trial, justified the Supreme Court’s conclusion that Lowe failed to adequately establish the existence of a material issue of fact necessitating a trial in response to J.C.’s prima facie showing of entitlement to judgment as a matter of law. Accordingly, summary judgment dismissing so much of Lowe’s second cross claim as was to recover compensatory damages for breach of warranty was properly awarded to J.C. (see Alvarez v Prospect Hosp., 68 NY2d 320 [1986]).”

Now, however, the Governor has signed a bill which specifies that disclosure is no longer a necessity in a summary judgment motion.  The bill, known as S5288/A6265 expressly overturns a line of cases which left to the judge’s discretion the question of whether such an expert’s affidavit was admissible and should be considered.

From the law:  “Where an expert affidavit is submitted in support of, or opposition to, a motion for summary judgment, the court shall not decline to consider the affidavit because an expert exchange pursuant to subparagraph (i) of paragraph (1) of subdivision (d) of section 3101 was not furnished prior to the submission of the affidavit.”

Legal malpractice cases are subject to a level of scrutiny greater than all other cases in the “but for” determination.  That’s built into the legal malpractice world along with the privity rule and is there for social policy reasons.  If it were not, then every case, whether lost by plaintiff or defendant would immediately morph into a legal malpractice case.

Beyond the structural differences, it sometimes seems that Supreme Court is too anxious to “weed out” legal malpractice cases it might not like at the CPLR 3211 stage.  Anecdotally, we think that a greater percentage of LM cases are dismissed on CPLR 3211 motions than overall for all cases.

Stewart Tit. Ins. Co. v Wingate, Kearney & Cullen  2015 NY Slip Op 09272  Decided on December 16, 2015 Appellate Division, Second Department is an example.  The AD simply finds that Supreme Court misinterpreted a key issue in the motion to dismiss.  “The plaintiff commenced this legal malpractice action in connection with the defendants’ representation of the plaintiff, Stewart Title Insurance Company, and its insureds in a mortgage foreclosure action. The plaintiff alleges that the defendants negligently failed to interpose or raise as a defense that the foreclosure action was time-barred pursuant to the applicable six-year statute of limitations (seeCPLR 213[4]). In lieu of an answer, the defendants moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court granted the motion. We reverse.

On a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211(a)(7), “the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law [, the] motion for dismissal will fail” (Zellner v Odyl, LLC, 117 AD3d 1040, 1040 [internal quotation marks omitted]; see Guggenheimer v Ginzburg, 43 NY2d 268, 275). In considering such a motion, “the complaint must be construed liberally, the factual allegations deemed to be true, and the nonmoving party granted the benefit of every possible favorable inference” (Hense v Baxter, 79 AD3d 814, 815; see Leon v Martinez, 84 NY2d 83, 87). “To state a cause of action to recover damages for legal malpractice, a plaintiff must allege: (1) that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession,’ and (2) that the attorney’s breach of the duty proximately caused the plaintiff actual and ascertainable damages” (Dempster v Liotti, 86 AD3d 169, 176, quoting Leder [*2]v Spiegel, 9 NY3d 836, 837).

Here, construing the complaint liberally, accepting the facts alleged in the complaint as true, and according the plaintiff the benefit of every possible favorable inference, as we are required to do, the plaintiff stated a cause of action to recover damages for legal malpractice. Contrary to the defendants’ contention, the plaintiff’s insureds were permitted to raise the statute of limitations defense, as they were either in privity with the original debtor (see 328 Owners Corp. v 330 W. 86 Oaks Corp., 8 NY3d 372, 384; Matter of Juan C. v Cortines, 89 NY2d 659, 667; Parolisi v Slavin, 98 AD3d 488, 490), or were judgment creditors with a lien secured against the subject property (see Matter of Rosevele Frocks, Inc. v Sommers, 191 Misc 614 [App Term, 1st Dept]; see also 75 NY Jur 2d, Limitations and Laches § 33). Accordingly, the Supreme Court should have denied the defendants’ motion to dismiss the complaint.”

Few Judiciary Law 487 claims survive the rugged course of litigation and make it over the last hurdle.  Here, in Ginsburg Dev. Cos., LLC v Carbone  2015 NY Slip Op 09250  Decided on December 16, 2015 Appellate Division, Second Department the Second Department affirmed Supreme Court and left the JL 487 claim for trial.  Interestingly, the legal malpractice case survived in this unique non-privity case.  Put another way, the opposing party can now try the legal malpractice and JL 487 case against their opponent.  This is a unique case!

“In an action to recover damages for fraud, violation of Judiciary Law § 487, legal malpractice, aiding and abetting the breach of a fiduciary duty, aiding and abetting fraud, and negligent misrepresentation, (1) the defendants appeal from so much of an order of the Supreme Court, Westchester County (Lefkowitz, J.), dated July 8, 2013, as denied those branches of their motion which were for summary judgment dismissing the second, third, and fourth causes of action, and the plaintiff cross-appeals from so much of the same order as granted those branches of the defendants’ motion which were for summary judgment dismissing the first, fifth, and sixth causes of action, (2) the plaintiff appeals, as limited by its brief, from so much of an order of the same court, also dated July 8, 2013, as denied those branches of its motion which were for summary judgment on the issue of liability on the fourth and sixth causes of action, and (3) the plaintiff appeals, as limited by its brief, from so much of an order of the same court dated November 27, 2013, as denied its motion for leave to renew its opposition to those branches of the defendants’ motion which were for summary judgment dismissing the first, fifth, and sixth causes of action, and those branches of its prior motion which were for summary judgment on the issue of liability on the fourth and sixth causes of action.

The Supreme Court properly denied that branch of the motion of Carbone and GF which was for summary judgment dismissing the second cause of action, which alleged violation of Judiciary Law § 487. Judiciary Law § 487 provides, in part, that an attorney who “[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party” is guilty of a misdemeanor, and, additionally, “forfeits to the party injured treble damages, to be recovered in a civil action.” Here, in opposition to the prima facie showing of Carbone and GF of their entitlement to judgment as a matter of law, GDC raised a triable issue of fact as to whether Carbone and GF intentionally deceived GDC (see Moormann v Perini & Hoerger, 65 AD3d 1106, 1108).

The Supreme Court properly denied that branch of the motion of Carbone and GF which was for summary judgment dismissing the third cause of action, which alleged legal malpractice. “In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [internal quotation marks omitted]). “To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence” (id. at 442). “To succeed on a motion for summary judgment, the defendant in a legal malpractice action must present evidence in admissible form establishing that the plaintiff is unable to prove at least one of these essential elements” (Alizio v Feldman, 82 AD3d 804, 804). Here, Carbone and GF did not make a prima facie showing of their entitlement to judgment as a matter of law, since they failed to show that GDC was unable to prove at least one of the essential elements of its legal malpractice cause of action (see Mueller v Fruchter, 71 AD3d 650, 651).”

One of the defining characteristics of professional malpractice, which differs from negligence as a whole, is the concept of privity.  If a washing machine is negligently designed, anyone hurt in using the machine can sue.  However, in professional and legal malpractice one may sue only those with whom they have a professional relationship, one of “privity.”

Prime Plus Acquistition Corp. v Eisneramper LLP  2015 NY Slip Op 32336(U)  December 10, 2015  Supreme Court, New York County  Docket Number: 651139/2014  Judge: Shirley Werner Kornreich is an example of this problem in an auditing case.  Besides statute of limitations and reasonable reliance in a fraud setting problems, the entire malpractice case was dismissed for lack of a professional relationship between plaintiff and defendant.  This dismissal takes place in a case with $ 25 Million in damages.

“Regardless of whether some of plaintiffs’ malpractice claims are time barred, all of the malpractice claims fail on the merits. EisnerAmper’s client was Oak Rock, not plaintiffs. As discussed in the IDB Decision: Before accountants may be held liable in negligence to noncontractual parties who rely to their detriment on inaccurate financial reports, certain prerequisites must be satisfied: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3) there must have been some conduct on the part of the accountants linking them to that party or parties, which evinces the accountants’ understanding of that party or parties’ reliance. Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551 ( 1986). Plaintiffs cannot maintain a malpractice claim against EisnerAmper because they do not plead the requisite linking conduct. Oasis does not allege that it had any direct contact with EisnerAmper. The only alleged direct communication between Prime and EisnerAmper was a single conversation between Dell and Charles Weinstein, an Eisner Am per partner. That alleged conversation took place in 200 I. The first audit at issue in this action did not occur until 2006. Five years beforehand, in 2001, Weinstein was seeking to convince Dell to make Prime’s initial investment in Oak Rock, and he allegedly told Dell that he could rely on EisnerAmper’s audit reports. This statement, allegedly made almost a decade prior to the 2010 Transactions, is insufficient to show that EisnerAmper knew the subject audits would be used for the “particular purpose” at issue here – the 2010 Transactions.

Absent a nexus between a communication and the subject transaction, the mere e~istence \ f of some prior communication between an accountant and an investor will not give rise to~ # relationship “sufficiently approaching privity.” See Sec. Pac. Bus. Credit, Inc. v Peat MJrwick 12 t [* 12] Main & Co., 79 NY2d 695, 702-08 (1992). Near privity is not present here because no one at EisnerAmper is alleged to have told Prime it was entitled to rely on the 2007 and 2008 audit reports attached to the November 4, 2009 offering memorandum. As a result, there is no conduct linking Prime and EisnerAmper to the 20 I 0 Transactions.

Moreover, Dell’s reliance on his 2001 conversation with Weinstein flies in the face of the express terms of EisnerAmper’s engagement letters, which clearly state that the audits are prepared only for the benefit of Oak Rock, i.e., not its members. Dell, a member of Oak Rock’s board, cannot claim ignorance of the terms of the EisnerAmper engagement letters. This renders any reliance by Prime on Weinstein’s alleged 200 I promise unreasonable as a matter of law. Again, absent a direct nexus between a specific communication and specific investment made in reasonable reliance on that communication, an investor does not have the right to sue an accountant for malpractice for all losses incurred due to the accountant’s negligent work. The context of the 200 I conversations, the remoteness in time from the subject audits and 20 I 0 Transactions, and the contrary terms of the engagement letters collectively preclude a finding of linking conduct based on communications between Weinstein and Dell. 7 Where, as here, there is no linking conduct with respect to the specific audits at issue, near privity between an auditor and a non-client investor cannot be predicated on alleged general assurances provided a decade before the subject transaction. Holding otherwise would contravene the Court of Appeals’ longstanding policy of refusing to adopt broad linking conduct theories. See Sec. Pac., 79 NY2d at 708 (“sweeping liability should [not] be newly and involuntarily imposed on the entire accounting industry by the simple act of lenders communicating their reliance in the manner promoted in this case.”). Finally, plaintiffs cannot establish linking conduct based on EisnerAmper providing Oak Rock’s board and members, including Prime and Oasis, with copies of the audit reports. It is well settled that “[t]he fact that plaintiffs were entitled to and received a copy of the audited financial statements, or that [the auditor] knew that the investors would rely upon the information contained in the financial statements, does not establish the requisite linking conduct.” CRT Investments, Ltd. v BDO Seidman, LLP, 85 AD3d 470, 472 (1st Dept 2011). Plaintiffs’ malpractice claims, therefore, are dismissed. “

We had not considered the question of how a bench trial and a jury trial might differ in the use of experts.  Remembering that an expert is necessary when the experience of an ordinary trier of fact does not encompass the issues, we recently ran across Oikonomos, Inc. v Bahrenberg
2015 NY Slip Op 51300(U) [48 Misc 3d 1228(A)]  Decided on August 18, 2015  Supreme Court, Suffolk County  Pines, J. in which plaintiff does not present expert evidence at a bench trial, and instead argues that a judge has sufficient experience as a trier of fact to obviate the need for expert testimony.  The argument succeeds.

“This case arises from numerous leases, promissory notes, guarantees, and services agreements entered into between the Plaintiffs and the corporate Defendants, each of which is a not-for-profit entity. The various Plaintiffs, all for-profit corporate entities, owned by Albert and Barbara Brayson (“the Braysons”) (or, in the case of WDR Assets LLC, by the Braysons’ children) are Oikonomos, Inc. (“Oikonomos”), Stonegate Springs, LLC (“Stonegate”), Educare Systems Solutions, LLC (“Educare”), 3390 Route 112, LLC (“3390”) and WDR Assets LLC (“WDR”).

The Plaintiffs assert claims against the various lessees, promissors on notes, and guarantors of the notes and leases, all named Defendants, for breaches of their agreements. The non-profit corporate Defendants include Lake Grove at Durham, Inc. (“Lake Grove”) (which operates a school located in Connecticut), Maple Valley School, Inc (“Maple Valley”) which operates a school in Massachusetts, the Brayson Foundation Ltd. (“the Foundation”), which provided financial support to these affiliated not-for-profit schools, and Windwood Meadow Inc. (“Windwood”), which provided management services to various entities. Additionally, the Plaintiffs have sued individual Defendant, John Claude Bahrenburg (“Bahrenburg”), the Braysons’ alleged former close friend and attorney, for over a twenty year period, for legal malpractice. Plaintiffs’ contend that Bahrenburg not only represented the Braysons but, in addition, all the corporate Plaintiffs at various times and each and every named corporate Defendant. Plaintiffs also have claims against individual Defendant, Jeffrey Dryfoos (“Dryfoos”), Chairman of the Board of Defendant Windwood (2001-2012) as well as Albert Brayson’s close personal friend and college roommate, essentially for acting in concert with Bahrenburg, and utilizing their corporate positions to cause the losses that the corporate Plaintiffs have allegedly suffered.

Currently before the Court is a motion (Mot. Seq. 016) pursuant to CPLR 4401 by the Foundation, Dryfoos and Bahrenburg, made after the close of the evidence presented at trial by the Plaintiffs, for judgment as a matter of law dismissing various causes of action. The [*2]arguments in support of and in opposition to the motion are summarized below.”

“Plaintiffs argue that expert testimony regarding the malpractice claim is not necessary here because the Court, as the trier of fact, is competent to analyze and evaluate whether Bahrenburg’s conduct violated the Code of Professional Responsibility and if so, decide whether such conduct constitutes malpractice. Plaintiffs cite to case law in the Second Department holding that expert testimony is required “unless the ordinary experience of the fact-finder provides sufficient basis for judging the adequacy of the professional service, or the attorney’s conduct falls below any standard of due care” (Northrop v Thorsen, 46 AD3d 780, 782 [2d Dept 2007]). Plaintiffs argue that Bahrenburg’s conduct in acting adversely to his client clearly falls below the standard of care set forth in the Code of Professional Responsibility.

Plaintiffs argue that the legal malpractice claim against Bahrenburg is not time-barred because of the continuous representation doctrine. Plaintiffs contend that the testimony and documents establish that Bahrenburg did legal work for Oikonomos and the Braysons at least through November 2006, despite the Release letter dated February 2, 2006. Thus, Plaintiffs contend that there is a triable issue of fact as to whether the representation giving rise to the malpractice claims ended in February 2006, in which case the malpractice claims first asserted in November 2009 would be untimely, or whether representation continued until November 2006 tolling the commencement of the three-year statute until then.”

“An action for legal malpractice requires proof of the following three elements: (1) the attorney’s failure to exercise that degree of care, skill and diligence commonly possessed by a member of the legal profession; (2) causation; and 3) actual damages (Prudential Ins. Co. of America v Dewey Ballantine, Bushby, Palmer & Wood, 170 AD2d 108 [1st Dept 1991], aff’d, 80 NY2d 377 [1992]; Gray v Wallman & Kramer, 184 AD2d 409 [1st Dept 1992]). To sustain a cause of action for legal malpractice, a party must show that an attorney failed to exercise “the ordinary reasonable skill and knowledge” commonly possessed by a member of the legal profession (Darby & Darby, P.C. v VSI Intern., Inc., 95 NY2d 308 [2000]). The New York Rules of Professional Conduct Code contain provisions bearing on malpractice by an attorney. Such rules are clearly relevant to a malpractice claim. A malpractice cause of action was held to lie where defendant attorney represented both sides of a transaction and allegedly withheld critical information from the plaintiff client (Sitar v Sitar, 50 AD3d 667 [2d Dept 2008]), and where a law firm’s divided loyalties impaired its professional judgment (Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 [1st Dept 2008]). In addition, a lawyer may not seek, by contract or other means, to limit prospectively the attorney’s individual liability to a client for legal malpractice (New York Rules of Professional Conduct Rule 1.8(h)(1).

An action for legal malpractice is governed by a three year statute of limitations (CPLR 214[6]). The continuous treatment rule applied to medical malpractice actions has been extended to claims of attorney malpractice (Zorn v Gilbert, 8 NY3d 933 [2007]; Sommers v Cohen, 14 AD3d 691 [2d Dept 2005]).

To recover for an attorney’s malpractice, a plaintiff must show that such proximately caused the loss (Rudolf v Shayne, Dachs, Stanisi, Corker & Sauer, 8 NY3d 438 [2007]). In addition, it has been generally recognized that a plaintiff in such cases must satisfy a more demanding test than usual by proving that “but for” the defendant’s negligence, the plaintiff would not have sustained the claimed loss in the underlying transaction (Waggoner v Caruso, 14 NY3d 874 [2010]). The Court notes, however, that in Barnett v Schwartz, 47 AD3d 197 [2d Dept 2007], the Second Department held that the “but for” causation standard does not require a [*9]greater or more direct degree of causation than the “proximate cause” standard set forth in PJI 2:70; and, further, that the “but for” standard does not require a showing that the defendant’s malpractice was the sole proximate clause, rather than a substantial cause, of the plaintiff’s loss. This particular view has not yet been considered by the Court of Appeals.

Unless the ordinary experience of the fact finder provides a sufficient basis for judging the adequacy of the professional service or the attorney’s conduct fell below any standard of due care, expert testimony will be necessary to established that the attorney breached a standard of professional care and skill (Northrop v Thorsen, 46 AD3d 780 [2d Dept 2007]; Zasso v Maher, 26 AD2d 366 [2d Dept 1996]).

Here, viewing the evidence in the light most favorable to the Plaintiffs, accepting the Plaintiffs’ evidence as true, and giving the Plaintiffs every favorable inference that can be reasonably drawn therefrom, the Court finds that the Plaintiffs have set forth sufficient evidence to support a legal malpractice claim against Bahrenburg. The Plaintiffs have presented evidence of an attorney-client relationship with Bahrenburg continuing into November 2006 such that judgment as a matter of law pursuant to CPLR 4401 dismissing the legal malpractice claim as time barred is not warranted. Contrary to Bahrenburg’s contention, the Plaintiffs’ failure to put forth expert testimony is not fatal as the ordinary experience of this Court, the fact finder on this case, provides a sufficient basis for judging whether Bahrenburg’s alleged actions and omissions violated his fiduciary duties, which, as previously held, are subsumed within the legal malpractice claim. There has also been sufficient evidence submitted to allow the Court to determine whether any of the allegations against Bahrenburg constitute a violation of the Rules of Professional Conduct. Plaintiffs have also submitted evidence that they would not have entered into the transactions at issue and sustained losses had Bahrenburg acted properly. Therefore, the motion is denied as to the twenty seventh cause of action.”