This is not strictly a legal malpractice case, yet there are allusions within the appellate decision.  This case is a warning to attorneys who attend Independent Medical Examinations (a sometimes oxymoron because they are rarely independent, and sometimes not so medical) that they cannot surreptitiously record the exam.  In this case, with the extraordinary interference of a Supreme Court justice, the case blew up, will cost Plaintiff’s attorney some stupendous attorney fee and costs associated with a new trial, and generally did no one any good.

Bermejo v New York City Health & Hosps. Corp.  2015 NY Slip Op 08374  Decided on November 18, 2015  Appellate Division, Second Department  Roman, J., J. is an extraordinary read, and not just for the facts.  For any trial lawyer, the colloquy and arc of events before Supreme Court, Queens County are not only realistic, they are the stuff of nightmares.

The decision is over 25pp. so we cannot re-print enough to give you the entire story.  Here is the gist:

“Prior to the trial on the issue of damages in this personal injury action, the plaintiff’s trial attorney surreptitiously videotaped an independent medical examination (hereinafter IME) conducted by an orthopedist retained by the defendant Ibex Construction, LLC (hereinafter Ibex). The attorney failed to disclose the existence of that recording to defense counsel, and then revealed its existence for the first time at trial, during redirect examination of his own paralegal, who took the witness stand to testify as to the brevity of the orthopedist’s examination of [*2]the plaintiff. This resulted in the declaration of a mistrial, and the orthopedist subsequently declared that he was not willing to testify at the new trial. Since Ibex and the defendant Amsterdam & 76th Associates, LLC (hereinafter Amsterdam, and together the appellants), would be required to serve a subpoena upon the orthopedist to secure his testimony at the new trial, they separately moved, inter alia, for leave to have the plaintiff re-examined by an orthopedist of their own choosing, and for an award of costs against plaintiff’s counsel pursuant to 22 NYCRR 130-1.1. Justice Duane A. Hart of the Supreme Court, Queens County, denied those branches of the appellants’ separate motions.

These appeals require us to determine whether a plaintiff’s attorney must obtain approval from the court before making a video recording of an IME of the plaintiff, and whether CPLR 3101 requires that such a recording be disclosed to opposing counsel before trial. We answer both questions in the affirmative. We further conclude that the declaration of a mistrial in this case was attributable to the conduct of the plaintiff’s trial attorney. Moreover, we find that the orthopedist was unwilling to testify voluntarily at the new trial because of that conduct and because the Supreme Court repeatedly, without any basis in fact, accused the orthopedist of lying during his cross-examination. The court also repeatedly threatened to recommend that the District Attorney’s office prosecute the orthopedist for perjury. Accordingly, those branches of the appellants’ separate motions which were for leave to have the plaintiff re-examined by an orthopedist of their own choosing and for an award of costs against plaintiff’s counsel pursuant to 22 NYCRR 130-1.1 should have been granted, and we remit the matter to the Supreme Court, Queens County, before a different Justice, for further proceedings consistent herewith.”

“In sum, given the avalanche of errors that occurred in this case, we find that the appellants satisfied their burden of demonstrating unusual and unanticipated circumstances justifying an additional medical examination of the plaintiff by an orthopedist to be designated by them. Under the particular circumstances of this case, a second examination by a different physician is necessary “to ensure that the focus of the medical testimony will be on the nature and extent of plaintiff’s alleged injuries, rather than on any taint or irregularity [surrounding] the [prior] examination” (Orsos v Hudson Tr. Corp., 95 AD3d at 526).

Accordingly, the Supreme Court abused its discretion in denying those branches of the appellants’ motions which were to compel the plaintiff to submit to an additional orthopedic examination.”

“As the appellants correctly contend, the necessity for a mistrial was created by the conduct of plaintiff’s counsel, and was not to any extent attributable to any conduct of the appellants or their counsel. First, as discussed above, plaintiff’s counsel surreptitiously created a video recording of the second IME without providing any notice to the court or defense counsel, much less obtaining the court’s approval, as is required. Had counsel obtained approval, or at least provided notice, of the videotaping, the mistrial would not have occurred. Second, as discussed above, plaintiff’s counsel compounded the prejudice to the appellants by improperly failing to disclose the video recording to defense counsel, as was clearly required under CPLR 3101(i). Had counsel disclosed the recording, the mistrial would not have occurred. Third, plaintiff’s counsel chose to reveal the existence of the recording to the jury in a way that maximized its dramatic effect, and was unfair to the appellants. Notably, Mr. Hackett admitted that he consulted with other attorneys prior to his paralegal’s testimony regarding the admissibility of the undisclosed video recording. Mr. Hackett waited until his re-direct examination of his paralegal to reveal the recording’s existence, even though Ms. Ramirez had not been asked any questions on cross-examination regarding the duration of the second IME. This was improper.

In opposing those branches of the appellants’ motions which sought an award of costs against plaintiff’s counsel pursuant to 22 NYCRR 130-1.1, the plaintiff’s only argument as to why the appellants should be held accountable for precipitating the mistrial, and plaintiff’s counsel should not be, is that the mistrial was caused by Dr. Katz’s act of lying during his cross-examination. The Supreme Court appears to have ultimately adopted this view. This position is unsupportable since, as discussed above, Dr. Katz did not lie. Moreover, even if Dr. Katz had lied, that act would not be the proximate cause of the mistrial.

Thus, we conclude that the conduct of plaintiff’s counsel was frivolous within the meaning of 22 NYCRR 130-1.1, and that the Supreme Court abused its discretion in denying those branches of the appellants’ motions which were for an award of costs against plaintiff’s counsel. The appellants are entitled to recover from Patrick J. Hackett and Constantinidis & Associates the costs they incurred in participating in the first trial on the issue of damages, as well as the costs they incurred in making and litigating the motions at issue on these appeals and in pursuing these appeals. Upon remittal, the Supreme Court should conduct a hearing to determine the total amount of such costs, as well as the proper apportionment of those costs as between Mr. Hackett and Constantinidis & Associates (see Preferred Equities Corp. v Ziegelman, 190 AD2d 659, 660).”

“Accordingly, the appeals by the defendant Ibex Construction, LLC, from the order and the amended order are dismissed, as those orders were superseded by the amended order and the second amended order, respectively, the second amended order is reversed insofar as appealed from, on the law, the order and the amended order are vacated, those branches of the motion of the defendant Ibex Construction, LLC, and the separate motion of the defendant Amsterdam & 76th Associates, LLC, which were for leave to have the plaintiff re-examined by an orthopedist of their own choosing, and for an award of costs against plaintiff’s counsel pursuant to 22 NYCRR 130-1.1, are granted, that branch of the motion of the defendant Amsterdam & 76th Associates, LLC, which was to disqualify plaintiff’s counsel based on a violation of rule 3.7 of the Rules of Professional Conduct is denied as academic, and the matter is remitted to the Supreme Court, Queens County, before a different Justice, for further proceedings consistent herewith.”

In a breach of contract and professional malpractice, plaintiff entered into a private mediation with a non-party, which affected its claim against Defendant.  May defendant obtain the arbitration documents in order to defend himself?  Answer:  yes.

City of Newburgh, N.Y. v Hauser  2015 NY Slip Op 02442 [126 AD3d 926]  March 25, 2015  Appellate Division, Second Department tells us that while arbitration materials may not be used as “evidence” they remain discoverable.

“The defendants sought to compel the plaintiff to produce certain documents submitted in a private mediation proceeding between the plaintiff and a nonparty. The subject documents are material and relevant to the defense of this action (see CPLR 3101; Andon v 302-304 Mott St. Assoc., 94 NY2d 740, 745-746 [2000]; Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]; Yoshida v Hsueh-Chih Chin, 111 AD3d 704, 705-706 [2013]; Osowski v AMEC Constr. Mgt., Inc., 69 AD3d 99 [2009]; American Re-Ins. Co. v United States Fid. & Guar. Co., 19 AD3d 103 [2005]; Masterwear Corp. v Bernard, 3 AD3d 305 [2004]; Masterwear Corp. v Bernard, 298 AD2d 249 [2002]).

Contrary to the plaintiff’s contention, CPLR 4547 does not bar disclosure of the subject documents, as that statute is concerned with the admissibility of evidence, and does not limit the discoverability of evidence (see Matter of Town of Waterford v New York State Dept. of Envtl. Conservation, 77 AD3d 224, 233 [2010], mod on other grounds 18 NY3d 652 [2012]).”

“Strict liability” renders a defendant legally responsible for damage and losses regardless of culpability or intent, fault or negligence. In Tang v Marks  2015 NY Slip Op 08110  Decided on November 12, 2015  Appellate Division, First Department it rendered plaintiff unable to sue defendant for legal malpractice.

“Defendant Marks, an attorney, represented plaintiffs in an underlying federal court action in which plaintiffs were found strictly liable under the Lanham Act, and in which the federal court entered a $400,000 judgment against them. Plaintiffs subsequently brought a legal malpractice and breach of contract action against Marks, claiming that, but for Marks’s negligence, plaintiffs would have faced a lower judgment.

To sustain a cause of action for legal malpractice, a plaintiff must show “(1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff’s losses; and (3) proof of actual damages” (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). “In order to establish proximate cause, a plaintiff must demonstrate that but for the attorney’s negligence, she would have prevailed in the underlying matter or would not have sustained any ascertainable damages” (id. [emphasis added]). “[S]peculation on future events [is] insufficient to establish that the defendant lawyer’s malpractice, if any, was a proximate cause of any such loss” (id. at 734-735).

Here, as plaintiffs were admittedly strictly liable in the underlying federal action, they are unable to show that they would have prevailed and that they would not have sustained any ascertainable damages.”

McPhillips v Bauman  2015 NY Slip Op 08218  Decided on November 12, 2015  Appellate Division, Third Department is the very rare case in which the State defends a legal malpractice case.  Here, a host of prison employees and the state were sued for the death of an incarcerated prisoner .  The physician’s conduct was unfavorably reviewed by the Commission of Correction Medical Review Board, and he was then added to the law suit.  Although offered a settlement in which he did not pay or be held liable, he refused.  He then demanded that a private attorney be assigned to him.  While that motion was pending, his case was dismissed, and the reset of the matter was settled.

First:  “This action followed in July 2013 with plaintiff alleging three bases for malpractice: defendant ignored a conflict of interest; defendant neglected to keep the 2010 memorandum confidential or seek redaction of the strongly worded unfavorable parts thereof; and defendant failed to inform plaintiff in a timely fashion of the existence of the 2010 memorandum (which he asserts he did not know about until 2013) so that he could have pursued a defamation action. He sought damages for injury to his professional reputation and mental anguish. Defendant moved to dismiss the complaint. Supreme Court granted the motion and this appeal ensued.

We affirm. Elements of a cause of action for legal malpractice include the existence of an attorney-client relationship (see Arnold v Devane, 123 AD3d 1202, 1203 [2014]), 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” (Dombrowski v Bulson, 19 NY3d 347, 350 [2012] [internal quotation marks and citations omitted]; see Hyman v Burgess, 125 AD3d 1213, 1215 [2015]). It is undisputed that the federal action against plaintiff was dismissed with no admission of wrongdoing by him, as well as no monetary payment or liability by plaintiff. Although his treatment of inmates with asthma is purportedly now more closely monitored, there is no allegation that plaintiff lost his state job or suffered any economic harm in his employment. Plaintiff’s complaint did not allege pecuniary damages and “‘the established rule limit[s] recovery in legal malpractice actions to pecuniary damages'” (Kaufman v Medical Liab. Mut. Ins. Co., 121 AD3d 1459, 1460 [2014], lv denied 25 NY3d 906 [2015], quoting Dombrowski v Bulson, 19 NY3d at 352).

Second: “Even if there was a conflict of interest constituting an ethical violation as alleged by plaintiff, such a violation would not give rise to a viable legal malpractice claim absent pecuniary damages (see Guiles v Simser, 35 AD3d 1054, 1055-1056 [2006]). The absence of such damages is also fatal to the alleged disclosure error and, moreover, we recently held that the disclosed memorandum was “clearly pertinent” to the pending federal action and defendant’s disclosure thereof was “shielded by absolute privilege” (McPhillips v State of New York, 129 AD3d at 1362). Plaintiff urges that he does not need to allege pecuniary damages regarding defendant’s failure to advise of a potential defamation action because that potential action involved statements that tended to impugn his professional ability (see Schindler v Mejias, 100 AD3d 1315, 1316 [2012]). However, we need not directly address that issue because we agree with Supreme Court that, under the circumstances of this case, defendant did not have a duty in his representation pursuant to Public Officers Law § 17 to advise plaintiff of a potential separate private action involving nonparties (see Matter of O’Brien v Spitzer, 7 NY3d 239, 243 [2006] [“The purpose of Public Officers Law § 17 is, in essence, to provide insurance against litigation”]; Frontier Ins. Co. v State of New York, 87 NY2d 864, 867 [1995]). The remaining issues are either academic or unavailing.”

The scope of legal malpractice litigation is wide, and sometimes surprisingly deep.  Wachtell, Lipton, Rosen & Katz v CVR Energy, Inc.  2015 NY Slip Op 30270(U)  February 24, 2015
Supreme Court, New York County  Docket Number: 654343/2013  Judge: O. Peter Sherwood is a case that involves Carl Ichan, huge sums of money and a starkly stated claim of legal malpractice.  It involves litigation in Kansas, the Southern District, and this case in Supreme Court, New York County.

“This dispute arises out of the same transaction as the related actions; Goldman Sachs & Co. v CVR Energy, Inc. (Index No. 652149/2012) and Deutsche Bank Securities, Inc. v CVR Energy (Index No. 652800/2012) (the Bank Actions). In January 2012, CVR Energy, Inc. (CVR) learned that Carl Icahn and his affiliated companies (collectively, Icahn) had acquired a substantial minority interest in CVR. CVR believed Icahn was preparing to acquire or influence control over CVR. CVR wanted to resist this attempt. Wachtell was CVR’s counsel. CVR hired Goldman Sachs and Deutsche Bank (the Banks) to act as CVR’s financial advisors. CVR entered into initial agreements with each of the Banks. The agreements were embodied in letters of engagement (the Initial Engagement Letters). ”

“Each Initial Engagement Letter provided for flat rate fees, applicable in a variety of transactions or situations in which CVR may become involved, and for reimbursement of each Bank’s reasonable out-of-pocket expenses. In each Initial Engagement Letter, the contracting parties anticipated that, in the event of a sale or similar transaction, the parties would enter into a second agreement governing the specific transaction and setting forth new fee provisions. After Icahn announced a tender offer for outstanding CVR stock, each Bank advised CVR that it required a new fee arrangement. CVR then entered into a new engagement letter with each Bank (the Second Engagement Letters). The Second Engagement Letters confirmed CVR’s retention of the Banks to provide advisory and investment banking services to CVR and its Board relating to Icahn’s attempt to obtain control over CVR. Each letter also set forth schedules of flat rate fees, including an independence fee, an announcement fee, a proxy contest fee, and a termination fee, and fees based upon a percentage of the value CVR stock, such as a sale transaction fee and a success fee, each payable upon different triggering events and dates, among other terms. CVR claims the Board was never aware the Second Engagement Letters were operative and did not understand the terms of those agreements. Mr. Frank Pici, CVR’s Chief Financial Officer, signed the Second Engagement Letters on behalf of CVR. Mr. Edmund Gross, General Counsel of CVR, was also aware of the Second Engagement Letters, but did not understand that the Banks would earn the fee for a successful sale if the Icahn tender offer succeeded (counterclaim, ~ 28). CVR’s counterclaim alleges Wachtell “failed to advise CVR that under the terms of the [Second Engagement Letters], CVR would face claims by [the Banks] for $36 million even if [Icahn] acquired control of CVR … , double the fees that [the Banks] would charge if CVR remained independent” (counterclaim,~ 3). CVR claims it would not have agreed to the Second Engagement Letters if it had understood the fee term (id.). ”

“CVR did not pay the Banks, and litigation followed. The Banks began the Bank Actions, seeking their fees pursuant to the Second Engagement Letters. On October 24, 2013, CVR sued Wachtell and two individual partners of the firm for legal malpractice in the United States District Court for the District of Kansas (the “Federal Action”), claiming that Wachtell advised it poorly about how much it could end up owing Deutsche Bank and Goldman Sachs. That action was removed to the Southern District of New York. Meanwhile, on December 18, 2013, Wachtell filed this action with claims for (I) a declaratory judgment stating that Wachtell’s representation of CVR was consistent with the standards of the legal profession and caused no loss to CVR; (2) breach of a protective order and agreement regarding the production of documents against all defendants, claiming that documents produced by Wachtell pursuant to protective orders in the Bank Actions were improperly disclosed to Icahn and used in the Federal Action; and (3) abuse of process, claiming defendants were using the Bank Actions and the Federal Action to harass and elicit funds from Wachtell. ”

“To state a claim for legal malpractice, a plaintiff must allege negligence of the attorney, which was the proximate cause of the loss sustained, and proof of actual damages (Reibman v Senie, 302 AD2d 290 [1st Dept 2003]; Schwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193, 198 [1st Dept 2003]). To show proximate cause, a plaintiff must demonstrate that “but for” the attorney’s negligence, the plaintiff would not have sustained any “ascertainable damages” (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]; Reibman, 302 AD2d at 290-291 ). Wachtell does not dispute that the counterclaim alleges negligence and damages. CVR alleges that Wachtell failed to provide CVR with information about the Second Engagement Letters, failed to “competently represent CVR in negotiating fair and appropriate fee terms,” falsified the minutes of a board meeting to make it appear that Wachtell had provided information about the Second Engagement Letters, and failed to represent CVR’s best interests with respect to the fee terms in the Second Engagement Letters (answer and counterclaim, NYSCEF Doc. No. 42, at ii 44). CVR claims the amounts it will be required to pay the Banks are its damages. Wachtell argues that because the Board ratified the Second Engagement Letters, CVR’s allegation that Wachtell’s negligence proximately caused CVR’s damages must fail. ”

“Here, CVR, while in possession of all of the relevant information about the fee terms, ratified the Second Engagement Letters. CVR also accepted the benefits of the Banks’ work performed pursuant to those agreements. Accordingly, New York State law precludes CVR claiming its attorney’s malpractice caused it to enter into those agreements (see id.). As CVR alleges those agreements are the sole source of its damages, it has failed to allege the causation element of a malpractice claim.”

When might the professional be responsible for mistakes, yet given a pass because of the client’s conduct?  It happens with some regularity in the accountant malpractice area.  Accountant makes a professional error, yet client is unable to sue because it has “dirty hands.”  One frequent fact pattern is a rogue insider who causes problems that the accounting professionals should have detected.  They fail to detect the problems, and when sued, blame the rogue insider which then allows them to avoid all liability.  As an example CRC Litig. Trust v Marcum, LLP   2015 NY Slip Op 07811  Decided on October 28, 2015  Appellate Division, Second Department shows us how the accounting firm escapes suit.

“In an action, inter alia, to recover damages for accounting malpractice, the plaintiff appeals from a judgment of the Supreme Court, Nassau County (Driscoll, J.), dated July 12, 2013, which, upon an order of the same court dated June 20, 2013, granting the defendants’ separate motions pursuant to CPLR 3211(a) to dismiss the amended complaint insofar as asserted against each of them and denying the plaintiff’s cross motion for leave to amend the amended complaint, is in favor of the defendants and against it dismissing the complaint. The notice of appeal from the order dated June 20, 2013, is deemed to be a notice of appeal from the judgment dated July 12, 2013 (see CPLR 5512[a]).”

“In addition to the expiration of the statute of limitations as to the accounting malpractice causes of action against Marcum, the Supreme Court properly concluded that all of the plaintiff’s claims, against both defendants, were barred by the doctrine of in pari delicto, which “mandates that the courts will not intercede to resolve a dispute between two wrongdoers” (Kirschner v KPMG LLP, 15 NY3d 446, 464; see Schwartz v Leaf, Salzman, Manganelli, Pfiel & Tendler, LLP, 123 AD3d 901, 902). Contrary to the plaintiff’s contention, the allegations of the complaint do not implicate the “adverse interest” exception to the doctrine, because the allegations do not support a finding that the corporate insiders who allegedly committed the wrongdoing totally abandoned the corporation’s interests and acted entirely on their own (see Kirschner v KPMG LLP, 15 NY3d at 467-468; Chaikovska v Ernst & Young, LLP, 78 AD3d 1661, 1663-1664; cf. Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d at 198).”