Plaintiff was a well-0ff husband facing an upcoming divorce.  He retained attorneys well in advance of the proceedings and was girded for war.  Then, things fell apart.  How did this happen, and are the attorneys to blame?

Sitomer v Goldweber Epstein, LLP  2015 NY Slip Op 31541(U)  August 14, 2015  Supreme Court, New York County  Docket Number: 158325/13
Judge: Barbara Jaffe tells us certain things.  One, if the retainer agreement says that the law firm is not required to perfect an appeal, then it will not likely be successfully sued for not taking an appeal.  The second is that if a lawfirm has evidence of diminution of value, it had better use the evidence in favor of its client.  The third is that strategic use/non-use of a witness may be subject to dismissal if the attorney can state any reason at all.

“By letter dated May l, 2002, plaintiff, then married, signed a shareholder agreement whereby he transferred to several institutional investors 2,500 or his 5,000 shares in his holding company, International Star Investments Limited (ISI Ltd.) in exchange for capital contributions. (NYSCEF 44). On April 1, 2005, plaintiff hired defendants to represent him in connection with an anticipated divorce action to be commenced against him. In signing the retainer agreement, plaintiff agreed, as pertinent here, that defendants would provide services in connection with proceedings at the trial court level only. (NYSCEF 9). On April 11, 2005, plaintiffs ex-wife commenced the divorce action in New York County. (NYSCEF 10). At that time, in addition to his interest in ISI Ltd., plaintiff had an ownership interest in Blue Star Jets, LLC. (NYSCEF 8, 37). Although plaintiff waived his answer and did not object to the grounds for divorce, he contested, inter alia, the distribution of marital assets. On August 15, 2005, the justice presiding in the matrimonial action so ordered the appointment of Klein Liebman & Gresen, LLC, a neutral valuation expert recommended by plaintiff and agreed to by his wife to appraise Blue Star. (NYSCEF 11). On July 16, 2007, Klein Liebman submitted its report, concluding that plaintiff owned a 45 percent interest in Blue Star valued at $4,829,000. (NYSCEF 15). Dissatisfied with the Klein Liebman report, defendants retained Robert Vigna, another valuation expert, to review it. By email dated September 24, 2007, Vigna sent defendants a list of “critical deficiencies” in the report, claiming that Klein Liebman wrongly relied on projected gross revenue figures instead of the lower actual figures, and that it applied “subjective and speculative” discounts to adjust for the disparity. (NYSCEF 16). On September 25, 2007, the divorce trial commenced. (NYSCEF 37). By email dated October 11, 2007, defendants approached Gordon Wilde, a director of ISI Ltd., to testify “about the dilution of [plaintiffs] stock interest in [ISI Ltd.] from 100% to 50% and the call for infusion of capital into the [real estate development] project in the amount of $675,000 for [plaintiffs] share[s].” (NYSCEF 57). Defendants followed up by email on November 2 in order to meet with Wilde and prepare him for his testimony; Wilde responded shortly thereafter and directed defendants to review his fee and expenses. (NYSCEF 58).”

Not calling a witness

” By letter dated November 20, 2007, defendants sent Wilde a $3,000 check covering his fee to testify. On a copy of the letter is a handwritten undated annotation: “Returned check to R Sitomer as Wilde not to be called at trial.” (NYSCEF 59). The trial concluded on December 7, 2007. Defendants did not call Vigna as a witness (NYSCEF 8, 37), nor did they offer in evidence the 2002 shareholder agreement or 2007 letter. ”

“Absent a basis for refuting Klein Liebman’s valuation method, and given the court’s questioning and findings and the concern that calling Vigna would undermine plaintiffs credibility, defendants have demonstrated that their decision not to call Vigna as a witness constituted a matter of strategy that, as a matter of law, forms no basis for a finding of legal malpractice. (See O’Callaghan v Brunelle, 84 AD3d 581, 581-582 [l5t Dept 2011], Iv denied 18 NY3d 804 [2012] [prior NYSE and SEC decisions revealed that uncalled witness could not help plaintiff and thus plaintiff could not establish causation]; L.l C. Commercial Corp. v Rosenthal, 202 AD2d 644, 644-645 [2d Dept 1994], Iv dismissed 84 NY2d 841 [decision not to call witness strategic as potential testimony confusing and unfavorable to plaintiff]; see also A.H Harris & Sons v Burke, Cavalier, Lindy & Engel P.C., 202 AD2d 929, 930 [3d Dept 1994] [failure to call witness appropriate course of action absent allegation of how failure fell below attorney standard of care]). Morever, as matters concerning the date of valuation of marital assets and whether to consider projected or past income figures are committed to the court’s discretion (see generally 11 [* 11] McSparron v McSparron, 87 NY2d 275, 287 [1995]), a determination that the attorney’s negligence resulted in a less favorable result is too speculative to provide a legal or factual basis for a finding of malpractice (see Grant v LaTrace, 119 AD3d 646, 647 [2d Dept 2014] [defendants’ alleged failure to remedy defects in service turned on court’s discretion in granting extension and thus required speculation as to whether different result would obtain absent attorney’s failure]; Bua v Purcell & Jngrao, P.C., 99 AD3d 843, 848 [2d Dept 2012], Iv denied 20 NY3d 857 [2013] [whether attorney’s failure to properly effect termination of contract for sale resulted in buyer later bringing action in specific performance was too speculative “inasmuch as it (was) premised on decision that were within the sole discretion of the buyer”]; see also Sierra Holdings, LLC v Phillips, Weiner, Quinn, Artura & Cox, 112 AD3d 909, 910 [2d Dept 2013] [whether attorney’s failure to notify clients of upcoming foreclosure sale resulted in their inability to recoup losses was too speculative to support claim for legal malpractice]). “

The oft-repeated statement that legal fee actions invite counterclaims is amply demonstrated in Law Offs. of Ira H. Leibowitz v Landmark Ventures, Inc.  2015 NY Slip Op 06575
Decided on August 19, 2015  Appellate Division, Second Department where a lot of litigation, and an appeal has gone on regarding what appears to be a claim for $ 15,000 or so.

“The plaintiffs, Ira H. Leibowitz and his law offices, commenced this action to recover legal fees for services rendered on behalf of the defendant, Landmark Ventures, Inc. (hereinafter Landmark), in connection with two separate matters. The plaintiffs’ services on each matter were rendered pursuant to separate retainer agreements for each matter.

The Supreme Court properly granted that branch of the plaintiffs’ motion which was for summary judgment on the cause of action alleging breach of contract. “Construction of an unambiguous contract is a matter of law, and the intention of the parties may be gathered from the four corners of the instrument and should be enforced according to its terms” (Beal Sav. Bank v Sommer, 8 NY3d 318, 324; see Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475; A. Gugliotta Dev., Inc. v First Am. Tit. Ins. Co. of N.Y., 112 AD3d 559, 560). “A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion'” (Kasowitz, Benson, Torres & Friedman, LLP v Duane Reade, 98 AD3d 403, 406, affd 20 NY3d 1082, quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355).

Here, the plaintiffs established, prima facie, their entitlement to judgment as a matter of law on the cause of action alleging breach of contract by submitting certain email exchanges between the parties, which demonstrated, “[b]y the plain language employed,” that the plaintiffs made an offer to represent Landmark in each matter for a certain fee, and that Landmark accepted that offer (Kasowitz, Benson, Torres & Friedman, LLP v Duane Reade, 98 AD3d at 405). In one matter, the parties agreed that the plaintiffs would represent Landmark at a rate of $350 per hour. The invoices documenting the number of hours worked and the amount of disbursements paid out demonstrated, prima facie, the plaintiffs’ entitlement to legal fees in the sum of $4,760 in connection with the services rendered for that matter. In the second matter, the agreement was for an initial retainer fee of $5,000, plus a 25% contingency fee with respect to any sums that Landmark ultimately recovered in that matter. Since it is undisputed that, shortly after the commencement of an action in connection with the second matter, Landmark entered into a stipulation of settlement whereby Landmark recovered $40,000, the plaintiffs established, prima facie, entitlement to their full fee of $5,000 plus a contingency fee of 25% of $40,000.

In opposition, Landmark failed to raise a triable issue of fact.

Landmark’s counterclaim, which alleged tortious interference with contract and tortious interference with prospective business relations, was premised upon the plaintiffs’ alleged contact with the third party with whom Landmark had entered into the stipulation of settlement in connection with the second matter. Specifically, Landmark alleged that, contrary to the terms of the stipulation, the plaintiffs requested that certain of the agreed-upon payments be made directly to them as Landmark’s counsel, rather than to Landmark. The ostensible purpose of this communication was to ensure that the plaintiffs would be able to deduct their legal fees from the settlement funds.”

Totally unexpected players in an attorney-fee-legal-malpractice case have led to a very interesting decision by Justice Kern that touches on a number of legal malpractice issues.  Today, we will discuss the Judiciary Law § 487 claim for file churning in Kagan Lubic Lepper Findelstein & Gold LLP v 325  Fifth Ave. Condominium 2015 NY Slip Op 31470(U)  August 6, 2015 Supreme Court, New York County  Docket Number: 151878/15   Judge: Cynthia S. Kern.

“Specifically, defendants’ answer alleges as follows. Defendants ~ired Kagan Lubic in October 2012 to represent them as general counsel and in an action again~! the sponsor of 325 Fifth and certain subcontractors arising from the defective design, constr~ction, sale, marketing ·! ‘ and management of the condominium building located at 325 Fifth Avenue, New York, New York (the “building”), which was allegedly plagued with defects from th~ outset. Defendants allege that Kagan Lubic failed to take even the most basic steps to secure remedies against those responsible for the defective design and construction of the Building and ihat for nearly two i I years, Kagan Lubic “churned the file” and generated enormous legal bills.through prolonged ‘ negotiations and other pre-litigation tactics that were time consuming, costly and entirely I ineffective, including, inter alia, (i) retaining duplicative, superfluous experts which caused I defendants to incur thousands of dollars in additional fees; (ii) engaging i~ futile settlement discussions for nearly eighteen months; (iii) generating enormous legal feFs by spending countless hours addressing inconsequential maintenance issues in the buiIµing which, in many ‘ instances, cost Jess to remediate than the time spent addressing them; (iv) :frustrating any progress I toward reaching a settlement with the sponsor with respect to the mainten~nce issues by delaying nearly four months before responding to the sponsor’s offer to remediate certain conditions; (v) routinely raising additional maintenance issues which resulted in further delay and costs; and (vi) allowing nearly two years to lapse without filing a complaint in the action. Defendants further allege that “[b]ut for Kagan Lubic’s dilatory tactics, the defects in the Building would have been remediated by now, and the impaired value of the Condominium units in ~he Building resulting from the design and construction defects and ongoing litigation would ha~e been restored.”

Additionally, plaintiffs motion for an Order pursuant to CPLR § 32 I I(a)(7) dismissing defendants’ second counterclaim for a violation of Judiciary Law§ 487 on the ground that it fails to state a claim is denied. Judiciary Law§ 487(2) provides, in pertinent part, that an attorney who “willfully delays his client’s suit with a view to his own gain” is guilty of a misdemeanor and may be liable in treble damages. Jn order to sustain a cause of action for.a violation of Judiciary Law§ 487(2), the pleading must allege specific facts demonstrating the attorney’s alleged delay for his own gain and may not merely allege bare legal conclusions. See Bernstein v. Oppenheim & Co., P. C., 160 A.D.2d 428 (I st Dept 1990); see also Fleyshman v. Suckle & Schlesinger. PLLC, 91A.D.3d591 (2d Dept 2012). Here, defendants’ answer sufficiently states a claim for a violation of Judiciary Law§ 487(2). The second counterclaim alleges that plaintiff, instead of diligef\tly and vigorously pursuing defendants’ legal claims against the sponsor and the subcontractors, engaged in selfserving dilatory tactics that were designed to impede settlement discussions and the timely resolution of the dispute “in order to generate enormous legal fees with a ;view to its own gain.” Specifically, defendants allege that they retained plaintiff in October 2012, after an action had been commenced by Summons with Notice in July 2012, and that from t~e outset of the I representation, plaintiff”failed to take even the most basic steps to resolve [defendants’] claims” and that “[i]nstead, for nearly two years, [plaintiff] simply churned the file and generated enormous legal bills through prolonged negotiations and other pre-litigation tactics that were time consuming, costly, and entirely ineffective,” such as requiring additional unnecessary expert investigations, delaying filing a complaint for almost two years, stalling all opportunities to settle the underlying matter and continuing to attempt to settle the matter despite the knowledge that settlement attempts were futile. As these allegations are sufficient to state a claim for a violation of Judiciary Law§ 487, plaintiffs motion to dismiss the second counterclaim is denied. ”

Mr. Karp and Mr. Cangemi made an arrangement to purchase and fund some investment real estate.  Cangemi v Karp  2015 NY Slip Op 51185(U)  Decided on August 6, 2015  Supreme Court, Queens County  McDonald, J.  After a while Mr. Karp grew “weary” of the arrangement and sought to shake things up.  He sued not only his business partner, but the attorney too.  The case went badly for Karp.

“On or about September 2, 2013, defendant entered into an agreement to loan plaintiff the sum of $500,000.00. On September 3, 2013, plaintiff executed a mortgage in connection with the loan agreement. Both parties were represented by attorney Peter Mammis. An Escrow Agreement was executed on September 11, 2013 in which Mr. Mammis created an arrangement where the loan documents were held by him in escrow pending either repayment of the loan in full or a default by plaintiff.

Plaintiff transferred ownership of the subject property located at 31-17 Ditmars Boulevard on September 3, 2013 to Ditmars Properties LLC, a New York Limited Liability Company. Defendant held an 85% share of Ditmars Properties LLC and plaintiff held a 15% share of the Ditmars Properties LLC. Plaintiff collected rent and paid a monthly payment of interest to defendant.

The Escrow Agreement provides, inter alia, the mortgage has not and shall not be recorded; upon receipt of notice from defendant that plaintiff is in default of the Note, Mr. Mammis will release all documents held in escrow to defendant; and upon notice from defendant that plaintiff has satisfied in full his obligation pursuant to the Note, Mr. Mammis will destroy all documents held in escrow. The Note provides, inter alia, plaintiff shall make a monthly interest payment in the sum of $5,833.33 to defendant; the final balloon payment consisting of the principal sum of $500,000.00 shall be paid by plaintiff to defendant on or before October 1, 2015; and if plaintiff fails to make three consecutive installment payments when due or if he fails to make the balloon payment then the shares will be released to defendant and plaintiff will waive any rights or interest in such shares and any ownership interest in the subject premises.

At some point after executing the loan documents, defendant became weary of such arrangement and commenced an action on or about March 18, 2014 in Supreme Court, Queens County under Index Number 701835/2014 against Mr. Mammis and plaintiff for reformation of the loan documents and legal malpractice. Defendant also filed a notice of pendency against the subject property, recorded the mortgage, and paid the mortgage recording tax of $14,000.00 along with the recording fees.”

“The essential elements for pleading a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff’s performance pursuant to the contract, the defendant’s breach of his or her contractual obligations, and damages resulting from the breach (see Dee v Rakower, 112 AD3d 204 [2d Dept. 2013]; Elisa Dreier Reporting Corp. v Global NAPS Networks, Inc., 84 AD3d 122 [2d Dept. 2011]).

Here, it is undisputed that a contract exists. Plaintiff demonstrated his performance pursuant to the contract by tendering the monthly interest payments and by ultimately tendering the balloon payment. Although defendant alleges that plaintiff breached the contract by failing to make the May 1, 2014 and June 1, 2014 payments, pursuant to the loan documents, three months of nonpayment constituted a breach. As such, plaintiff demonstrated his compliance with the contract and also demonstrated defendant’s breach when defendant commenced the reformation action and filed the mortgage in direct contravention of the terms of the Escrow Agreement. Lastly, plaintiff alleged damages resulting from defendant’s breach including the $14,000.00 mortgage tax and the additional financing plaintiff incurred. As such, plaintiff sufficiently pled a cause of action for breach of contract.”

We’ve taken a look at Saviano v Corniccelo  2015 NY Slip Op 31447(U)  August 3, 2015
Supreme Court, New York County  Docket Number: 153168/2014  Judge: Kelly A. O’Neill Levy for the question of statute of limitations.  Now, when might an individual sue when he has already given his rights over to an LLC ?

On a motion to dismiss made pursuant to CPLR 3211, the court’s “task is to determine whether plaintiffs’ pleadings state a cause of aetion.” 51 I W 232nd Owners Corp. v .Jenn!fer Realty Co., 98 NY2d 144, 151-152 (2002). The court must construe Plaintiffs’ pleadings liberally, see Leon v Martinez, 84 NY2d 83, 88 (1994); CPLR 3026, and accept as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion. 5 See 51 I W 232nd, 98 NY2d at 152. The Court must accord Plaintiffs “the benefit of every favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.” Leon, 84 NY2d at 87-88. The dismissal motion must be denied if, from the pleading’s “four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law.” Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977).

Pursuant to CPLR 3211 (a)(3), a defendant may seek dismissal of an action where “the party asserting the cause of action has not legal capacity to sue.” See also Hecht v Andover Assoc. Mgt. Corp., 114 AD3d 638, 640 (2d Dept 2014). Standing is a threshold determination that the plaintiff has “an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” Caprer v Nussbaum, 36 AD3d 176, 182 (2d Dept 2006). “A plaintiff generally has standing only to assert claims on behalf of himself or herself.” Id. Under longstanding common law, a court has “no inherent power to right a wrong unless thereby the civil, property or personal rights of the plaintiff in the action or the petitioner in the proceeding are affected.” Socy. of Plastics Indus., Inc. v County of Suffolk, 77 NY2d 761, 772 (1991 )(internal citations omitted). In this regard, Defendants argue that Saviano, having assigned his rights and interests in the Contract to the LLC, never actually owned the Building, and as such cannot maintain any claims which flow “exclusively” from losses sustained by the LLC. (Defendants’ Memorandum of Law, dated Sept. 11, 2014, p. 14 ). The court disagrees. Defendants’ position interprets the standing issue too narrowly. The appropriate inquiry is whether Saviano has been aggrieved by Defendants’ actions such that he should be “allowed access to the courts to adjudicate the merits” of his individual claims. Caprer, 36 AD3d at 182. Assuming Defendants failed to advise Saviano of the air rights issue and the existence of the title report before the closing, and Saviano consequently lost the opportunity to exercise a termination clause in the Contract of Sale and the ability to live with his family in the Planned Duplex, there are sufficient facts to “cast [Saviano’s individual claims] in a form traditionally capable of judicial resolution” such that Saviano has standing to maintain them. Schlesinger v Reservists Comm. to Stop the War, 418 us 208, 220-221 (1974). “

Saviano v Corniccelo  2015 NY Slip Op 31447(U)  August 3, 2015  Supreme Court, New York County  Docket Number: 153168/2014  Judge: Kelly A. O’Neill Levy discusses how an individual commencing an action might toll the statute of limitations for an LLC which then joins in.

“Plaintiffs allege in their complaint that in or around September 2010, Saviano identified a four-story residential brownstone building located at 218 East 301 h Street, New York, New York (“the Building”), then owned by Dianova USA, Inc. (“Seller”), for purchase. Saviano intended to add a fifth floor to the Building, combining the fourth and fifth floors to create a duplex for himself and his family (“the Planned Duplex”). Saviano retained Defendants in connection with the purchase thereof. Saviano concedes that he did not sign a retainer agreement with Defendants.

In June of 2011 Defendants received a title report for the Building which showed that the air and development rights over the Building had already been sold, effectively preventing any upward construction. Plaintiffs allege that Defendants neither consulted the title report nor informed Saviano of the contents thereof prior to the closing. (Amended Complaint  26). On June 14, 2011, acting on the advice of the Defendants, Saviano assigned all rights and interests in the Contract to the LLC. Defendants told Saviano the assignment was “a nominal and ministerial act” designed to insulate Saviano from liability. (Amended Complaint 37). Saviano signed the Assignmen·t of Contract individually and as a managing member of the newly created LLC. Saviano did not sign a retainer agreement with Defendants on behalf of the LLC. The closing was held on June 21, 2011. In or around May 2012, during a “chance discussion with a neighbor,” Plaintiffs learned that the air and development rights over the Building had been sold, making it impossible to construct the Planned Duplex. (Amended Complaint 40).”

“Under CPLR 3211 (a)(5), a defendant may obtain dismissal of one or more causes of action on the ground that the cause of action is barred by the statute of limitations. In general, a legal malpractice action must be commenced within three years of the date of accrual of the claim. CPLR 214(6); see also Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d 191, 194 (2d Dept 2009). Here, Defendants argue that the LLC’s legal malpractice claim is barred by the three-year statute of limitations. According to Defendants, the claim accrued on June 21, 2011, the date of the closing, and the Amended Complaint (filed June 21, 2014), which for the first time asserted claims on behalf of the LLC, is untimely. Taken together with Defendants’ assertion that Saviano has no standing to maintain his individual claims, Defendants argue that there are no valid pre-existing claims to which the LLC’s claims can relate back. Thus, Defendants claim that sustaining the LLC’s claims will “severely prejudic[e]” their defense and preparation of the case. (Defendants’ Reply Memorandum of Law, dated Nov. 11, 2014, p. 7). An otherwise untimely malpractice claim may survive a motion to dismiss ifthe claim relates back to an earlier duly filed complaint where (1) both claims arise out of the same transactions or occurrences, and (2) the new and original plaintiff are so closely related that the original plaintiffs claims would have given the defendant “notice of the transactions, occurrences … to be proved [by] the amended pleadings.” Giambrone v Kings Harbor Multicare Ctr., 104 AD3d 546, 548 (I st Dept 2013). For a defendant to be prejudiced, there must be some indication that the he was “hindered in the preparation of his case or has been prevented from taking some measure in support of his position.” Id. Although the court agrees that Plaintiffs’ malpractice action accrued on June 21, 2011, Defendants’ arguments are unavailing. Here, the LLC’s claims satisfy both elements of the relation-back standard. There can be no dispute that both sets of claims arise from the same transactions and occurrences inasmuch as the LLC’s allegations in the Amended Complaint are essentially identical to Saviano’s original, timely complaint. In this same vein, the LLC and Saviano are so closely related that Saviano’s original claims gave Defendants notice of the transactions or occurrences underlying the LLC’s claims. Notably, Plaintiffs allege that Saviano assigned his rights and interests to the LLC on Defendants’ advice. Moreover, Defendants concede that they informed Plaintiffs that the original complaint failed to name the LLC as a party. (Defendants’ Memorandum of Law, dated Sept. 11, 2014, p. 5). Therefore, it is evident that Defendants were aware of the LLC’s claims as the actual Building owner when Saviano filed his original complaint. “