When one looks back in retrospect, certain patterns might become clear.  Napoli Bern, a hugely successful mass torts firm has imploded.   Christine Simmons of the NYLJ writes:  “The feuding equity partners of Napoli Bern Ripka Shkolnik have engaged Mark Zauderer, a partner at Flemming Zulack Williamson Zauderer, to mediate their partnership dispute and adjourned a contempt hearing that was scheduled Wednesday.

Paul Napoli and Marc Bern, equity partners in Napoli Bern and several related firms, have filed breach of contract claims against each other, alleging that the other’s conduct has harmed the partnership. In November, Manhattan Supreme Court Justice Eileen Bransten appointed former Nassau County Justice Ira Warshawsky as temporary receiver to oversee finances for the Napoli Bern firms.”

Late last year, the fen-phen settlement fell apart when claims of deceit surfaced.  Appel-Hole v Wyeth-Ayerst Labs.  2014 NY Slip Op 33170(U)
November 21, 2014  Supreme Court, New York County  Docket Number: 105122/09  Judge: Charles E. Ramos describes some of the issues.

“In November 2001, the Original Action was settled, and the settlement approved by a predecessor court, by Justice Helen Freedman. At or around this time, the concern was raised that the settlement and disbursements obtained had been manipulated and misallocated by settling counsel, defendants herein, Napoli Bern & Kaiser, LLP (NKB), to clients other then those referred to by Parker & Waichman, LLP (P&W). At the time that P&W referred clients, NKB agreed to represent them and to share attorneys’ fees with P&W. Shortly after approval of the settlement, P&W commenced an action against NKB alleging misrepresentations in connection with that settlement, entitled P&W v Napoli, and bearing the index number 605388/01 (P&W Action) . This Court largely dismissed the action on the ground that P&W lacked standing to assert claims of breach of contract between the referred clients and NKB, and because it constituted a collateral attack on the settlement, which was affirmed (Parker & Waichman, 29 AD3d 396 [1st Dept 2006]). A claim for an accounting remains in the pending P&W Action. In 2003, P&W and 389 of its referred clients commenced another, closely related action entitled Abramova v Napoli, and bearing the index number 601332/03 (Abramova Action). This action is stayed while most of the referred clients pursue their claims in this action. In 2006, P&W and proposed intervenor plaintiffs sought the Court’s permission to commence this action against NKB and its three named partners, Paul Napoli, Gerald Kaiser, and Marc Bern, in order to assert claims for fraud and violation of Judiciary Law§ 487. ”

“For instance, the third amended intervenor complaint alleges that John Bagglio repeatedly expressed dissatisfaction with the settlement amount being offered via NKB, and requested that NKB renegotiate a better settlement offer. Nonetheless, in a series of communications with John Bagglio, NKB misrepresented that he “had no case,” that his case faced “serious consequences” if he did not return the release form and accept the settlement amount being offered, and that he would “get nothing” if his case went to court. NKB also allegedly misled him concerning the settlement procedure, how the settlement offer was arrived at, and falsely put him in fear of losing any potential recovery if he did not accept a lower settlement amount, which the complainant relied upon in accepting a low settlement amount. The allegations of the remaining intervenor plaintiffs which defendants maintain are insufficient contain either a greater or lesser level of detail, describing the manner in which the defendants misrepresented how each individual settlement was arrived at, and how plaintiffs were pressured into settling the case based on terms which were false. Taking the allegations in the light most favorable to the plaintiffs, the Court concludes that, under the circumstances, sufficient facts are alleged to permit a fact-finder to infer that the intervenor defendants falsely represented how each settlement was arrived at and the settlement process itself. True, with respect to many of the complainants, intervenor plaintiffs have not alleged specific details of each individual intervenor defendants’ conduct. Nonetheless, the third amended intervenor complaint alleges the basic facts to establish the elements of fraud, and adequately informs the defendants of the complained-of incidents (see Eurycleia Partners, L.P., Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]). ”

Judiciary Law § 487 is a unique common law claim reserved solely for attorneys.  In general, real deceit, and lots of it, is required in order to succeed. Brady v Friedlander  2014 NYSlipOp 06677
October 2, 2014  Appellate Division, First Department  is an example of a claim that was not robust enough to survive a motion to dismiss.

“On or about September 30, 2009, defendant moved in Civil Court, New York County (Samuels, J.), to withdraw as counsel in the underlying nonpayment proceedings (see IGS Realty Co., L.P. v James Catering, Inc., 99 AD3d 528 [1st Dept 2012]). Over plaintiffs’ objection, the court granted the motion. Plaintiffs did not appeal from Civil Court’s order. With respect to the cause of action for a violation of Judiciary Law § 487, the instant complaint alleges that defendant provided fabricated grounds in support of his motion, to wit, a conflict with plaintiffs regarding strategy and a lack of trust in defendant’s representation, in order to conceal the true reason, which was an unfounded belief that plaintiffs could or would not pay future legal bills. However, while the parties’ communications as quoted in the complaint reflect that defendant was remarkably concerned with billing, which may have informed his decision to withdraw, the complaint also reflects that plaintiff Brady expressed disagreement with defendant as to strategy and questioned defendant’s honesty and competency, thus providing support for defendant’s stated grounds for the motion (cf. Palmieri v Biggiani, 108 AD3d 604 [2d Dept 2013]).

In granting the motion, over plaintiffs’ objection, Civil Court implicitly determined that defendant had shown “just cause” to be relieved. That issue may not be re-litigated via the instant misrepresentation claim (cf. Hass & Gottlieb v Sook Hi Lee, 11 AD3d 230 [1st Dept 2004]).”

Chambers v Weinstein     2014 NY Slip Op 51331(U) [44 Misc 3d 1224(A)]  Decided on August 22, 2014  Supreme Court, New York County  Sherwood, J. reads like a summer thriller.  Big money on the move…fraud lurking around every bend…the hero is in danger.  Will Proskauer Rose, LLP, which is billing a cool $1 Million as a non-refundable fee be kept in the case?

“The Complaint avers, among other things, that based on Schleider’s false representations that [*2]he would invest in certain investment transactions and take steps to protect those investments, Plaintiffs lent up to $6.7 million to defendant 148 Investment LLC (148), a company owned by Todd. Id., ¶¶ 30-31. Schleider engaged the KS Defendants to represent Plaintiffs in transactions with 148. Id., ¶ 32. In February and March of 2012, based on Schleider’s representation that Weinstein had access to large blocks of Facebook shares that they intended to purchase through 148 prior to an initial public offering (IPO) and then sell them at a substantially higher price, Plaintiffs lent a total of $3.025 million to 148 to purchase pre-IPO shares in three separate transactions. However, 148 purchased no Facebook shares and did not otherwise invest the money. Id., ¶¶ 35-50. Instead, Todd, Schlieder, Weinstein, Muschel and 148 engaged in self-dealings and used Plaintiffs’ money for their own personal expenses. Id., ¶ 51.

To further the fraudulent Facebook scheme, Todd represented to Plaintiffs that the transactions would be secured by collateral valued at $12 million, consisting of mortgages 148 held against a property known as 1741-1751 Park Avenue, New York (Park Avenue Property). Id., ¶ 75. The complaint avers that defendant 121 Park had made a $6 million mortgage to Kahal securing the Park Avenue Property and recorded same in March 2008.[FN1] Id., ¶ 76. In November 2011, Kahal assigned the mortgage to 148, which was recorded in June 2012. However, in or about March 2012, 148 reassigned the mortgage to Kahal. Both of the collateral assignments were performed without any consideration, but rather were made to deceive Plaintiffs. Id., ¶¶ 79-81, 88.

The Complaint also avers that in September 2011, Belle Glade Gardens Realty Group, LLC (BGG), a Florida company owned and controlled by Schleider, entered into an agreement with Prince of Belle Glade Gardens, LLC to purchase Belle Glade Gardens, a 384-unit apartment complex, for $16.4 million. Complaint, ¶¶ 118-120. Schleider retained defendant Greenberg to represent BGG in the transaction. Id. Although BGG deposited $120,000, Greenberg returned the down-payment to BGG in November 2011, thus terminating the purchase agreement. Id., ¶ 121-122. In February and April 2012, Schleider represented to Plaintiffs that the BGG transaction was still active and that he would be matching their investment therein. Id., ¶¶ 123. Based on the representation, Plaintiffs wired $2.5 million to Greenberg in February 2012, which was deposited into an escrow account for Schleider and a subaccount for BGG. Id., ¶¶ 124-125. Schleider subsequently directed Greenberg to wire $2.5 million to 148, but misrepresented to Plaintiffs that the $2.5 million was being held by Greenberg for the transaction. Id., ¶ 128. In April 2012, Schleider induced Plaintiffs to make an additional $330,000 investment, but later directed Greenberg to deduct its legal fees from the $330,000 wired by Plaintiffs, without disclosing that the BGG deal was no longer active. Id., ¶¶ 129-132. Schleider intended to and fraudulently turned over the BGG funds to 148 for use by Schleider, Todd, Weinstein and 148. Id., ¶ 133.

In 2011, Weinstein was prosecuted by the United States in the United States District Court of New Jersey (2011 Action). Proskauer represented Weinstein from December 31, 2012 to May 30, 2013 in the 2011 Action. Complaint, ¶ 226. As compensation for its services, Proskauer charged Weinstein $1 million as a minimum non-refundable fee. On December 20, 2012, Kahal paid the fee with a check containing a reference stating “Loan Return for 148 LLC.” Id., ¶¶ 227-228. The Complaint alleges that Proskauer did not perform adequate due diligence to insure that the retainer funds were not proceeds of Weinstein’s criminal activities, and that Proskauer had “actual knowledge” that Weinstein was prohibited by the government in the 2011 Action from engaging in financial transactions of more than $1,000. Id., ¶¶ 230-231. On January 3, 2012, Weinstein entered into a plea agreement whereby he admitted to committing wire fraud and money laundering. On May 20, 2013, Weinstein was charged by the United States with various criminal activities (2013 [*3]Action). The indictment alleges that Proskauer received $1 million. The Complaint alleges that Proskauer spent the $1 million within two weeks of its receipt from Kahal, and that Proskauer paid “an unknown portion of these funds to persons unknown” for the benefit of Weinstein, and “thereby intentionally engaged in a scheme to defraud Plaintiffs by agreeing to launder’ funds for Defendant Weinstein and prevent their recovery by Plaintiffs.” Id., ¶¶ 240-241. Proskauer moved to be relieved as Weinstein’s attorney in the 2011 Action, in light of the allegations in the 2013 Action. The motion was granted on May 30, 2013. Id., ¶¶ 236-237.”

“In this case, the parties do not dispute that Weinstein committed fraud prior to 2011 involving victims other than Plaintiffs. In fact, Weinstein was sentenced for fraud in the 2011 Action. The dispute in this case lies in whether fraud perpetrated against Plaintiffs in 2012 is adequately stated in the Complaint, and whether Proskauer had “actual knowledge” and gave “substantial assistance.” Notably, Plaintiffs’ allegations in the Complaint are primarily based on sworn statements, dated May 13, 2013, made by an FBI agent, Karl Ubellacker, in connection with the government’s complaint filed in the 2013 Action. A copy of Agent Ubellacker’s statement is annexed as exhibit B to Plaintiffs’ opposition to Proskauer’s motion to dismiss.

In opposition to the motion, Plaintiffs contend that Proskauer’s actual intent can be inferred from the following factual circumstances. Proskauer knew of the allegations against Weinstein in the 2011 Action because it served as his defense counsel. It knew that Weinstein was prohibited from engaging in transactions over $1,000 without the approval of the government’s special counsel. It knew that the $1 million retainer was “probably directly or indirectly” proceeds of the 2011 Action. Kahal paid Proskauer’s retainer with a check bearing a notation that it was a “Loan Return for 148 LLC.” Proskauer accordingly knew that the check never went to 148, but was diverted to pay [*4]Weinstein’s legal fees, just as he had diverted funds in the 2011 Action. Additionally, after learning that the government might try to seize the diverted funds, Proskauer was told by Weinstein to “minimally” inquire about the source of funds with Todd, who replied in a manner as directed by Weinstein. Lastly, Weinstein admitted that the fraudulent scheme in the 2011 and 2013 Actions “was a key component of both.” Plaintiffs’ opposition, ¶¶ 53-63.

Plaintiffs’ contentions are insufficient to defeat the motion. That a law firm represents a client accused of a prior fraud against certain victims does not support an inference that the firm knew about, much less aided and abetted, a subsequent fraud committed by the client against other victims. Here, the government’s complaints in the 2011 and 2013 Actions named different sets of victims and Plaintiffs were not named in the 2011 Action. Thus, Weinstein’s retention of Proskauer as defense counsel in connections with the 2011 Action does not support an inference that Proskauer knew of the subsequent fraud allegedly perpetrated against the Plaintiffs, which fraud was the subject of the 2013 Action. See National Westminister Bank v Weksel, 124 AD2d 144, 150 [1st Dept 1987] (while a law firm gains access to information in the course of representing a client, “the fact of legal representation, even as to transactions allegedly the subject of subsequent [fraud], does not itself support the inference of the high degree of scienter necessary to extend fraud liability [against the firm] on an aiding and abetting theory”).”

Joint Ventures often start out with an idealistic version of “Let’s Put on a Play!”  A and B decide that they can put together a business, and recruit monied friends C and D, and they put together, say, a nursing home.  Then B,C and D decide that they really don’t need A, and the trouble begins.  The attorney who was hired represented them all, didn’t she?

Mawere v Landau  2015 NY Slip Op 06317  Decided on July 29, 2015  Appellate Division, Second Department is an example of how the attorneys can get themselves into trouble.

“The instant action involves the purchase of Ruby Weston Manor and Marcus Garvey Residential Rehab Pavilion, Inc., which were both financially troubled nursing home facilities [*2]located in Brooklyn. The plaintiff, Jonathan Mawere, alleges that the defendants Joel Landau and Jack Basch agreed to jointly purchase and operate the facilities together with him, via operating companies, the nominal defendants Alliance Health Associates, Inc., and Alliance Health Property, LLC, but that Landau and Basch, along with the defendants Leibel Rubin, Marvin Rubin, and Solomon Rubin (hereinafter collectively the purchasing defendants) ultimately excluded him from the transaction. He further alleges that the defendants Garfunkel Wild, P.C., and Judith Eisen, a partner in that firm (hereinafter together the law firm defendants), breached fiduciary obligations they owed to him by helping the purchasing defendants complete the transaction. The purchasing and nominal defendants moved, and the law firm defendants separately moved, inter alia, pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them. The Supreme Court granted those branches of the motions, and the plaintiff appeals.”

“However, the Supreme Court should not have granted those branches of the law firm defendants’ motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the eleventh and fourteenth causes of action, alleging legal malpractice and breach of fiduciary duty, asserted against them. The documentary evidence they submitted did not conclusively establish that no attorney-client relationship existed between them and the plaintiff (see CPLR 3211[a][1]). Furthermore, granting all favorable inferences to the plaintiff, the allegations in the complaint were sufficient to plead the existence of an attorney-client relationship between the law firm defendants and the plaintiff (see CPLR 3211[a][7]; Tropp v Lumer, 23 AD3d 550, 551), and that the law firm defendants committed legal malpractice and breached their fiduciary duties to the plaintiff (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; Kurtzman v Bergstol, 40 AD3d 588, 590; Collins v Telcoa Int’l Corp., 283 AD2d 128, 134).”

CPA firm is hired to do taxes for a medical corporation.  Medical corporation’s bookkeeper is stealing large amounts of money, and is eventually discovered.  Was the CPA firm, which was not hired to investigate, nor to monitor the bookkeeper potentially liable?

JAG Orthopedics, P.C. v AJC Advisory Corp.  2015 NY Slip Op 51111(U)  Decided on July 21, 2015  Supreme Court, Kings County  Demarest, J. says, yes, it can be liable.

“Plaintiff’s claims against defendants arise out its allegations that defendant Lydia Vecchio Ferrante, plaintiff’s officer manager from September 2009 to June 2014, misappropriated/embezzled hundreds of thousands of dollars from plaintiff by: (1) writing checks to herself well in excess of her monthly salary of $4,000; (2) obtaining, without authorization from plaintiff, a debit/credit card tied to plaintiff’s checking account and charging items for her own personal use; (3) forging the signature of plaintiff’s owner and president, Andrew Miller, M.D., on checks made out in her name, and (4) misappropriating funds from a checking account that plaintiff had closed prior to the misappropriation. Santander’s liability is premised on its alleged failure to close a checking account in plaintiff’s name from which Ferrante appropriated funds and also its processing checks forged by Ferrante made out to Ferrante. The AJC Defendants’ liability is primarily premised on their [*3]failure to inform plaintiff of Ferrante’s misappropriation of plaintiff’s assets that was evident from financial records submitted to the AJC Defendants for them to prepare plaintiff’s taxes.

According to the second amended complaint, plaintiff, a provider of orthopedic services, hired Lydia Ferrante in September 2009, and in her role as office manager, she was, among other things, in charge of billing, payment of office bills, and receiving and reconciling bank statements (Second Amended Complaint at ¶¶ 12-13). In order to carry out these duties, plaintiff made Ferrante [FN2] an authorized signatory on its checking account (the 4933 account) with Santander (Second Amended Complaint at ¶ 15). In August 2013, Dr. Miller went to a Santander branch and requested that it close the 4933 account and that it transfer the funds in that account to a new account for plaintiff (the 0089 account) opened by Dr. Miller (Second Amended Complaint at ¶¶ 18-19, 29). Although plaintiff gave Ferrante a check book relating to the new 0089 account, Ferrante was not given any authority to write checks on that account, which authority was only maintained by Dr. Miller (Second Amended Complaint at ¶ 20).”

“Initially, the court addresses the portion of the AJC Defendants’ motion seeking [*5]dismissal of plaintiff’s malpractice claim against them. “A claim of professional negligence requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury” (Bruno v Trus Joist a Weyerhaeuser Bus., 87 AD3d 670, 672 [2d Dept 2011]; see also Schwartz v Leaf, Salzman, Manganelli, Pfiel & Tendler, LLP, 123 AD3d 901, 902 [2d Dept 2014]; Kristina Denise Enters., Inc. v Arnold, 41 AD3d 788, 788 [2d Dept 2007]). The AJC Defendants’ primary contention regarding the malpractice claim is that they were simply hired to prepare plaintiff’s income taxes, not to audit plaintiff’s books or to act as bookkeepers, and as such, had no duty to discover or report Ferrante’s misappropriations. Plaintiff’s claim, however, is not that the AJC Defendants were hired to discover or ferret out Ferrante’s wrongdoing through an audit or a financial review,[FN4] but rather, that information in plaintiff’s ledgers and the financial information used by the AJC Defendants in order to prepare the tax returns raised questions about the propriety of Ferrante’s payments to herself such that they had a duty to inform plaintiff of the questionable practices. Based upon the Affidavit of Gary Hoffman, a licensed tax preparer and tax accountant, describing the standards applicable to tax preparers such as defendants, these allegations sufficiently plead a departure from accepted accounting practices (see 1136 Tenants’ Corp. v Rothenberg & Co. (36 AD2d 804 [1st Dept 1971], affd 30 NY2d 585 [1972]) (“even if defendant were hired to perform only write-up’ services, it is clear, beyond dispute, that it did become aware that material invoices purportedly paid by Riker were missing, and, accordingly, had a duty to at least inform plaintiff of this. But even this it failed to do. Defendant was not free to consider these and other suspicious circumstances as being of no significance and prepare its financial reports as if same did not exist”); see also Collins v Esserman & Pelter, 256 AD2d 754, 756-757 [3d Dept 1998]; Board of Trustees of IBEW Local 43 Elec. Contrs. Health & Welfare, Annuity & Pension Funds v D’Arcangelo & Co., LLP, 124 AD3d 1358, 1359 [4th Dept 2015]; Hall & Co. v Steiner & Mondore, 147 AD2d 225, 228 [3d Dept 1989]).

The AJC Defendants argument that they may not be held liable for malpractice because plaintiff made Ferrante its agent in dealing with the AJC Defendants is improperly raised for the first time in reply (see U.S. Bank N.A. v Sarmiento, 121 AD3d 187, 208 [2d Dept 2014]; Congel v Malfitano, 61 AD3d 809, 810 [2d Dept 2009]). Even if this argument could be seen as a response to arguments raised by plaintiff in its opposition papers, plaintiff’s giving Ferrante the responsibility for “interacting” with AJC on plaintiff’s behalf (Second Amended Complaint at ¶ 13) does not, in itself, vitiate AJC’s duty to plaintiff, as in performing the tax preparation services on plaintiff’s behalf, Ferrante’s improper conduct was undoubtedly recognizable as adverse to plaintiff’s interests (see Schwartz, 123 AD3d at 902-903; Capital Wireless Corp. v Deloitte & Touche, 216 AD2d 663, 666 [3d Dept 1995]; see also Collision Plan Unlimited, Inc. v Bankers Trust Co., 63 NY2d 827, 830 [1984]; 1136 [*6]Tenants’ Corp., 36 AD2d at 804-805; 2A NY Jur 2d, Agency and Independent Contractors § 103). Similarly, while it appears that plaintiff’s own negligence in monitoring Ferrante enabled Ferrante to continue her scheme for several years, the pleadings do not show it to be the sole proximate cause of the loss since such negligence does not appear to have impeded the AJC Defendants performance of their duties in reviewing plaintiff’s tax materials (see Collins, 256 AD2d at 757).

Accordingly, plaintiff’s allegations sufficiently plead a departure from accepted accounting practices. In addition, this alleged failure to inform plaintiff of the improprieties apparent from the financial record certainly could be seen as a proximate cause of damages suffered in that plaintiff, if it had earlier knowledge of Ferrante’s misdeeds, may have been able to prevent some of her misconduct (see Collins, 256 AD2d at 756-758; see also Kocak v Egert, 280 AD2d 335, 336 [1st Dept 2001]; CAE Indus. v KPMG Peat Marwick, 193 AD2d 470, 473 [1st Dept 1993]; cf. Leigh Mgt. Assoc. v Weinstein, 251 AD2d 225, 226 [1st Dept 1998]).”

Who may sue an attorney for legal malpractice?  In most cases (and that means almost all the time) only the party that hired and contracted with the attorney.  East 51st St. Dev. Co., LLC v Lincoln Gen. Ins. Co.  2015 NY Slip Op 31245(U)  July 17, 2015 Supreme Court, New York County Docket Number: 150063/2010 Judge: Carol R. Edmead is an example of two very sophisticated consumers fighting over attorney fees and other problems.  These two insurance companies, which are on the hook for an extraordinarily bad crane accident, seem to have overlooked the question of privity.

“In this insurance d.eclaratory judgment action, Lincoln General Insurance Company
(“Lincoln General”) seeks, by separate motions, leave to supplement its affirmative defenses and
leave to assert a third party action against the lawfirm, O’Melveny and Meyers, LLP (“OMM”)
which defends plaintiff East 51″ Street Development Company, LLC (“East 51 “”) in numerous
tort and property damage cases.”

“Lincoln General’s claims premised on equitable subrogation lacks merit.
Lincoln General failed to assert sufficient “wrongdoing” on the part of OMM, or cite any
authority for the position that the fees charged by OMM, in and of themselves, constitute
‘\>TOngdoing” under any theory oflaw, let alone under the theory of equitable subrogation. Here,
Illinois Union retained OMM to defend East 51” in the Crane Collapse Litigation. The mere
allegation that OMM placed its interests in recovering a fee ahead of its duties of loyalty and care
to Illinois Union and East 51 st, to the detriment of Lincoln General who is obligated to pay the
defense costs incurred, is unsupported by the papers or the proposed third party complaint.
Notably, in reply, Lincoln General concedes that it is not asserting that OMM committed legal
ma! practice.  To apply the doctrine as urged by Lincoln General, Lincoln General, as the an insurer,who is duty bound to pay “losses” (defense costs) of its insured (East 5lst), seeks to be “placed in the position ofits insured” East 51 “,”so that it may recover from” OMM-the party Lincoln General claims is legally responsible forthe loss. OMM cannot be held liable for its own
“reasonable” defense costs. Therefore, application of the doctrine to Lincoln General  is nonsensical. And again, the “loss” Lincoln General claims it stands to suffer, is the payment
toward “reasonable” defense costs, which the First Department has already determined is
warranted.
As acknowledged by Lincoln General, the doctrine of equitable subrogation allows it to 1
“step into the shoe~” of Illinois Union and/or East 51 to assert claims they have a right to bring.
However, the only claim Illinois Union and/or East 51″ may have to bring against OMM, as
relevant to this instant action, concern the reasonableness of attorneys’ fees. No third-party cause
of action against OMM is warranted in this regard.
Lincoln General contends that to disallow it from proceeding against OMM “under the
principles of equitable subrogation would completely absolve OMM from liability associated
with its actions which deviated from fiduciary standards, and would place the loss for such
deviation on Lincoln General and the co-primary insurers.” However Lincoln General alleges no
specific conduct constituting a breach of fiduciary obligations. Again, it bears repeating that
Lincoln General concedes that it does not claim that OMM committed malpractice. “

Plaintiff settles a case handled by her attorney and is dissatisfied.  Dissatisfaction is normal after a settlement, goes the saying, because everyone has compromised and no one is happy.  However, what if the settlement was required because legal malpractice had changed the landscape?  What if the attorneys’ mistakes had required that the plaintiff salvage something and get whatever money could still be had?

Plaintiffs who are “effectively compelled” to settle a case may still sue the attorney.  Stein v Chiera  2015 NY Slip Op 06234   Decided on July 22, 2015  Appellate Division, Second Department is the Second Department’s latest pronouncement on this issue.

“To state a cause of action to recover damages for legal malpractice, a plaintiff must allege 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 failure was a proximate cause of actual and ascertainable damages (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434-435; Randazzo v Nelson, 128 AD3d 935; Held v Seidenberg, 87 AD3d 616, 617). To establish causation, it is sufficient that the plaintiff allege that, but for the defendant attorney’s failure to exercise ordinary reasonable skill and knowledge, there would have been a more favorable outcome in the underlying proceeding (see Mackey Reed Elec., Inc. v Morrone & Assoc., P.C., 125 AD3d 822, 823). Even when the underlying proceeding has settled, a plaintiff may state a cause of action alleging legal malpractice, upon sufficiently alleging that the settlement was ” effectively compelled by the mistakes of counsel'” (Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083, quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430; see Schiff v Sallah Law [*3]Firm, P.C., 128 AD3d 668).”

Here, as applied, there was no compulsion.  “Inasmuch as the plaintiff’s allegation against Chiera was based on the incorrect premise that Chiera’s alleged negligence caused the plaintiff’s cause of action to become time-barred, it is clear that any failure by Chiera in the prosecution of the 2005 action did not “effectively compel” the plaintiff to settle the 2006 action for less than its full value (see Schiff v Sallah Law Firm, P.C., 128 AD3d 668; Leiner v Hauser, 120 AD3d 1310, 1312; Keness v Feldman, Kramer & Monaco, P.C., 105 AD3d 812, 813).”