The difference between legal malpractice and Breach of Fiduciary Duty can be important. In Ferrara v Amritt-Hall  2015 NY Slip Op 31228(U)  July 13, 2015  Supreme Court, Queens County  Docket Number: 22203/11  Judge: Allan B. Weiss the difference is whether an attorney’s conduct is subject to a 3 or a 6-year statute of limitations.

The case revolves around a practice of salesmen going door-to-door and selling home renovation.  They promise a low cost loan, with a cash-out feature.  Plaintiff thought that she was replacing her old mortgage with a lower interest mortgage, getting her bathroom renovated and getting $ 7,000 cash out.  Sadly it did not work out.  When an attorney called her and suggested that he represent her at the closing, sadly it did not work out for him either.

“To state a cause of action for a breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct (see Baumann v Hanover Community Bank, 100 AD3d 814 [2012]; Rut v Young Adult Inst., Inc., 74 AD3d 776 [2010]). Here, Amritt-Hall alleges that Horn was acting in his capacity as her attorney in the refinancing transaction, and that such fiduciary relationship continued beyond the subject closing due to his representations that he would obtain a traditional refinanced loan on her behalf at a more favorable rate and with a more favorable term. She further alleges that she was injured because Horn intentionally and willfully solicited her with false information, failed to represent her interests at closing, failed to ensure that she had the information necessary for making informed decisions, and misled her into believing that she would obtain a more favorable loan after the subject closing. In moving to dismiss, Horn argues that Amritt-Hall has mislabeled what is essentially a legal malpractice claim instead as a breach of fiduciary duty claim involving fraud (with a six-year statute of limitations) in order to avoid the three-year statute of limitations for malpractice claims (CPLR 213, 214), which he avers has expired. In determining whether the claim sounds in malpractice or arises from a fiduciary relationship, the court looks to the essence of the claim rather than the form in which it is pleaded (see State v Cortelle Corp., 38 NY2d 83, 86 [1975]). A fiduciary relationship is defined as one “founded upon trust or confidence reposed by one person in the integrity and fidelity of another” (see Penato v George, 52 AD2d 939, 942 [1976]), the hallmark of which is an imbalance of power between the parties (see Langford v Roman Catholic Diocese of Brooklyn, 271 AD2d 494, 504 [2000]). Although the allegations herein are similar, this cause of action is sufficiently based on a violation of the trust AmrittHall placed in Horn to represent her in the loan transaction and secure refinancing thereafter, rather than some lack of skill or negligence in performing his duties (see generally Malmsteen v Berdon, LLP, 477 F Supp 2d 655, 661-662 [SDNY 2007]; cf. Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc.], 3 NY3d 538, 542 [2004]). Moreover, the third-party action was timely commenced before the six-year statute of limitations for a breach of fiduciary duty claim based on fraud had expired (CPLR 213). The court further notes that the breach of fiduciary duty claim is not duplicative of the fraud claim asserted against him (see KS v ES, 39 Misc 3d 1219[A], 2013 NY Slip Op 50664[U], *8 [2013]; cf. Stein v McDowell, 74 AD3d 1323, 1326 [2010]). Rather, the alleged fraud Horn perpetrated against his client was one way in which he violated the trust placed in him by virtue of the fiduciary nature of their relationship. As Amritt-Hall correctly notes, Horn’s reliance on Mecca v Shang (258 AD2d 569 [1999]) is misplaced, as it merely stands for the proposition that a separate claim for fraud does not exist when it is duplicative of a legal malpractice claim because it is based on concealment or intentional failure to disclose the attorney’s own lack of competence or legal expertise (see id., citing White of Lake George v Bell, 251 AD2d 777 [1998]), which is not alleged here.”

In the Surrogates’ Court, cases move slowly, in keeping with the universal understanding that the main character in the drama is dead.  Steffan v Wilensky   2015 NY Slip Op 31194(U)  July 8, 2015  Supreme Court, New York County  Docket Number: 150020/11  Judge: Cynthia S. Kern may well be an extreme example.  Decedent died in 1993, with about $100,000 in the bank.  The bank account was in two names, perhaps so that the second named person could pay medical bills for decedent.  It was not until 2006 that the executor sued the bank. Why the 13 year delay?

We don’t know, but we do know that the case

“In or around June 2006, Wilensky filed a proceeding against Chase in Surrogate’s Court,
New York County, pursuant to Surrogate’s Court Procedure Act (“SCPA”) § 2103 (the “SCPA
2103 Proceeding”) seeking delivery of the funds in the Chemical Accoui:it to the Estate. Chase
moved to dismiss the petition as time-barred, which was granted on or aoout May 7, 2009. In
dismissing the petition, the court held that the Estate’s “cause of action arose no later than 1999,
when. the bank acknowledged the existence of the account in its letter inviting reactivation.
Since the current proceeding was not commenced until 2006, it is barred ‘by the six-year statute
of limitations.”
In or around 2011, plaintiff commenced the instant action against’ Wilensky alleging a
cause of action for legal malpractice, specifically alleging that as counsel for the Estate,
Wilensky owed it a duty to render legal services in a competent and professional manner and to
act with ordinary and reasonable skill, care and diligence and that Wilensky instead acted
negligently under the circumstances by failing to, inter alia, timely file the SCPA 2103
Proceeding. Plaintiff now moves for an Order pursuant to CPLR § 3212 granting it summary
judgment on its complaint.
On a motion for summary judgment, the movant bears the burden of presenting sufficient
evidence to demonstrate the absence of any material issues of fact. See Alvarez v. Prospect
Hosp .. 68 N. Y.2d 320, 324 (1986). Once the movant establishes a prima facie right to judgment
as a matter of law, the burden shifts to the party opposing the motion to “produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which he rests his claim.”  Zuckerman v. City of New York, 49 NY2d 557,562 (1980). However, mere conclusions, expressions of hope or unsubstantiated allegations or asserti.ons are insufficient” to defeat summary judgment. Id. A prima facie case for legal malpractice requires a plaintiff to establish “that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action ‘but for’ the attorney’s negligence.” Leder v. Spigel, 9 N.Y.3d 836 (2007) (quoting Am-Base Corp. V Davis Polk & Wardwell, 8 N.Y.3d 428, 434 (2007)). In the instant action, plaintiff has failed to establish its prima facie right to summary judgment on its claim for legal malpractice as it has failed to demonstrate that it would have succeeded on the merits of the SCPA 2103 Proceeding “but for” Wilensk:y’s negligence in untimely commencing the proceeding. Based on the evidence before this court, even if the SCPA 2103 Proceeding had been timely commenced, plaintiff has failed;to establish that it ” would have been successful as a matter of law as there exist issues of fact as to whether plaintiff would have been entitled to recover the funds in the Chemical Account pursuant to the Banking Law.”

Ponzi schemes, named for Charles Ponzi is a recurring situation for attorneys, especially those who meet with monied clients in transactional settings.  Biberaj v Acocella  2014 NY Slip Op 06165 [120 AD3d 1285]  September 17, 2014  Appellate Division, Second Department describes how an attorney-client relationship wandered into these storm tossed waters.

“The plaintiff and the defendant, an attorney licensed in New York, met in or about 2001, when the plaintiff sought the defendant’s legal representation. The parties established a business relationship, which later evolved into a friendship. In 2007, upon the defendant’s recommendation, the plaintiff made an investment of $260,000 in an enterprise known as Agape World (hereinafter Agape), which purportedly used investor money to provide bridge loans to businesses, and paid interest to the investors. The defendant allegedly also invested large sums of his own money in Agape. In 2008, it was revealed that Agape was, in fact, a Ponzi scheme, in which new investors’ funds were used to pay earlier investors’ returns. The plaintiff and the defendant allegedly lost their investments in Agape.

[*2] In July 2009, the plaintiff commenced the instant action to recover damages for fraud (first cause of action), breach of fiduciary duty (second cause of action), negligence (third cause of action), money had and received (fourth cause of action), legal malpractice (fifth cause of action), based on a constructive trust (sixth cause of action), and for breach of contract (seventh cause of action). After issue was joined, the defendant moved for summary judgment dismissing the complaint. The Supreme Court granted those branches of the defendant’s motion which were for summary judgment dismissing the causes of action to recover damages for breach of fiduciary duty, negligence, and legal malpractice, and denied the remaining branches of the motion. The defendant appeals and the plaintiff cross-appeals from stated portions of this order.

To recover damages for legal malpractice, a plaintiff must prove the existence of an attorney-client relationship (see Berry v Utica Natl. Ins. Group, 66 AD3d 1376 [2009]; Rechberger v Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 AD3d 1453 [2007]; Moran v Hurst, 32 AD3d 909, 910 [2006]). A plaintiff is also required to establish that the defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Gershkovich v Miller, Rosado & Algios, LLP, 96 AD3d 716, 717 [2012]). “To succeed on a motion for summary judgment dismissing the complaint in a legal malpractice action, the defendant must present evidence in admissible form establishing that the plaintiff is unable to prove at least one essential element of his or her cause of action alleging legal malpractice” (Scartozzi v Potruch, 72 AD3d 787, 789-790 [2010]; see Gershkovich v Miller, Rosado & Algios, LLP, 96 AD3d at 717).

Here, in support of that branch of his motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice, the defendant met his prima facie burden of establishing that he had no attorney-client relationship with the plaintiff referable to the plaintiff’s investment in Agape (see Volpe v Canfield, 237 AD2d 282, 283 [1997]). In opposition, however, the plaintiff raised a triable issue of fact as to the existence of an attorney-client relationship in that context. Moreover, with regard to this cause of action, the defendant failed to show, prima facie, that he exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession in allegedly advising the plaintiff regarding Agape, or that the alleged breach of this duty did not proximately cause the plaintiff to sustain damages. Accordingly, the Supreme Court should have denied that branch of the defendant’s motion which was for summary judgment dismissing the cause of action to recover damages for legal malpractice.”

There are dismissals on the merits and there are dismissals which are not on the merits.  What difference, one might ask?  The major difference is whether the case may be brought again within 6 months under CPLR 205.

The next question is whether a dismissal under CPLR 3211, a common event, is on the merits or not on the merits.  Not only does it depend, but it depends on how the parties chart their own litigation course.  Meredith v Siben & Siben, LLP  2015 NY Slip Op 06120  Decided on July 15, 2015  Appellate Division, Second Department describes how the parties wandered from a mere motion in lieu of an answer into a motion for summary judgment.

“Initially, contrary to the plaintiff’s contention, the defendant did not waive its statute of limitations defense, asserted in its answer, by failing to make a pre-answer motion to dismiss (see Rich v Lefkowitz, 56 NY2d 276). Rather, a statute of limitations defense may be asserted after joinder of issue in a motion for summary judgment pursuant to CPLR 3212 (see Rich v Lefkowitz, 56 NY2d at 282). Although the defendant’s motion was made pursuant to 3211(a)(5), the parties clearly charted a summary judgment course by submitting extensive documentary evidence and factual affidavits laying bare their proof (see One Monroe, LLC v City of New York, 89 AD3d 812, 813; Tendler v Bais Knesses of New Hempstead, Inc., 52 AD3d 500, 502; Harris v Hallberg, 36 AD3d 857, 858-859; O’Dette v Guzzardi, 204 AD2d 291, 292; see also Schultz v Estate of Sloan, 20 AD3d 520; Kavoukian v Kaletta, 294 AD2d 646, 646-647). Thus, the defendant’s motion is properly treated as a motion for summary judgment dismissing the complaint as time-barred.”

Law Firm A starts to represent Plaintiff.  At some time afterwards, Law Firm B comes in.  Legal malpractice ensues.  Time goes by.  Can Law Firm A be held responsible for Plaintiff’s losses?  The answer depends on a number of salient issues, and the statute of limitations is one of them.  When does the statute of limitations commence for Law Firm A?

Meredith v Siben & Siben, LLP  2015 NY Slip Op 06120  Decided on July 15, 2015  Appellate Division, Second Department provides some discussion, but no absolute clarity.

“Further, the Supreme Court properly concluded that the plaintiff’s legal malpractice cause of action is time-barred. The defendant met its prima facie burden of demonstrating that the action was commenced more than three years after the alleged malpractice occurred (see Farage v Ehrenberg, 124 AD3d 159, 164; Fleyshman v Suckle & Schlesinger, PLLC, 91 AD3d 591, 592; Rupolo v Fish, 87 AD3d 684, 685). In opposition, the plaintiff failed to raise a triable issue of fact as to whether the statute of limitations was tolled by continuous representation (see Farage v Ehrenberg, 124 AD3d at 165; Fleyshman v v Suckle & Schlesinger, PLLC, 91 AD3d at 592). In that respect, the evidence demonstrated that after the plaintiff and her husband retained the defendant law firm to represent them in a personal injury action, the defendant law firm retained the law firm of Bauman & Kunkis, P.C. (hereinafter Bauman & Kunkis), to represent the plaintiff and her husband [*2]in that action, and thereafter had no contact with the plaintiff. All of the work on the case, from filing the pleadings to selecting a jury, was performed by Bauman & Kunkis. Before the case could be tried, it was dismissed based on willful default, and Bauman & Kunkis was substituted with a different law firm, which sought to restore the action. Even if the arrangement between the defendant and Bauman & Kunkis could be equated with joint representation, under the circumstances of this case, the defendant’s representation of the plaintiff would have terminated as of December 1, 2006, the date on which Bauman & Kunkis was substituted. Accordingly, the present legal malpractice cause of action, commenced on or about April 9, 2012, was untimely.”

What are fictitious profits, and how do they affect damages in accounting malpractice.  Accounting malpractice is akin to legal malpractice, especially in that economic damages are paramount.  Fictitious profits cannot serve as the source of actual damages.  So, in Delollis v Margolin, Winer & Evens, LLP  2014 NYSlipOp 06935  October 15, 2014  Appellate Division, Second Department the question of damages remains open.  “While damages may not be based solely on fictitious profits, the defendant failed to establish, as a matter of law, at this stage of the proceedings, that the plaintiffs’ claimed damages merely constituted fictitious profits or were speculative (see Hecht v Andover Assoc. Mgt. Corp., 114 AD3d 638 [2014]). Accordingly, the Supreme Court properly denied the defendant’s motion for partial summary judgment limiting the plaintiffs’ damages (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]).”

From Hecht v Andover Assoc. Mgt. Corp.  114 AD3d 638 (2d Dept, 2014):   “Contrary to the plaintiff’s contention, Citrin Cooperman raised the issue of the measure of Andover’s damages before the Supreme Court. Further, damages may properly be limited on a motion to dismiss (see Howard S. v Lillian S., 14 NY3d 431, 437 [2010]; Sand v Chapin, 238 AD2d 862, 863 [1997]; Swersky v Dreyer & Traub, 219 AD2d 321, 328 [1996]; Crossland Sav. v Foxwood & S. Co., 202 AD2d 544, 546 [1994]). When a party seeks damages for lost profits, the profits may not be imaginary (see Kenford Co. v County of Erie, 67 NY2d 257, 261 [1986]; O’Neill v Warburg, Pincus & Co., 39 AD3d 281, 283 [2007]). It is undisputed that the profits reported by Madoff were completely imaginary. [*3]The fictitious profits never existed and, thus, Andover did not suffer any loss with respect to the fictitious sum (see Jacobson Family Invs., Inc. v National Union Fire Ins. Co. of Pittsburgh, PA, 102 AD3d 223, 233-234 [2012]). However, the Supreme Court did not merely determine that the plaintiff may not recover the amount of the fictitious profits, but specifically limited damages to the amount of Andover’s un-recouped investment. The plaintiff pleaded facts based on which other damages related to the payment of fees may be recoverable and thus, it was error for the Supreme Court to limit damages to the amount of Andover’s un-recouped investment.”

It’s not often that a civil litigant in State Court can wind up with the US Attorney and some of the bigger defense firms in NY arrayed against her.  However, Ms. Lipin seems to have angered State Supreme Court, the Appellate Division, and possibly US District Court too. Lipin v Danske Bank
2015 NY Slip Op 05896  Decided on July 7, 2015  Appellate Division, First Department has ended with her being muzzled.  No new lawsuits without court permission.

“Order, Supreme Court, New York County (Louis B. York, J.), entered June 24, 2014, which denied plaintiff’s motion for a default judgment against defendants in action number one [*2](index # 100807/13) on the ground that the court lacked jurisdiction due to removal of the action to federal court, and enjoined plaintiff from making additional motions in the action without the court’s consent, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered July 18, 2013, which denied another motion for a default judgment on the same ground, unanimously dismissed, without costs, as untimely taken. Appeal from order, same court and Justice, entered September 24, 2013, which denied plaintiff’s motion to reargue a motion for default judgment on the same ground, unanimously dismissed, without costs, as taken from a nonappealable paper. Order, Supreme Court, New York County (Louis B. York, J.) entered June 19, 2014, which denied plaintiff’s four motions for default judgments against defendants in action number two (index # 155308/13) also on the ground of lack of jurisdiction due to removal of the action to federal court, and also enjoined plaintiff from making additional motions in the action without the court’s consent, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered July 23, 2013, which denied another motion for default judgment on the same ground, unanimously dismissed, without costs, as untimely taken. Appeal from order, same court and Justice, entered September 25, 2013, which denied plaintiff’s motion to reargue her prior motion for default judgment on the same ground, unanimously dismissed, without costs, as taken from a nonappealable paper.

In these two related actions, the motion court properly denied plaintiff’s motions for default judgments on the basis of lack of jurisdiction. Once the underlying actions were removed to the United States District Court for the Southern District of New York by the filing of the notice of removal with the state court, the state court no longer had jurisdiction to rule on plaintiff’s motions (see 28 USC § 1446; Clayton v American Fedn. of Musicians, 243 AD2d 347 [1st Dept 1997]). The notice of removal was timely and properly filed (see 28 USC § 1446), and the District Court has original jurisdiction over claims alleging violations of federal statutes, as well as supplemental jurisdiction over the state claims, including the Judiciary Law

§ 487 claims, since they arose out of the same case or controversy (see 28 USC §§ 1331, 1367[A], 1441[a]; Eastern States Health & Welfare Fund v Philip Morris, Inc., 11 F Supp 2d 384, 388 [SDNY 1998]).

Furthermore, the court properly exercised its discretion in enjoining plaintiff from making any further motions in these actions without prior court approval given the frivolous motions she continued to file even after the action was removed to federal court, and after the motion court concluded that it lacked subject matter jurisdiction (see Bikman v 595 Broadway Assoc., 88 AD3d 455 [1st Dept 2011], lv denied 21 NY3d 856 [2013]; Jones v Maples, 286 AD2d 639 [1st Dept 2001], lv dismissed 97 NY2d 716 [2002]).”