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]).”

What could be more Manhattanite than the combination of a Central Park South double apartment, a real estate legal proceeding, lots of money and legal malpractice?  Nothing that we can conjure.

Russo v Rozenholc  2015 NY Slip Op 06029  Decided on July 9, 2015  Appellate Division, First Department is about tenants who had a lovely setting on Central Park South, only to have it torn from under them.  What to do? Sue for their rights under the Rent Stabilization Law.  Here is the story.

“In May 2006, the nonparty building owner filed an application with the Department of Housing and Community Renewal (DHCR) seeking to demolish the building located at 220 Central Park South in Manhattan and evict the tenants. As a result, a group of rent-stabilized tenants formed a tenants’ association to rebuff the building owner’s efforts. One of those tenants was plaintiff’s decedent Ronald E. Pecunies (the decedent), who lived with his girlfriend Emel Dilek in apartment 16AB — a large unit created by converting two apartments into one.

The tenants retained defendants David Rozenholc and David Rozenholc and Associates (collectively, DR & A) to represent them in the DHCR proceeding and to negotiate with the building owner. In the retainer agreement, dated April 3, 2009, the tenants represented and warranted that they had “agreed to share equally in any settlement offer made by [the owner].” The retainer agreement also stated that each apartment represented a single share, but specifically stated, “it is further agreed that [decedent], who occupies combined apartment 16 AB[,] will receive two (2) shares and agrees to pay two (2) shares of any legal fees owed.”

In April 2009, DHCR issued an order permitting the building owner to evict the tenants. In February 2010, after unsuccessfully challenging the order, DR & A commenced an article 78 proceeding on behalf of the tenants, including decedent. However, decedent died on May 22, 2010, after the commencement of the article 78 proceeding but before any settlement could be reached with the building owner. On September 24, 2010, counsel for decedent’s estate wrote to DR & A, authorizing it to continue to represent the estate’s interest. According to the estate’s counsel, this authority came from plaintiff, who was the executor of decedent’s estate.

A dispute later apparently arose between plaintiff and Dilek as to Dilek’s rights with respect to the apartment. Plaintiff and Dilek each had counsel, both of whom remained in communication with DR & A. According to attorney Rozenholc, the building owner refused to offer any money to either Dilek or to the estate, taking the position that no one had any succession rights to the apartment under the Rent Stabilization Code.

The tenants and the building owner ultimately settled the article 78 proceeding for more than $33 million. At approximately the same time, plaintiff, Dilek, and the building owner, entered into an agreement, dated December 2, 2010 (the Dilek Buyout Agreement), in which the plaintiff recited that as executor of the estate, he had no claim to apartment 16AB after decedent died on May 22, 2010. Plaintiff also recited that Dilek had occupied apartment 16AB before decedent’s death “and succeeded to his tenancy.” The signatories to the Dilek Buyout Agreement agreed that in exchange for Dilek’s vacating apartment 16AB, the building owner would pay her a single share’s worth of the $33 million settlement — namely, $1,562,500 ($1,700,000 less $187,500 in counsel fees). The Dilek Buyout Agreement further stated that DR & A represented plaintiff and Dilek in connection with that agreement.”

“Turning now to the legal malpractice claim, we find that the motion court properly allowed the cause of action for legal malpractice to proceed. A viable claim for legal malpractice requires that a complaint allege ” the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and actual damages'” (O’Callaghan v Brunelle, 84 AD3d 581, 582 [1st Dept 2011], lv denied 18 NY3d 804 [2012], quoting Leder v Spiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008]). Here, the logic for the [*3]legal malpractice cause of action is similar to the logic in sustaining the breach of contract claim: whether decedent had rights under the Rent Stabilization Code is beside the point for purposes of the pleadings here. The relevant issue is not whether decedent had rights to the rent-stabilized apartment but whether decedent had rights to his two shares under the retainer agreement. Indeed, plaintiff does not argue that but for DR & A’s negligence, the estate would have prevailed in the article 78 proceeding; he argues that DR & A failed to tell him about the existence of the retainer agreement and to make sure that the estate received the settlement monies to which it was entitled under the settlement agreement.

The affidavits in support of the complaint assert, among other things, that had attorney Rozenholc informed plaintiff of the retainer agreement’s terms, plaintiff would not have agreed to any settlement that resulted in no money to the estate. The affidavits also state that “but for” attorney Rozenholc’s failure to properly advise the estate of its rights under the retainer, plaintiff “would not have consented to the settlement in its final form but rather would have insisted on payment of the two shares from the total proceeds.” These averments, in addition to the allegations of the complaint, are sufficient to state a claim for legal malpractice.”

“

Lawfirm signs on to represent plaintiffs and a “liaison for plaintiffs” in an ongoing legal malpractice and fee dispute action, and do so for about 6 months until they are disqualified due to a “conflict of interest in representing both the plaintiffs” and the liaison.  Plaintiffs then go on to sue Lawfirm for legal malpractice and unjust enrichment.

This small quote from the case indicates that this saga had a long history.  Plaintiffs had an original case which they lost.  They then sued their attorneys because of that loss.  Their attorneys left the case for some reason.  Lawfirm took over, and were then disqualified.  Other attorneys took over and this case went badly.  Plaintiffs then sued the lawfirm, in a serial legal malpractice case.

Back to our case.  Comprehensive Mental Assessment & Med. Care, P.C. v Gusrae Kaplan Nusbaum, PLLC  2015 NY Slip Op 05904  Decided on July 8, 2015  Appellate Division, Second Department indicates that the Lawfirm won dismissal of the legal malpractice claims, for the most part.  “”To succeed on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211(a)(1), the documentary evidence must utterly refute the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law” (Gould v Decolator, 121 AD3d 845, 847; see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; Leon v Martinez, 84 NY2d 83, 88). On a motion pursuant to CPLR 3211(a)(7) to dismiss for failure to state a cause of action, the court must accept the facts alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; Leon v Martinez, 84 NY2d at 87-88).

Applying these principles here, the Supreme Court properly granted those branches of GKN’s motion which were to dismiss the first, second, and third causes of action pursuant to CPLR 3211(a)(1). The documentary evidence submitted by GKN in support of the motion refuted the allegations of legal malpractice set forth in the first, second, and third causes of action, and conclusively established a defense to those claims (see Green v Gross & Levin, LLP, 101 AD3d 1079, 1081; Jean-Baptiste v Law Firm of Kenneth B. Mock, 98 AD3d 566).

The Supreme Court erred in granting that branch of GKN’s motion which was pursuant to CPLR 3211(a)(1) to dismiss the fourth cause of action. The fourth cause of action sought to recover damages for legal malpractice due to GKN’s alleged misrepresentation that it had filed a motion to reargue on the plaintiffs’ behalf. While the documentary evidence submitted by GKN in support of its motion established that such a motion was prepared, the motion itself indicates that it was not filed until after GKN ceased representing the plaintiffs.”

This legal malpractice case, which is based upon tax advice may eventually lead to the largest legal malpractice settlement of the year, and perhaps, of the decade.  Overseas Shipholding Group, Inc. v Proskauer Rose, LLP  2015 NY Slip Op 05772  Decided on July 2, 2015  Appellate Division, First Department deals with damages not in the millions, but in the hundreds of millions.  It involves questionable tax advice concerning $1 Billion dollars of earnings.  Whew!

The immediate lesson to be learned is whether continuous representation in the transactional arena can survive a period of time in which nothing actually happens.  This case holds that it can.

” The motion court correctly determined that the legal malpractice claim, based on allegedly deficient tax advice provided by defendants beginning in 2005 and continuing throughout the course of its ongoing representation of plaintiff, is not time-barred (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]; Ackerman v Price Waterhouse, 252 AD2d 179, 205-206 [1st Dept 1998]; see also Zwecker v Kulberg, 209 AD2d 514, 515 [2d Dept 1994]). Further, plaintiff sufficiently pleaded that defendants’ advice was the proximate cause of its alleged damages.

Defendants argue that because the 2006 credit facility agreement was drafted by another law firm, it severed any causal chain between defendants’ work in 2005 and plaintiff’s increased tax liability. However, “[a]s a general rule, issues of proximate cause[, including superceding cause,] are for the trier of fact” (Hahn v Tops Mkts., LLC, 94 AD3d 1546, 1548 [4th Dept 2012] [alterations in original] [internal quotation marks omitted]) and defendants’ contention is unavailing at this procedural juncture (see Ableco Fin. LLC v Hilson, 81 AD3d 416, 417 [1st Dept 2011]). Plaintiff alleges, inter alia, that it continually relied on defendants’ advice for the purpose of shielding income from its off-shore subsidiary from federal income tax and that defendant improperly advised it to make the 2005 “check-the-box” election, which greatly enlarged the prospective pool of income on which plaintiff could be taxed. Plaintiff further alleges that the error in advising it to make the check-the-box election, which according to defendant could not be changed for the next five years, was compounded by the error of changing the language in the credit facility agreements from several liability to joint and several liability, effectively transferring the entire pool of off-shore subsidiaries’ income to plaintiff.”

For the extremely fact-intensive background, read the Richter, J. concurrance.