Weinberg v Sultan   2015 NY Slip Op 30932(U)  June 1, 2015  Supreme Court, New York County
Docket Number: 652273/2013  Judge: Cynthia S. Kern is the story of a building owner who let a valuable building on West 46th Street slip out of her hands after 40 years.  Is the attorney to blame?

“The following facts are not disputed. For forty years, up until 201,3, plaintiff was the owner of the Building. In 2008, plaintiff entered into a cash-out mortgage on the Building in the amount of $2,325,000.00. Plaintiff failed to make the required payments· on the loan secured by the mortgage and the default provisions of the mortgage, including a 24% penalty rate, were invoked in 2012. In January 2013, the holder of the mortgage on the Building commenced a  foreclosure action against plaintiff and a receiver was appointed for the Building with the  authority to manage the property and collect rents.

The plaintiff did not refinance the Building and the lender moved for summary judgment in the foreclosure action, by notice of motion dated April 10, 2013. After the lender brought the motion for summary judgment in the foreclosure action, plaintiff entered into a contract to sell the Building to the purchaser (the “Purchaser”) on April 22, 2014. The Purchaser purchased the Building from the plaintiff for $3,500,000.00 by deed dated May 22, 2013. Of that amount, approximately $2,800,000.00 was used to pay off the mortgage which was in the process of being foreclosed. The balance of the proceeds, after the payment of certain expenses, was placed in escrow for plaintiff and potentially for the Purchaser pursuant to two escrow agreements which were executed at the closing.

At the closing, plaintiff executed an escrow agreement whereby she agreed to deposit $100,000.00 in escrow, which she would receive when she vacated the building, which was ‘ supposed to be no later than two weeks after closing. The escrow agreement provided that the $100,000.00 would be held in escrow to secure plaintiffs removal from the Building which was to occur no later than May I 5, 2013. The agreement further provided that in the event plaintiff failed to vacate the Building, the $100,000.00 would be applied to all costs incurred by Purchaser in connection with removing plaintiff from the Building, including fair use and occupancy at the rate of $5,000 per month. Plaintiff continued to reside in the Building and did not pay any use and occupancy other than $5,000 ordered by the Housing Court. The court held in its previous decision that the Purchaser was entitled to the $100,000.00 held in escrow pursuant to the plaintiffs continued occupancy of the Building for more than 20 months after the closing. The second escrow agreement plaintiff executed at the closing set aside $62,152.00, representing the security deposit paid to plaintiff by the first floor commercial tenant. The escrow agreement provided that in the event that the security deposit was less than $62,152.00, plaintiff would be given six months to provide the Purchaser an estoppel letter from the tenant setting forth the correct amount. If plaintiff did not obtain the estoppel letter, the escrow amount was to be paid over to the Purchaser. The court held in its previous decision that the Purchaser was entitled to the $62, 152.00 being held in escrow because more than six months had passed since the closing and plaintiff had not provided the Purchaser with an estoppel letter.

In the instant case, the moving defendants have made a prima facie showing that even if they were negligent in their representation of plaintiff, plaintiff cannot make out a claim for legal malpractice because she cannot sufficiently establish that she has suffered any actual damages as a result of any alleged negligence in allowing the sale of the Building to go forward for an amount below market value. It is undisputed that the Building was the subject of a foreclosure action at the time of the sale based on plaintiffs failure to make the mortgage payments on her $2,325,000.00 first mortgage note secured by the Building and that a summary judgment motion for a judgment of sale and foreclosure was then pending. Plaintiff does not allege that she had any valid defense to the foreclosure action or that she had any basis for stopping the impending foreclosure. It is also undisputed that plaintiff was granted a thirty day stay of the foreclosure action to allow her the opportunity to refinance the Building and that she failed to do so. Based on the foregoing, defendants have sufficiently established that the only reason plaintiff sold the Building was to avoid the imminent foreclosure which was about to occur and not because of any deficient representation on the part of the defendants-she sold the Building because she did not have any other options to avoid the foreclosure. Moreover, plaintiff has failed to raise a disputed issue of fact with respect to her claim that she could have achieved a more favorable outcome to the foreclosure action but for the alleged negligence of the moving defendants. Her bare conclusory allegation that there were other options available to her other than the sale of the Building to avoid’foreclosure are insufficient to raise an issue of fact. Her allegation that it would have taken months to achieve a judgment of foreclosure, which would have given her an opportunity to sell the Building with a real estate broker or refinance the building rather than sell the Building to the Purchaser is insufficient as she fails to identify any evidence, other than mere speculation, that she would have been able to sell or refinance the Building in the time frame between the pending summary judgment motion and the foreclosure of the Building. She has not identified a single prospective purchaser who was willing to pay market value for the Building or a lender or investor who was willing to refinance the delinquent mortgage. To the contrary, plaintiff was unable to refinance the Building during the 30 day stay period provided by the court presiding over the foreclosure action. “

Many large law firm retainer agreements contain arbitration clauses.  It is our guess that the law firms believe that respondent has the better hand in arbitration, that arbitration is costly and not particularly beckoning to Plaintiffs, and that arbitrators will be kinder to the law firm than would a jury.  Arbitration clauses are enforceable, and little can be done after the retainer agreement is signed.

Menche v Meltzer, Lippe, Goldstein & Breitstone, LLP  2015 NY Slip Op 04617  Decided on June 3, 2015  Appellate Division, Second Department  demonstrates how the Appellate Division pays heed to an arbitration clause.

“The plaintiff retained the defendant law firm Meltzer, Lippe, Goldstein & Breitstone, LLP, to represent him in two matters involving his service as a trustee. An engagement letter executed by the parties contained an arbitration provision stating that in the event of “any dispute arising out of or relating to this agreement and/or the legal services rendered hereunder,” the parties agreed to binding arbitration before the Alternative Dispute Resolution Tribunal of the Bar Association of Nassau County, Inc. After a dispute arose, the plaintiff commenced this action in the Supreme Court to recover damages for legal malpractice, breach of fiduciary duty, and fraud. The defendant moved pursuant to CPLR 3211(a) to dismiss the complaint, and the Supreme Court granted the motion.

” 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'” (M.H. Mandelbaum Orthotic & Prosthetic Servs., Inc. v Werner, 126 AD3d 857, 858, quoting Gould v Decolator, 121 AD3d 845, 847; see Goshen v Mutual Life. Ins. Co. of N.Y., 98 NY2d 314; Leon v Martinez, 84 NY2d 83). Contrary to the plaintiff’s contention, the arbitration provision of the engagement letter was clear, explicit, and unequivocal, and the legal malpractice and breach of fiduciary duty causes of action fall within the broad scope of this provision (see Nasso v Loeb & Loeb, LLP, 19 AD3d 465; Stoll Am. Knitting Mach. v Creative Knitwear Corp., 5 AD3d 586).”

Irony is a state of affairs or an event that seems disturbingly contrary to what one expects.  Legal malpractice concerns the effects of human error in the litigation of client’s cases.  It is highly ironic when mistakes are made in the litigation of legal malpractice cases.  Here is one example.

Yuan v Kaplan  2015 NY Slip Op 04637  Decided on June 3, 2015  Appellate Division, Second Department is a short opinion.  It is devastatingly forthright.

” In an action to recover damages for legal malpractice and breach of fiduciary duty, the plaintiff appeals from an order of the Supreme Court, Queens County (Brathwaite Nelson, J.), dated March 21, 2013, which granted the defendants’ unopposed motion pursuant to CPLR 3211(a)(7) to dismiss the complaint for failure to state a cause of action.

ORDERED that the appeal is dismissed, with costs.

The plaintiff did not submit papers to the Supreme Court in opposition to the defendants’ motion pursuant to CPLR 3211(a)(7) to dismiss the complaint for failure to state a cause of action, and the motion was granted on default. No appeal lies from an order or judgment granted upon the default of the appealing party (see CPLR 5511; Reynolds v Haiduk, 120 AD3d 656; HCA Equip. Fin., LLC v Mastrantone, 118 AD3d 850; J.F.J. Fuel, Inc. v Tran Camp Contr. Corp., 105 AD3d 908). Since the order appealed from was entered upon the plaintiff’s default in opposing the motion, the appeal must be dismissed (see Lumbermen’s Mut. Cas. Co. v Fireman’s Fund Am. Ins. Co., 117 AD2d 588).”

Sometimes a story sounds bad on first reading, and changes thereafter.  This story sounds worse on second reading.  It reeks of non-actionable wrongs suffered by a not-so-astute plaintiff.

Mizrahi v Adler  2014 NY Slip Op 31701(U)  June 30, 2014  Sup Ct, NY County  Docket Number: 650802/2010  Judge: O. Peter Sherwood is a retelling of a very old “hot” real estate deal gone sour.

“It is uncontested that, in 2006, plaintiff Eitan Mizrahi (plaintiff) entered into a written retainer agreement with Adler and his law firm, non-party, Stern, Adler & Associates, LLP, for the firm to act as plaintiffs attorneys, to provide advice and services specifically with regard to estate planning issues (Retainer Letter, attached to Adler Aff. as Exhibit C). At a meeting in February 2007, plaintiff and Adler discussed a possible real estate opportunity, found by Adler, to purchase residential units then under construction in Las Vegas, Nevada, called the Trump International Hotel and Tower (Trump Towers). Trump Towers was to be comprised of two towers, Tower I and Tower II. Apparently, Adler had marketing materials on hand at the meeting which described the [* 1] investment, and plaintiff allegedly expressed interest in investing in the project.

Adler claims that he explained to plaintiff that Saw was in a “unique position” to offer prospective investors the opportunity to purchase units in the Towers before they were offered to the general public (Adler Aff., ¶14), and that plaintiff could take advantage of Saw’s contacts to purchase units by entering a finder’s agreement with Saw, and paying Saw a fee. Plaintiff claims that he was told that Saw was owned by an individual named Jack Wishna (Wishna), and that Adler would be working Wishna. Adler contends that plaintiff knew Saw was Adler’s company. Adler adds that he told plaintiff that his “contacts” with Wishna would aid in the process of purchasing property in Trump Towers, as Wishna was alleged to have a relationship with the developer (id.). Plaintiff maintains that Adler told him an investment in Trump Towers would be entirely risk-free, and that by investing through the intervention of Saw (and hence, Wishna), plaintiff would obtain certain benefits, “including, but not limited to, the ability to sell or swap units prior to closing, and postpone the contracted closing date” (Complaint, attached to Adler Aff. as Exhibit A, ¶ 15). Plaintiff calls these alleged rights the “Wishna Umbrella.” Early in May, 2007, upon Adler’s advice, plaintiff executed Reservation Deposit Forms for two units in Tower II, and made deposits of $I 0,000 per unit. Plaintiff claims that the Reservation Deposit Form named “Jack Wishna of Liberty Realty Inc.” as a sales agent involved with the sale (id.¶ 18).

The complaint alleges that defendant lost his down payment due to wrongdoing by Adler in representing to plaintiff that the investment was risk-free and that the plaintiff would have rights in the purchase of units in Trump Towers that he did not actually have under the Purchase Agreement. Plaintiff argues that he labored under the reasonable misconception that Adler was acting as his attorney at all times during the transactions at issue. Plaintiff claims to have only a fragmentary education and a slim grasp of the English language, and that he relied  totally on Adler, as his attorney
in making the investment. Plaintiff never read any document he was asked to sign, under the assumption, that Adler, as plaintiffs attorney, was looking out for plaintiffs interests.

Plaintiffs action fails on the question of proximate cause. While the issue of proximate cause can often be ~jury question (see Bradley v Soundview Healthcenter, 4 AD3d 194 [1st Dept 2004 ]), the court may always determine whether there are questions of fact (see Laub v Faessel, 297 AD2d 28 [1st Dept 2002]). In Laub v Faessel, dealing with claims for fraud, negligent misrepresentation and breach of fiduciary duty, the court, discussing proximate cause, di~tinguished between a misrepresentation which induces a plaintiff to engage in a transaction (“transaction causation”), and misrepresentations which directly cause the loss to plaintiff (“loss causation”) (id. at 31 ). “Loss causation is the fundamental core of the common-law concept of proximate cause: ‘An essential element of the plaintiffs cause of action for negligence, or for … any … tort, is that there be some reasonable connection between the act or omission of the defendant and the damage which the plaintiff has suffered [citation omitted]'” (id.). “Transaction causation is often synonymous with ‘but for’ causation” (Amusement Industry, Inc. v Stern, 786 F Supp 2d 758, 776 [SDNY 2011 ]). In the present context of a legal malpractice claim, plaintiff alleges “transaction causation,” because he says that he would not have entered into the agreements had he known that they bore any risk. That is, “but for” Adler’s representations, there would have been no transaction. However, even assuming that th_e representations are a basis for finding “transaction causation,” plaintiff cannot establish “loss causation,” because many factors led to the failure to close on Unit 6401, or any other unit in the Trump Towers. Plaintiffs losses were caused by the precipitious drop in real estate prices, and the value of the Trump Towers units in 2008; the Joss of his job; and plaintiffs failure to obtain financing. 4 The “Wishna Umbrella” could not have protected plaintiff from his losses. As a result, plaintiff has failed to plead proximate cause.

The failure to establish proximate cause dooms plaintiffs cause, of action for legal malpractice. Likewise, it dooms his claims for fraud and negligent misrepresentation (see Friedman v Anderson, 23 AD3d 163 [I st Dept 2005]), and for breach of fiduciary duty (see Northbay Constr.Co. v Bauco Constr. Corp., 38 AD3d 737 (2nd Dept 2007]).

Further, plaintiff cannot establish reasonable reliance on any representation that the deal was risk free. Reasonable reliance is an element of a fraud cause of action (see MBIA Ins. Co. v Countrywide Home Loans, Inc., 87 AD3d 287 [I st Dept 2011 ]), and of a claim for negligent misrepresentation (see JA. 0. Acquisition Corp. v Stravitsky, 8 NY3d 144 (2007]). In the Finder Agreement, plaintiff represented to Saw that he was a “sophisticated investor,” and that he “acknowledg[ ed] that buying real estate is a risky investment and that there is no guarantee the value of the unit will increase.over time.” He cannot later claim that he did not know that his investment was risky. “

Divorce proceedings lead to a large number of legal malpractice inquiries.  They are generally in the nature of “I did not get enough/gave too much in the divorce.  Is it legal malpractice?   Sometimes it is.  In Tanenbaum v Molinoff  2014 NY Slip Op 04186 [118 AD3d 774]  June 11, 2014  Appellate Division, Second Department it was not.  Plaintiff did not get his attorney fees paid by the more monied spouse.  The suit was for legal malpractice, which the Court and the AD found lacking.

“Here, the defendant established that he was entitled to the dismissal of the first cause of action, which alleged legal malpractice, pursuant to CPLR 3211 (a) (1) and (7). Contrary to the plaintiff’s contentions, the complaint in this action, as well as certain documentary evidence before the Supreme Court, including, inter alia, a portion of the settlement agreement between the plaintiff and his former wife, conclusively established as a matter of law that, under the terms of the settlement agreement (see generally Trinagel v Boyar, 99 AD3d 792, 792 [2012]; Matter of Berns v Halberstam, 46 AD3d 808, 809 [2007]), the plaintiff was not entitled to an award of an attorney’s fee in the proceeding against his former wife before the Family Court (see Matter of Tanenbaum v Caputo, 81 AD3d 839 [2011]), and that the defendant therefore did not commit malpractice in failing to obtain an award of an attorney’s fee in that proceeding. Moreover, the retainer agreement between the parties here conclusively refuted any claim based on the plaintiff’s allegation that the defendant assured him that the plaintiff’s former wife would be responsible for the payment of all legal fees in that proceeding. Accordingly, the Supreme Court properly granted that branch of the defendant’s motion which was to dismiss the first cause of action pursuant to CPLR 3211 (a) (1) and (7).”

Jeffrey M. Rosenblum, P.C. v Casano  2014 NY Slip Op 51629(U) [45 Misc 3d 1218(A)] Decided on November 19, 2014   District Court Of Nassau County, First District  Fairgrieve, J. is an example of what happens when law firms sue to obtain payments.  They trigger lots of litigation and almost always. a legal malpractice counterclaim.  Here, in this Nassau County District Court, where the jurisdictional limit is $ 15,000 the attorneys have triggered a much bigger legal malpractice counterclaim.

“Before the court is plaintiff’s motion to dismiss defendant’s five (5) counterclaims. Said motion is decided as provided herein.

In her Verified Answer with Counterclaims (Plaintiff’s Exhibit B), defendant sets forth [*2]and classifies each of the five (5) counterclaims raised therein. They are designated as Breach of Contract (First and Second Counterclaims), Unjust Enrichment (Third Counterclaim), Declaratory Judgment (Fourth Counterclaim), and Attorney Malpractice (Fifth Counterclaim).

Initially, plaintiff’s counsel presses two arguments for dismissal of the first four counterclaims. First, she argues that pursuant to CPLR 3211(a)(2), this court lacks subject matter jurisdiction because “the monetary jurisdictional limit of the District Court is $15,000,” which these counterclaims exceed (Affirmation in Support, ¶ 22). To the contrary, however, this court “shall have jurisdiction of counterclaims … for money only, without regard to amount” (UDCA §208[b]). Accordingly, plaintiff’s argument characterizing the amount sought by defendant’s counterclaims as exceeding statutory authority, is rejected. Therefore, its requests for dismissal on this basis are denied.”

“Lastly, plaintiff seeks dismissal of the fifth and final counterclaim on two grounds. The first isres judicata and identity of issues with the earlier arbitration proceeding herein. In this regard, it is uncontroverted that this case was previously arbitrated pursuant to 22 NYCRR Part 137, that said arbitration resulted in a decision in defendant’s favor and that plaintiff timely commenced a trial de novo pursuant to 22 NYCRR 137.8. Given same, the arguments proferred by plaintiff to dismiss defendant’s fifth counterclaim are inapplicable to the present case.

The cases cited by plaintiff, Wallenstein v Cohen, 45 AD3d 674 (2d Dept 2007) and Altamore v Friedman, 193 AD2d 240 (2d Dept 1993), involved different arbitration statutes. Moreover, the arbitration statute in Wallerstein was repealed on January 1, 2002, and the Altamore case was specifically premised upon the binding nature of the arbitration involved in that proceeding. Unlike either of these cases, the arbitration provision used herein, explicitly provides a non-prevailing party with the opportunity to elect to proceed to a trial de novo, and plaintiff having done so, defendant can pursue her counterclaim. Therefore, that portion of plaintiff’s motion seeking dismissal of defendant’s fifth counterclaim, on res judicata grounds, is denied.

Plaintiff also seeks dismissal of said fifth counterclaim based upon an alleged failure of defendant to state a claim. In considering a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must accept the facts alleged as true and make a determination as to whether the facts alleged are within any cognizable legal theory (see Holmes v Gary Goldberg & Co., Inc., 40 AD3d 1033 [2d Dept 2007]). The non-moving party is afforded “the benefit of every possible inference” (see Goshen v Mut. Life Ins. Co., 98 NY2d 314, 326 [2002], quoting Leon v Martinez, 84 NY2d 83, 87 [1994]). Therefore, if the pleading contains factual allegations which taken together manifest any cause of action cognizable at law, the motion must be denied (see Natural Organics, Inc. v Smith, 38 AD3d 628 [2d Dept 2007]).

In a legal malpractice action, the “plaintiff must prove (1) the negligence of the attorney, (2) that the negligence was the proximate cause of the loss sustained, and (3) proof of actual damages. Plaintiff must also prove that she would have succeeded on the merits of the underlying action but for’ the attorney’s negligence” (Tilton v Trezza, 2006 NY Slip Op 50867[U] [Sup Ct, Nassau Cty 2006], citing Davis v Klein, 88 NY2d 1008 [1996]). Review of ¶¶ 52-54 of defendant’s answer (Plaintiff’s Exhibit B), reveals that the above requisites for a claim sounding in legal malpractice have been satisfied. Accordingly, plaintiff’s request for dismissal of defendant’s fifth counterclaim, for failure to state a cause of action, is denied.”

Sometimes a cigar is simply a cigar, and sometimes plaintiffs have to produce wildly expensive trial props.  In Melcher v Greenberg Traurig LLP
2015 NY Slip Op 30855(U)  May 18, 2015  Supreme Court, New York County  Docket Number: 650188/2007  Judge: O. Peter Sherwood a scene not unlike the Pumpkin Papers case unfolded.  Here is Judge Sherwood on the replica kitchen.

“On January 27, 2004, Melcher’s counsel, Jeffrey Jannuzzo, requested that the original Amendment be produced for forensic testing ofits authenticity (Jannuzzo letter to Corwin dated Jan. 27, 2004, Plaintiffs Exhibit 9). On February l, Fradd informed Corwin that the original Agreement had been damaged-in a tea-making incident (Fradd e-mail to Corwin dated Feb. 1, 2004, Plaintiffs Exhibit 1 I). The first page was destroyed and the second page, with Fradd’s signature, was singed (id.; Plaintiffs Exhibit 12). On February 2, 2004, Corwin was informed that no record of creating 3 [* 3] the Amendment was found in Governale’s files, and that the Amendment lacked the standard footer used by Govemale’s firm (Corwin notes dated Feb. 2, 2004, Plaintiffs Exhibit 13). 1 Nonetheless, an undamaged copy of the Amendment was attached to Fradd’s February 13, 2004, affidavit, which was filed and submitted to the court in support of a motion to dismiss the Apollo Action (Plaintiffs Exhibit 27).

Plaintiffs arson expert the Apollo Action created a replica of Fradd’s kitchen in order to test whether the damage to the Amendment could have been done in the manner claimed. Plaintiff stored the replica kitchen, so that the defendants in this case could inspect it. Fradd no longer lives in the same apartment, so the original kitchen is no longer available for inspection. Plaintiff offered the replica kitchen to defendants, and has advised defendants that he intends to discard it if they do not take it. Defendants argues that plaintiff must preserve this evidence. Accordingly, plaintiff seeks an order instructing defendants to take the replica kitchen or waive the right to inspect it. He asserts that his obligation to produce pursuant to CPLR 3120 can be “satisfied by telling the party seeking 17 [* 12] the discovery where the materials are and providing a reasonable opportunity” to view them (Memo at 4, quoting Zegarelli v Hughes, 3 NY3d 64, 69 [2004 ]). The parties dispute whether expert testimony regarding the feasability ofFradd’s version of how the Amendment came to be damaged will be relevant at trial, and expert discovery has not yet begun. As Melcher has not shown any undue burden, the court directs that he preserve the replica kitchen at least until expert discovery is concluded.”