Client hires attorney to make sure that a large loan is handled correctly and that the loan transaction would be legal, valid, binding, and enforceable.  The loan became noncollectable. When the motions for summary judgment were filed, Supreme Court granted summary judgment to Plaintiff and denied summary judgment to defendants.  The Appellate Division disagreed.

Quantum Corporate Funding, Ltd. v Ellis  2015 NY Slip Op 02104  Decided on March 18, 2015 Appellate Division, Second Department is a prime example of the legal malpractice battlefield.  It almost always takes place over the “but for” proofs.

“The plaintiff, Quantum Corporate Funding, Ltd., commenced this action against the defendants, Richard I. Ellis and Cassin & Cassin, LLP (hereinafter Cassin), to recover damages for, among other things, legal malpractice. The complaint alleged that the defendants represented the plaintiff in connection with a loan transaction and that, due to the defendants’ malpractice, the note that was given in exchange for the loan was rendered partially uncollectible.

Specifically, the complaint alleged that, in January 2007, nonparty Mardi Gras Celebrations, Inc. (hereinafter Mardi Gras), executed a promissory note in the principal sum of $505,000 in favor of nonparty TCRM Commercial Corp. (hereinafter TCRM), and that the note was contemporaneously assigned from TCRM to the plaintiff. The complaint further alleged that the note was to be secured by the joint personal guaranty (hereinafter the guaranty) of the nonparties Valerie Birkart (hereinafter Valerie) and Nina Birkart (hereinafter Nina). As a condition of the loan, Valerie and Nina were required to give a blanket mortgage on their respective real properties, which were both located in Sanibel, Florida. These mortgages were intended to secure both the note and the guaranty. Although Valerie’s property was allegedly encumbered by a senior mortgage in the amount of $910,000, Nina’s property was allegedly “free and clear of any liens.” In addition, the complaint alleged that all shares of Mardi Gras were pledged to secure the guaranty, and that Mardi Gras would provide a senior security interest in all of its personal property assets.

The complaint alleged that, in November 2007, Mardi Gras defaulted on its obligations under the loan, and that both Valerie and Nina failed to comply with the terms of the guaranty and the mortgages despite due demand. In April 2008, Nina disaffirmed any liability on the ground that she had been less than 18 years old at the time she had signed the guaranty and, thus, lacked legal capacity to be bound by it. The complaint further alleged that, due to certain language in the deeds that had conveyed the real properties to Valerie and Nina, the titles to those properties were not marketable. Furthermore, the UCC financing statements perfecting the security interest in Mardi Gras’s assets were not recorded, and the plaintiff never received the shares of stock of Mardi Gras that had been pledged to secure the note.

The complaint alleged that Ellis and Cassin had been retained to ensure that the loan transaction would be legal, valid, binding, and enforceable against Mardi Gras, Valerie, and Nina. The complaint further alleged that Ellis and Cassin were retained to ensure that the mortgages were enforceable and that the title to the real properties was marketable.

The complaint alleged 11 causes of action against Ellis and 6 causes of action against Cassin, sounding in legal malpractice and breach of contract. The defendants separately moved for summary judgment dismissing the complaint insofar as asserted against each of them. In support of the motions, the defendants argued that they had no duty to inquire into Nina’s age, and were permitted to assume her legal capacity to execute the guaranty. The defendants also asserted that the legal malpractice causes of action should be summarily dismissed because the plaintiff had already recovered an amount in excess of its damages pursuant to a settlement agreement reached with nonparties to this action.”

“Here, the plaintiff failed to establish, prima facie, its entitlement to judgment as a matter of law on the first cause of action, which was asserted against Cassin, or on the second cause of action, which was asserted against Ellis. The plaintiff failed to demonstrate the amount it could or would have collected if the note, the guaranty, and mortgage had been enforceable against Nina (see Jedlicka v Field,14 AD3d 596, 597; Evangelista v Slatt, 295 AD2d 156, 156; McKenna v Forsyth & Forsyth, 280 AD2d 79, 82-83; accord Kay v Bricker, 485 So 2d 486, 487 [Fla 3d DCA]; Freeman v Rubin, 318 So 2d 540, 543 [Fla 3d DCA]). In addition, the plaintiff failed to demonstrate that it was unable to recover the amounts due under the note by other legal means available to it under the terms of the note and guaranty, or that it was unable to obtain equitable relief from Nina even after she disaffirmed liability on the ground of legal incapacity (see Restatement [Second] of Contracts § 14, Comments b, c; see also Restatement of Restitution § 139). Since the plaintiff failed to demonstrate the extent to which it would have been unable to enforce the note and the guaranty after it was disavowed by Nina, and the precise extent to which it would have been able to recover had the note, the guaranty, and the mortgage been enforceable against her, the plaintiff failed to establish, prima facie, that any negligence on the part of Cassin or Ellis was a proximate cause of actual and ascertainable damages (see Bells v Foster, 83 AD3d 876, 877; Snolis v Clare, 81 AD3d 923, 925; cf. Parklex Assoc. v Flemming Zulack Williamson Zauderer, LLP, 118 AD3d 968, 970). [*4]Accordingly, the Supreme Court should have denied those branches of the plaintiff’s cross motion which were for summary judgment on the issue of liability on the first cause of action, which was asserted against Cassin, and on the second cause of action, which was asserted against Ellis.

The Supreme Court properly denied those branches of the defendants’ separate motions which were for summary judgment dismissing various causes of action that were asserted against each of them. “To succeed on a motion for summary judgment, a defendant in a legal malpractice action must establish that the plaintiff is unable to prove at least one” of the essential elements of a legal malpractice cause of action (Parklex Assoc. v Flemming Zulack Williamson Zauderer, LLP, 118 AD3d at 970). It is a defendant’s burden, when it is the party moving for summary judgment, to demonstrate affirmatively the merits of a defense, which cannot be sustained by pointing out gaps in the plaintiff’s proof (see Kempf v Magida, 116 AD3d 736, 736-737; Alizio v Feldman, 82 AD3d 804, 804).

Contrary to Cassin’s contention, it was not entitled to summary judgment dismissing the first cause of action, notwithstanding its contention that it owed no duty to verify that Nina had the legal capacity to execute the guaranty. Cassin’s submissions included evidence that showed that, consistent with the allegations in the complaint, Cassin was retained to ensure that the loan transaction was legal, valid, binding, and enforceable. Accordingly, Cassin failed to eliminate all triable issues of fact as to the scope of its representation of the plaintiff and its concomitant duty in the underlying transaction (see Marshel v Hochberg, 37 AD3d 559, 559-560; see also Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 39; cf. AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 429).

Contrary to both of the defendants’ contentions, they were not entitled to summary judgment dismissing the legal malpractice causes of action. The defendants failed to establish that the plaintiff recovered in excess of its actual and ascertainable damages by virtue of the settlement agreement it reached with certain of the nonparties that were involved in the underlying loan transaction. In addition, there is no merit to the defendants’ contention that the actual amount that was loaned by the plaintiff was $444,400.03, and that $60,599.97 of the principal loan amount was withheld pursuant to an interest reserve agreement.”

Fidelity Natl. Tit. Ins. Co. v Smith Buss & Jacobs, LLP  2015 NY Slip Op 02058  Decided on March 17, 2015
Appellate Division, First Department brings us the question of whether the law firm aided and abetted fraud, was negligent or simply made a big mistake.  The Appellate Division left that question open on a motion to dismiss.

“The complaint alleges that the sponsor of 16 apartment units in a condominium development, Empire Builders of New York Corp., and other parties defrauded the purchasers of the units by falsely representing that part of the purchase price would be used to satisfy portions of a blanket mortgage allocated proportionally to the units and by diverting the funds meant to satisfy the mortgage for their own use. Empire also allegedly failed to disclose that six of the units were encumbered by mortgages held by Al Perna. Plaintiff defended the purchaser’s title and mortgagee Wells Fargo Bank’s mortgage loan against foreclosures of the mortgages, pursuant to title insurance policies that its policy-issuing agent, Imagine Title, had allegedly fraudulently issued on its behalf. Proceeding individually and as subrogee of the purchasers and Wells Fargo, plaintiff asserts claims for fraud, aiding and abetting fraud, aiding and abetting conversion, and breach of fiduciary duty against Empire’s attorney, defendant Smith Buss & Jacobs, LLP (SBJ) and a breach of contract claim against defendant Blomberg for breaching instructions that Wells Fargo had given him by failing to ensure that all liens of record were satisfied before disbursing Wells Fargo’s funds from escrow.

The complaint alleges that SBJ misrepresented that the subject units would not be encumbered by the mortgages in the offering plan and closing statements it drafted and that it deviated from normal practice by failing to obtain the necessary payoff letters from New York Community Bank (NYCB), which had been assigned the mortgages, before preparing the closing statements (which typically set forth the payoff amounts) and by directing the purchasers to pay a party named Michael Lease, instead of NYCB. These allegations raise a reasonable inference of fraudulent intent on SBJ’s part and justifiable reliance by the purchasers, and therefore state a claim for fraud against SBJ (see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).

The allegations of SBJ’s involvement are sufficient to establish its actual knowledge of the fraud scheme, as well as its substantial assistance therein, and thus state an aiding and abetting fraud claim (see Oster v Kirschner, 77 AD3d 51, 55-56 [1st Dept 2010]). These allegations also state a claim for aiding and abetting Imagine’s breach of fiduciary duty to Fidelity (see Kaufman v Cohen, 307 AD2d 113, 125-126 [1st Dept 2003]). In addition, they state a claim for aiding and abetting the conversion of funds by Empire and Imagine (see Weisman, Celler, Spett & Modlin v Chadbourne & Parke, 253 AD2d 721 [1st Dept 1998]).”

Judiciary Law 487 is the attorney deceit law from Olde England.  It allows for treble damages against an attorney who attempts or succeeds at deceit towards the Court or a party in litigation.  How bad do you have to be to violate the statute?

Savitt v Greenberg Traurig, LLP  2015 NY Slip Op 02003    Decided on March 12, 2015  Appellate Division, First Department is an example of not enough.

“Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 28, 2013, which, to the extent appealed from, as limited by the briefs, granted defendants’ motions to dismiss the Judiciary Law § 487 claims against defendant law firm and the individual attorney defendants, and the derivative claims against defendants Janis Savitt (Janis) and Designs by Janis Savitt, Inc. (Designs), unanimously modified, on the law, the motion to dismiss the derivative claims denied, and otherwise affirmed, without costs.

The motion court properly dismissed the Judiciary Law § 487 claims since the complaint “fails to show either a deceit that reaches the level of egregious conduct or a chronic and extreme pattern of behavior on the part of” the defendant attorneys (see Wailes v Tel Networks USA, LLC, 116 AD3d 625, 625-626 [1st Dept 2014]; Herschman v Kern, Augustine, Conroy & Schoppman, 113 AD3d 520 [1st Dept 2014]). The complaint alleges only bare legal conclusions that the defendant attorneys, who jointly represented plaintiffs and defendants Janis and Designs in a prior lawsuit, acted with the requisite intent to deceive. Specifically, there are no factual allegations from which to infer that the attorneys knew that their advice to plaintiffs that there were no meritorious claims they could have asserted against Janis and Designs in the prior lawsuit, was false, and thus, that they knowingly and intentionally misled plaintiffs into releasing Janis and Designs from all claims in the course of settling that lawsuit (Callaghan v Goldsweig, 7 AD3d 361, 362 [1st Dept 2004]).”

Pari Delicto or unclean hands is a principal that the courts should not decide between wrongdoers.  When may the court use this principal to wipe the board clean and allow no-one to bring a legal malpractice or a judiciary law 487 claim?

In Savitt v Greenberg Traurig, LLP  2015 NY Slip Op 02003  Decided on March 12, 2015  Appellate Division, First Department  we see Supreme Court dismissing the claims, and the Appellate Division reversing.  For the AD, there was not enough wrongdoing.

“Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 28, 2013, which, to the extent appealed from, as limited by the briefs, granted defendants’ motions to dismiss the Judiciary Law § 487 claims against defendant law firm and the individual attorney defendants, and the derivative claims against defendants Janis Savitt (Janis) and Designs by Janis Savitt, Inc. (Designs), unanimously modified, on the law, the motion to dismiss the derivative claims denied, and otherwise affirmed, without costs.”

“The motion court erred, however, in dismissing the derivative claims asserted by plaintiff Michelle Savitt on behalf of M+J Savitt, Inc. (M+J), against Janis and Designs on the basis of unclean hands (see Ross v Moyer, 286 AD2d 610, 611 [1st Dept 2001]). Michelle and Janis allege corporate misdeeds against each other. However, there are issues of fact as to whether Michelle committed misconduct and, if so, whether Janis’s misconduct far exceeded that of [*2]Michelle. There are also questions of fact as to whether Janis was aware of and consented to Michelle’s conduct (Dillon v Dean, 158 AD2d 579, 580 [2d Dept 1990]; Stahl v Chemical Bank, 237 AD2d 231, 232 [1st Dept 1997]).”

 

When does Continuous representation end?  Sometimes a matter of days can be decisive.  In Alizio v Ruskin Moscou Faltischek, P.C.  2015 NY Slip Op 01909  Decided on March 11, 2015 Appellate Division, Second Department it was the difference between April 20 and May 10.  If continuous representation ended on April 20 the complaint was late.  If it ended on May 10, it was timely.

“Causes of action alleging legal malpractice which would otherwise be barred by the statute of limitations are timely if the doctrine of continuous representation applies” (Macaluso v Del Col, 95 AD3d 959, 960; see Louzoun v Kroll Moss & Kroll, LLP, 113 AD3d 600, 601). The continuous representation doctrine tolls the statute of limitations where “there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim” (McCoy v Feinman, 99 NY2d 295, 306; see DeStaso v Condon Resnick, LLP, 90 AD3d 809, 812). Here, there is no real dispute that, pursuant to the doctrine of continuous representation, the three-year statute of limitations pertaining to the defendant’s alleged legal malpractice in 2008 in Action Nos. 1 and 2 was tolled during the time period when the defendant continued to represent the plaintiff in those actions (see McCoy v Feinman, 99 NY2d at 306; DeStaso v Condon Resnick, LLP, 90 AD3d at 812). At issue is when that representation and tolling ceased and the three-year statute of limitations period began.

The defendant met its prima facie burden by establishing that the statute of limitations expired on April 20, 2013, three years after the consents were executed by the plaintiff, the defendant, and new counsel. The defendant took no acts on behalf of the plaintiff in the actions after the consents were signed on April 20, 2010. The parties’ execution of the consents on that date in all of the actions, including Action Nos. 1 and 2, demonstrated the end of the defendant’s representation of the plaintiff and the parties’ mutual understanding that any future legal representation in the actions would be undertaken by the plaintiff’s new counsel (see McCoy v Feinman, 99 NY2d at 306; Landow v Snow Becker Krauss, P.C., 111 AD3d at 796). Therefore, the defendant met its prima facie burden of establishing that the three-year statute of limitations period for commencing a cause of action alleging legal malpractice had expired at the time the plaintiff commenced this action on May 10, 2013.

Upon that showing, the burden then shifted to the plaintiff to raise a question of fact as to whether the tolling ceased on a date after April 20, 2010, such that the causes of action alleging legal malpractice were timely commenced (see Landow v Snow Becker Krauss, P.C., 111 AD3d at 796-797; Zaborowski v Local 74, Serv. Empls. Intl. Union, AFL-CIO, 91 AD3d at 768-769). Here, the plaintiff failed to do so. The plaintiff contends that the statute of limitations did not begin running until May 12, 2010, when the May 2010 revised consent in Action No. 1 was executed. However, the plaintiff failed raise a question of fact as to whether the attorney-client relationship between the defendant and the plaintiff continued in the actions after April 20, 2010, when the consents were executed (see Farage v Ehrenberg, 124 AD3d 159; McCoy v Feinman, 99 NY2d at 306; Landow v Snow Becker Krauss, P.C., 111 AD3d at 796). The May 2010 revised consent, which was prepared and distributed by new counsel, not the defendant, and related only to Action No. 1, constituted “a mere memorialization of what had already occurred” in April 2010 (Farage v Ehrenberg, 124 AD3d at 168).”

 

When does continuing representation end?  In the absence of a bright line rule, the Courts and practitioners have to rely upon arguments that the representation continued while there was a continuing relationship of trust and confidence and a shared understanding of the need for more work on the case.  An alternative bright line rule might be that continuing representation ends with a filed consent to change attorneys or a court order.

In Beroza v Sallah Law Firm, P.C.  2015 NY Slip Op 01913  Decided on March 11, 2015  Appellate Division, Second Department the court denies a motion to dismiss without any real explanation of what the parties did to indicate continuing representation.

“The three-year limitations period applicable to causes of action to recover damages for legal malpractice “may be tolled by the continuous representation doctrine where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim” (Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d 1037, 1038 [internal quotation marks omitted]; see Zorn v Gilbert, 8 NY3d 933, 934; McCoy v Feinman, 99 NY2d 295, 306; Singh v Edelstein, 103 AD3d 873, 874). “For the doctrine to apply, there must be clear indicia of an ongoing, continuous, developing, and dependent relationship between the client and the attorney” (Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d at 1038 [internal quotation marks omitted]; see Piliero v Adler & Stavros, 282 AD2d 511, 512). ” One of the predicates for the application of the doctrine is continuing trust and confidence in the relationship between the parties'” (Aseel v Jonathan E. Kroll & Assoc., PLLC, 106 AD3d at 1038, quoting Luk Lamellen U. Kupplungbau GmbH v Lerner, 166 AD2d 505, 507; see Coyne v Bersani, 61 NY2d 939; Piliero v Adler & Stavros, 282 AD2d at 512).

Here, the defendants established their prima facie entitlement to dismissal of the complaint based on the expiration of the applicable three-year statute of limitations (see CPLR [*2]214[6]). In opposition, however, the plaintiff raised a question of fact as to whether the applicable statute of limitations was tolled by the doctrine of continuous representation (see Kitty Jie Yuan v 2368 W. 12th St., LLC, 119 AD3d at 674-675; Bill Kolb, Jr., Subaru, Inc. v LJ Rabinowitz, CPA, 117 AD3d 978, 980; Macaluso v Del Col, 95 AD3d 959, 960-961).

Accordingly, the Supreme Court properly denied the defendants’ motion pursuant to CPLR 3211(a)(5) to dismiss the complaint as time-barred.”

CLEs on professional malpractice always discuss the question of whether attorney fee claims trigger legal malpractice counterclaims.  They do.  Sometimes the counterclaim is unwarranted.  Often it is not.  The coupling of fee claim-malpractice counterclaim stains the entire field.  Attorneys commonly brand all legal malpractice as fee-avoidance or, at best, misguided emotional response.   Anyway…

Wagner Davis P.C. v Gargano   2014 NY Slip Op 02247 [116 AD3d 426]   April 1, 2014  Appellate Division, First Department seems to be one of the unwarranted cases.  “In this action for unpaid legal fees, defendants asserted a counterclaim for legal malpractice alleging that they would have prevailed on a motion for a preliminary injunction in the underlying action commenced by defendants against their neighbors over a retaining wall between their properties, if it had been made earlier by plaintiff. However, defendants failed to establish that they would have been successful on the motion absent counsel’s delay (see Warshaw Burstein Cohen Schlesinger & Kuh, LLP v Longmire, 106 AD3d 536, 536 [1st Dept 2013], lv dismissed 21 NY3d 1059 [2013]). In any event, plaintiff’s delay while a new expert prepared a report on the challenged retaining wall, was a reasonable strategic decision that cannot form the basis of a malpractice claim (Morrison Cohen Singer & Weinstein v Zuker, 203 AD2d 119, 119 [1st Dept 1994]).

Defendants’ contention that the claims for fees should not have been granted due to plaintiff’s failure to comply with the rules on fee arbitration is unavailing. The complaint expressly states that the amount of damages sought is $56,943.25, which is beyond the maximum amount covered by the Fee Dispute Resolution Program (see 22 NYCRR 137.1 [b] [2] Kerner & Kerner v Dunham, 46 AD3d 372[1st Dept 2007]). Although defendants’ arguments regarding [*2]the amount of the fees were deferred to an evidentiary hearing, the motion court properly declined to consider the unnotarized, out of state report of defendants’ expert (see CPLR 2309, 2106). Concur—Mazzarelli, J.P., Sweeny, Andrias, Manzanet-Daniels and Kapnick, JJ.”

In general, the rule in legal malpractice claims after a criminal prosecution is that the plaintiff must show “actual innocence” in order to sue the criminal defense attorney.  This principal prevents 99% of criminal defendants from proceeding.   Meralla v Goldenberg   2015 NY Slip Op 01873   Decided on March 5, 2015   Appellate Division, First Department is the rare exception.  Plaintiff had his criminal conviction overturned and the prosecution declined to re-try him.  He successfully avoided the “pecuniary loss” problem.  Now, his case is ready for trial.  News excerpts suggest that the plaintiff is uninsured.

“In this legal malpractice action, plaintiff alleges that defendant attorney’s failure to move to sever plaintiff’s criminal trial from that of a codefendant, and to move to exclude certain evidence based on the collateral estoppel effect of a prior trial in which plaintiff was acquitted of a related crime, caused him to be convicted and incarcerated. Plaintiff served more than six years in prison before this Court overturned his conviction based on defendant’s ineffective assistance of counsel (People v Meralla, 228 AD2d 160 [1st Dept 1996], lv denied 88 NY2d 989 [1996]). After the prosecution determined that plaintiff could not be retried, he commenced this action to recover damages against defendant.

The motion court correctly concluded that plaintiff did not waive his claim for pecuniary damages, as the ambiguous colloquy during plaintiff’s deposition did not amount to “an intentional relinquishment” of his right to assert such damages (EchoStar Satellite L.L.C. v ESPN, Inc., 79 AD3d 614, 617 [1st Dept 2010] [internal quotation marks omitted]). After the deposition, plaintiff continued to respond to discovery requests related to his employment history, and the parties did not execute a stipulation evidencing plaintiff’s withdrawal of his claim for pecuniary damages. Further, plaintiff should not be equitably estopped from asserting a claim for pecuniary damages, since defendant failed to demonstrate that he detrimentally relied on plaintiff’s purported waiver (see generally River Seafoods, Inc. v JPMorgan Chase Bank, 19 AD3d 120, 122 [1st Dept 2005]).

As this Court held on the appeal overturning plaintiff’s conviction, defendant’s delay in moving to exclude evidence based on collateral estoppel, and failure to seek a severance before the second trial, “amounted to fundamentally flawed, less than meaningful representation” and “substantially impaired the defense” (Meralla, 228 AD2d at 161). Accordingly, drawing all inferences in favor of plaintiff as the nonmoving party (see Ortega v Everest Realty LLC, 84 AD3d 542, 545 [1st Dept 2011]), an issue of fact exists as to whether defendant’s alleged negligence was the proximate cause of plaintiff’s alleged injuries (see Kaminsky v Herrick,[*2]Feinstein LLP, 59 AD3d 1, 9 [1st Dept 2008], lv denied 12 NY3d 715 [2009]). It cannot be said, as a matter of law, that the outcome of the matter would have been substantially the same even if defendant had made the motions before trial and in writing (see id.).”

Leser v Multi Capital Group LLC  2015 NY Slip Op 50272(U)  Decided on March 2, 2015  Supreme Court, Kings County
Demarest, J. reads like a poorly conceived story of corporate greed.  It does teach several important lessons in legal malpractice.  The first is how essential privity of contract between the attorney and the client remains.  The second is how powerful the statute of limitations remains, and the rare, rare application of the exception that a cause of action remains vital until all elements of the claim exist.  Here, this argument did not work.

“Abraham Leser (plaintiff), an experienced real-estate investor, alleges that non-party Eli Verscheliser (Verscheliser), the principal of defendant mortgage broker, Multi Capital Group LLC (Multi), approached plaintiff in late 2006 concerning two projects: one residential tower in Philadelphia and another in Seattle. Verscheliser allegedly proposed that plaintiff serve as each project’s “sponsor,” which, plaintiff explains, required making no investment whatsoever, but acting as “the public persona of the project for underwriting purposes and for reassurance to other joint venture partners.” In return for this role, plaintiff alleges that he was promised 20% of the eventual profits. Verscheliser apparently assured plaintiff that he would not bear responsibility for any losses and would not have to sign any personal guaranties for the projects.”

“Verscheliser purportedly told plaintiff that he would act as an authorized signatory for VTE, but that VTE, Multi and its attorneys would carefully review any documents prior to plaintiff’s signing “to ensure that all parties involved were adequately protected and to make sure that this deal would not be a liability to [plaintiff].” Multi negotiated two loans from US Bank to finance the projects: $17.5 million for the Philadelphia project and $21 million for the Seattle project. Plaintiff explains that, in July and November 2007, respectively, Multi delivered to him, for signature, loan documents for[*2]the Philadelphia and Seattle projects. In both instances, plaintiff alleges that he received a large stack of documents with flags indicating locations where he should sign. He recounts that Multi represented to him that it and its attorneys had reviewed the documents and that he would not be signing anything in his personal capacity. Plaintiff explains that he signed both sets of documents alone, in his office, without any further review by himself or others, and returned the documents to Multi. Among the documents that plaintiff signed were agreements of guaranty and suretyship for the loans, which rendered plaintiff guarantor of each in his personal capacity. Plaintiff asserts that he later learned that Buchanan Ingersoll had acted as counsel for Multi and VTE throughout the course of these deals.

In February 2009, plaintiff learned, in a meeting with representatives from US Bank, that the loans were in default and that US Bank considered him as the loans’ personal guarantor. Plaintiff thereafter commenced an action in the United States District Court for the Eastern District of New York and sought a declaration that the guaranties were forged and not enforceable against him [FN1] . US Bank commenced a counterclaim seeking to enforce the guaranties against plaintiff. On January 14, 2013, the jury in that action returned a verdict finding the guaranties enforceable against plaintiff, and the court thereafter issued a judgment in favor of US Bank against plaintiff for $52,946,419.15.”

“Plaintiff argues that an attorney-client relationship does not require a formal retainer or payment of a fee and that the complaint adequately alleges that Buchanan Ingersoll performed legal work for plaintiff’s benefit by forming entities and listing plaintiff as the owner or managing member. He thus asserts that Buchanan Ingersoll “performed actual legal work on behalf of [plaintiff] (even if formally retained by [Buchanan Ingersoll]’s good friend Eli Verscheliser of [Multi]).” Plaintiff contends that Buchanan Ingersoll subsequently “represented US Bank in lending money to the Leser Entities and their affiliated entities, hid a personal guaranty from [plaintiff] within loan documents, did not alert [plaintiff] of the same, represented VTE . . . , and failed to communicate at all with [plaintiff][FN2] .” He characterizes his inability, during the declaratory-judgment action, to identify Buchanan Ingersoll by name as irrelevant, and he urges that only discovery of material exclusively within Buchanan Ingersoll’s possession can prove the extent to which it represented him. Plaintiff argues, in any case, that malpractice liability may accrue even without privity in a case involving fraud, which he [*5]has explicitly alleged.

Plaintiff argues that the statute of limitations does not bar his malpractice claim, because such a cause of action does not accrue until damages occur and legal relief becomes available. He contends that his damages were not “fully liquidated” until the judgment entered against him in the Eastern District of New York in May 2013. Plaintiff urges that he could not have sued before that date, as future damages are unrecoverable in legal-malpractice actions. In the alternative, plaintiff argues that the limitations period was tolled by Buchanan Ingersoll’s continuous representation, and he urges that the full length of its engagement is unknown.”

“Here, plaintiff essentially asserts that Buchanan Ingersoll’s failure to warn him about the presence of personal guaranties in the loan documents he signed constituted a breach of its duty to exercise reasonable knowledge and skill in representing him. He fails, however, to plead facts from which it could be inferred that an attorney-client relationship existed. Indeed, plaintiff states that he never had any communication or contact with Buchanan Ingersoll, and he admits that he was not aware of its identity until after he had signed the loan documents. Even if Verscheliser or Multi told plaintiff that its unidentified attorneys would review the loan documents for his benefit and that he need not hire his own attorney, such representations could not give rise to an attorney-client relationship between plaintiff and Buchanan Ingersoll. Similarly, plaintiff’s allegation that Multi retained Buchanan Ingersoll to form entities naming plaintiff as owner or managing member does not establish any direct relationship between plaintiff and Buchanan Ingersoll (see Federal Ins. Co. v North Am. Specialty Ins. Co., 47 AD3d 52, 60 [2007] [“(w)hile . . . third parties may be interested in the actions by another’s attorney and even benefit therefrom, that circumstance does not give rise to a duty on the part of the attorney to that third party”]; see also Fortress Credit Corp. v Dechert LLP, 89 AD3d 615, 616 [2011],lv denied 19 NY3d 805 [2012]).

In any event, even if plaintiff could establish that Buchanan Ingersoll owed him any sort of duty, all elements of the alleged cause of action had accrued, at latest, by February 2009, when US Bank informed plaintiff that it was planning to enforce the [*9]personal guaranties against plaintiff due to default on the loans (see McCoy v Feinman, 99 NY2d 295, 301 [2002]; Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994], amend denied 85 NY2d 836 [1995]). Hence, the three-year statute of limitations applicable to legal-malpractice claims requires dismissal of this claim (see CPLR 214 [6]; Zorn v Gilbert, 8 NY3d 933, 933-934 [2007]; Farage v Ehrenberg, 124 AD3d 159, 163-164 [2014]). Plaintiff’s argument that continuous representation should permit tolling of the limitations period lacks merit, as there is no evidence of any representation, particularly after 2007.”

Client has a problem selling his house in upstate New York because many many years before, his father did not record the deed.  He makes a deal with buyer and agrees to a reduction in price if he cannot present good title.  He hires an attorney to quiet title, and asks whether it can be done in the year-long period agreed to by the buyer.  Attorney says that he’s 90% sure it can be done.  Of course more than a year goes by before attorney succeeds.  Is that  malpractice?

Hinsdale v Weiermiller  2015 NY Slip Op 01854  Decided on March 5, 2015  Appellate Division, Third Department doesn’t answer the ultimate question, but it denies summary judgment.

“Defendant Mark A. Weiermiller (hereinafter defendant) represented plaintiff in a real estate transaction involving property where the deed had apparently been lost and never recorded by plaintiff’s father when he originally acquired the property. Because of the title defect, the terms of the April 2007 purchase and sale agreement included a provision that the price of $325,000 would be reduced by $100,000 to $225,000 if plaintiff could not obtain a judgment quieting title within one year, i.e., by April 10, 2008, with time being of the essence. According to defendant, he encountered several significant and

unanticipated difficulties in securing the judgment, which was not obtained until May 6, 2008. The buyer nonetheless agreed to pay part of the $100,000 reduction amount authorized by the agreement, resulting in plaintiff allegedly receiving $74,963 less than if a judgment had been obtained within one year. Plaintiff commenced this legal malpractice action against defendant and his law firm for the $74,963 loss he had sustained. Supreme Court denied plaintiff’s motion for summary judgment. Plaintiff appeals.

We affirm. “In an action to recover damages for legal malpractice, a plaintiff must demonstrate 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 breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007], quoting McCoy v Feinman, 99 NY2d 295, 301 [2002]). Here, defendant stated in his affidavit that, when plaintiff asked him before [*2]signing the agreement whether he “could be 90% sure” that title could be quieted within one year, he responded that he “could not give [plaintiff] any percentage of certainty but that in [his] judgment [he] thought [he] would be able to get it done in that time.” However, he thereafter allegedly encountered many unexpected difficulties in attempting to gather information necessary for the action. He explained that the person who had transferred the property to plaintiff’s father had died many years earlier, leaving numerous heirs scattered throughout the country. He eventually had to hire a private investigator to assist in locating heirs and, once located, some were uncooperative. Defendant’s time records substantiated work in every month, sometimes many hours, as he attempted to gather necessary information and meet the deadline. Since he submitted proof of ongoing efforts that were met with considerable problems, this case is different from the situation where, for example, an attorney simply fails to act in a timely fashion believing a longer statute of limitations controls (see e.g. Bergin v Grace, 39 AD3d 1017, 1018 [2007]). Viewing the evidence in a light most favorable to defendant (see M & R Ginsburg, LLC v Segal, Goldman, Mazzotta & Siegel, P.C., 90 AD3d 1208, 1210-1211 [2011]) and accepting for purposes of this motion his proof regarding the caution he gave at the outset, his efforts and the unanticipated difficulties, the issue of whether he exercised reasonable skill in light of all the circumstances cannot be determined as a matter of law.”