SS Marks LLC v Morrison Cohen LLP  2014 NY Slip Op 31030(U)  April 16, 2014  Sup Ct, New York County  Docket Number: 650049/2009 Judge: O. Peter Sherwood is an example of how a likely sounding legal malpractice case can be lost on a series of e-mails.  Here, plaintiff’s plausible claims are completely undone by e-mails which unseat him.

"Beginning in February 2005, Marks began working with non-party Peter Morris to obtain  financing for real estate transactions. In December 2005, Morris informed Marks about a potential investment in real property located in Stanfordville, NY known as the Roseland Ranch (the  Property"). Originally, the parities contemplated a consulting agreement where Marks would be paid  fees for his services. The proposed transaction involved acquisition of the Property and its
subsequent operation as a dude-ranch style hotel, with the possibility of developing single family
homes on a portion of the land. Brett Marks was also to invest in the transaction. Eventually it was
proposed that the Marks invest, through SAM.  SSM agreed to invest $1,050,000 toward purchase of the Property. In exchange, SSM was  to receive an 89% ownership interest in the Property as tenant in common with Roseland Ranch  Holdings, LLC ("RR Holdings"). Once acquired, the Property would be managed by Roseland Ranch  Management, LLC (the "Manager”).
The parties entered into a Lease and Management Agreement (the ”Lease") in connect.ion with the transaction. The Lease had a two year initial term, with automatic renewals, unless one party chose to terminate. Under the terms of the Lease, SSM was entitled to receive monthly payments of$ I 0,500 from the manager. Upon termination of the Lease, SSM was entitled to a return of its investment in the form of a ”termination payment" in the sum of $ I ,050,000.

On March 2, 2006, the Lenders demanded that a subordination clause be included in the 
Lease. The effect of the subordination clause was that SSM would not receive the termination
payment until after the Lenders were repaid. According to Marks, this clause was inserted without
his knowledge or consent after he had already executed the agreement. Marks also claims that
Soleymani did not explain the effect of the subordination clause on the personal guarantees.
It is undisputed that Soleymani forwarded the Lenders’ demand to Marks within half an hour
of receipt (Rule 19-a Stmt 45 and Furman Aff, Ex V.). Two hours later, a draft of the Lease containing the subordination provision was emailed to Marks (id, Ex Y). Marks denies having read
the emails (Response to Rule 19-a Stmt ,45, 46). However an email exchanged on March 2, 2006 at 12:38 PM shows that Marks was aware of the subordination provision, understood it .and sought to negotiate changes (Furman Aff, Ex U ["We still need to discuss the lender’s requested revisions .. , Sandy wants to discuss , .. "]).

Admissible proof in the record, shows that Marks was advised of the subordination clause and of the unsigned guaranties prior to the closing. Marks’s excuse for not having read his emails
even if credited, is insufficient to create a triable fact as to legal malpractice. Dismissal of a
malpractice claim is appropriate when, as here, it is "inconceivable that plaintiff’s principal was
unaware of’ that of which defendant allegedly failed to advise him (see Delphi Easter Partners Ltd.
Partnership v Prickett, Jones, Elliott, Kristo! & Schnee, 224 AD2d 349 [1st Dept 1996]). The documents SSM points to in support of its contention that the personal guarantees were critical to the transaction do not support the assertion. ln an email Marks sent to Soleymani on January 19, 2006, he insists that the consulting agreement must ensure that the other investors ”cannot in any way get out of paying that money to me" and that "’in the event they don’t pay that the interest in the hotel is then pledged (100% to me)" (Marks Aff, Ex 1 ). The document does not reference guaranties. Instead it refers to a consulting fee Marks wanted, prior to the agreement to invest in the Property. In any case, the other investors did in fact receive an interest junior to SSM.
The "interest in the hotel" Vas indeed pledged to Marks. A guaranty goes far beyond an "interest in
the hotel." lfarks also sent an email on January 20, 2006 where he stated that the consulting
agreement is "the important agreement I have to make sure they pay me no matter what happens"
(Marks Aff, Ex 2). Again the email refers to a consulting agreement. It makes no mention of a
guaranty.

Accordingly, it is hereby ORDERED that defendants’ motion for summary judgment dismissing the complaint is GRANTED in its entirety

Attorney is hired to defend a case. What is the standard of care if the case is "unwinnable"? Justice Jaffe of Supreme Court, New York County discusses what happens when a franchisee who has signed personal guarantees falls behind in royalty payments to the franchisor.  It’s not pretty.

In Pu v Mitsopoulos  2014 NY Slip Op 31038(U)  April 17, 2014  Sup Ct, New York County  Docket Number: 602986/06  Judge: Barbara Jaffe the facts are:  "In December 2004, defendant George Mitsopoulos contacted plaintiff, an attorney, to  discuss an ongoing dispute between him and his company, defendant Titan Pharmaceuticals and  Nutrition, Inc., in connection with a franchise agreement with franchisor Medicine Shoppe, Inc. The franchise agreement permitted Mitsopoulos to operate a pharmacy under franchisor’s name and required him to pay royalties based on the pharmacy’s gross income. The parties also agreed  that any disputes would be arbitrated and that franchisor was entitled to attorney fees in the event  of litigation. When Mitsopoulos first met with plaintiff, he told him that Titan was behind in paying franchisor and that on December 1, 2004, franchisor sued him, his parents, and Titan in federal court. Franchisor also commenced an arbitration proceeding in St. Louis, Missouri against Titan and Mitsopoulos. (Id, Exhs. I, J).
On or about December 15, 2004, Mitsopoulous, his parents, and Titan retained plaintiff,
and agreed to pay him $275 an hour, plus expenses. They also agreed that if plaintiff sued them
to recover his legal fees, they would compensate him for any fees incurred in connection thereof. "

"As plaintiff has submitted the parties’ retainer agreement along with an affidavit detailing the work he performed and his itemized bills, he has established, prima facie, his entitlement to the attorney fees and expenses he seeks. (See eg Phillips Nizer et al. v Chu, 240 AD2d 231 [1st Dept 1997] [reasonable value of attorneys’ services itemized in invoices annexed to complaint]).
Apart from the malpractice counterclaims, defendants advance the following arguments for why plaintiff is not entitled to some of his fees: (1) plaintiff billed defendants for services rendered during his suspension from practicing law in the federal courts; and (2) plaintiff billed for unnecessary and wasteful motions. (Mem. of Law, dated Oct. 2, 2013).

As defendants raise a triable issue as to whether plaintiff performed unnecessary work on the case or overbilled them for work he should not have performed, the reasonableness of plaintiffs fees must be determined at a hearing. (See eg Bomba v Silberfein, 238 AD2d 261 [1st Dept 1997] [factual issue as to reasonableness of attorney’s fees precluded summary judgment as to damages]"

"Although it is not disputed that defendants had no viable defense to the arbitration as they owed franchisor money past due and possible larger sums, and that franchisor had every right to
enforce the parents’ guaranty, there is no allegation that plaintiff recommended that defendants
litigate knowing that he could not prevail, leaving them owing franchisor damages as well as
additional legal fees. Rather, plaintiff was faced with defending two actions against defendants
with no viable defense to either, and having to choose a strategy whereby he could minimize
defendants’ losses. That plaintiff was unable to win a conceitedly unwinnable case does not
establish that he was negligent. "

Was it strategy or mistake?  Was the Warning given or not?  Was the Attorney negligent or did he do a good job?  These are the questions that are daily raised in legal malpractice cases.  Sometimes, as in Mateo v Silver & Silver, LLP  2014 NY Slip Op 30986(U)  April 15, 2014
Supreme Court, New York County  Docket Number: 150393/10  Judge: Anil C. Singh, a simple letter would have resolved all doubt.

Client says that attorney was hired to vet and do due diligence on a loan, lease and real estate arrangement.  Attorney says he was hired to do the paperwork, but not to advise the client about the landlord’s mortgage.  Both experts agree that something should have been said to the client.  We believe that if there had been a letter warning the client there would have been a dismissal here.

"Defendant Herbert Silver asserts that he was retained by plaintiffs to draft promissory notes. He contends that he did not have a duty to assess the adequacy of the security being offered for the loans given by plaintiffs to Peter Skyllas, and that he cannot be held liable for the failure of that security. According to Mr. Silver, plaintiff Fernando Mateo did not ask him to conduct the "due diligence" which he faults him for not having performed.

In opposition to the motion, plaintiff Fernando Mateo contends in a sworn affidavit that he asked Silver to vet the loan transactions and to assist in structuring  the deal. Further, he asserts that plaintiffs specifically retained the Silver defendants  "to vet and review the May lease, and advise us of any problems." Mateo asserts that,  at the time the lease was executed, Silver did not advise plaintiffs that there was an  outstanding mortgage on the Skyllas building; how that mortgage might impact  to plaintiffs’ business; what might happen if the landlord defaulted on his mortgage; or
what might happen if the landlord’s lender decided to foreclose on the property.  Further, Mateo contends that Silver did not propose any safeguards that Alma might  be able to take to secure its leasehold interest in the Skyllas building against the risk  of foreclosure; and failed to advise plaintiffs of the potential legal benefits and  consequences of recording the lease against the Skyllas building. Finally, Mateo  states that he would have found another space for his restaurant, or pursued an  entirely different business venture, had he known about the risks posed by the
mortgage. "

"Both parties rely upon the opinions of experts. Although the experts appear to agree that a reasonably prudent attorney reviewing a commercial lease transaction has  a duty to warn his client of the potential negative consequences if the attorney fails to obtain a non-disturbance agreement for the lease, they disagree about the nature of the warning the attorney should give to the client. Silver’s expert contends that a simple explanation of the consequences to the client entering an unprotected lease is sufficient. By contrast, Mateo’s expert contends that a diligent attorney should advise his client not to enter into the lease and, if necessary, should put such advice in writing. "

"In light of the completely divergent facts presented by the parties and the conflicting opinions of the experts, the Court finds that there is clearly a genuine issue of material fact regarding the extent and adequacy of the legal advice, services, and representation provided by defendants. The Court is mindful that, on a motion for summary judgment, the function of the Court is issue finding, not issue determination. "

We believe that a greater proportion of legal malpractice cases are subject to motions for summary judgment, and that more decisions to dismiss are granted than in other specialties.  In Kempf v Magida  2014 NY Slip Op 02410  Decided on April 9, 2014  Appellate Division, Second Department the merely unusual happened.  Summary judgment was denied because defendant did not show prima facie entitlement.

"contrary to the defendant’s contention, he failed to present evidence in admissible form establishing that the plaintiffs were unable to prove at least one of the essential elements of a cause of action to recover damages for legal malpractice (see Barnave v Davis, 108 AD3d 582; Valley Ventures, LLC v Joseph J. Haspel, PLLC, 102 AD3d 955, 956; Alizio v Feldman, 82 AD3d 804). The defendant failed to affirmatively demonstrate the merits of his defense, and he could not sustain his burden merely by pointing out gaps in the plaintiffs’ proof (see Alizio v Feldman, 82 AD3d at 804). Since the defendant did not eliminate all triable issues of fact as to whether he failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and whether his alleged breach of this duty proximately caused the plaintiffs to sustain actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; Barnave v Davis, 108 AD3d at 582-583; Valley Ventures, LLC v Joseph J. Haspel, PLLC, 102 AD3d at 956; Alizio v Feldman, 82 AD3d at 804), he failed to sustain his prima facie burden on the motion, and his motion for summary judgment dismissing the complaint was properly denied. "

An estate is left to two sisters.  An uncle is named executor.  He loots the estate for more than $1 million, and is surcharged and suspended.  New executor sues the attorneys representing uncle and the estate for the losses.

Betz v Blatt  2014 NY Slip Op 02554  Decided on April 16, 2014  Appellate Division, Second Department tells us that the law suit for legal malpractice fails, because there was no privity (no attorney-client relationship) between the estate and the attorneys.  The attorneys represented the executor only.

"Contrary to the Supreme Court’s factual finding, the Sirignano defendants’ retainer agreement with Carbone does not contain the phrase "administration of the estate." Both the retainer agreement and the facts as pleaded in the complaint indicate that the Sirignano defendants were retained solely to defend Carbone in the contested accounting proceeding and related matters, and were not retained to administrate the estate. Therefore, the Supreme Court erred in finding that the Sirignano defendants "under[took] a duty of undivided loyalty to the Estate and its beneficiaries." Since the documentary evidence demonstrates that the Sirignano defendants were not in privity with the estate, and because the plaintiff failed to plead specific facts tending to show that the Sirignano defendants engaged in fraud or colluded with Carbone, the plaintiff did not assert a viable cause of action against them on the estate’s behalf to recover damages for legal malpractice. Accordingly, the eleventh cause of action, which alleged legal malpractice by the Sirignano defendants, must be dismissed pursuant to CPLR 3211(a) (see Keness v Feldman, Kramer & Monaco, P.C., 105 AD3d at 813; Jacobs v Kay, 50 AD3d at 526-527; Chinello v Nixon, Hargrave, Devans & Doyle, LLP, 15 AD3d at 895; Conti v Polizzotto, 243 AD2d at 672). For the same reasons, the twelfth cause of action, which alleged breach of fiduciary duty by the Sirignano defendants, was properly dismissed.

This Court has held that "an attorney represents the administrators individually and not the estate itself" (Matter of Hof, 102 AD2d 591, 593, citing Matter of Schrauth, 249 App Div 847, 847, and Matter of Scanlon, 2 Misc 2d 65, 69 [Sur Ct, Kings County]; see Matter of Della Chiesa, 23 AD2d 562). Accordingly, an attorney may recover fees from the estate only where the services rendered benefit the estate (see Matter of Rodken, 2 AD3d 1008, 1009; Matter of Winckler, [*3]234 AD2d 307, 309; Matter of Baxter [Gaynor], 196 AD2d 186, 190; Matter of Della Chiesa, 23 AD2d at 562; see also Matter of Smolley, 188 AD2d 535, 538). Where a plaintiff asserts a cause of action for restitution, the " essential inquiry’" is " whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered’" (Goel v Ramachandran, 111 AD3d 783, 791, quoting Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415, 421; see Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182; Sample v Yokel, 94 AD3d 1413, 1415; Trotta v Ollivier, 91 AD3d 8, 12). In determining whether this equitable remedy is warranted, a court should " look to see if a benefit has been conferred on the defendant under mistake of fact or law, if the benefit still remains with the defendant, if there has been otherwise a change of position by the defendant, and whether the defendant’s conduct was tortious or fraudulent’" (Goel v Ramachandran, 111 AD3d at 791, quoting Paramount Film Distrib. Corp. v State of New York, 30 NY2d at 421; see Zamor v L & L Assoc. Holding Corp., 85 AD3d 1154, 1156-1157).

Here, the plaintiff alleged that the Sirignano defendants’ fees for representing Carbone were paid from estate assets even though those services were not beneficial to the estate and were, in fact, adverse to it. Thus, the plaintiff has pleaded facts sufficient to assert a cause of action for restitution (see Goel v Ramachandran, 111 AD3d at 791; see also Matter of Rodken, 2 AD3d at 1009; Matter of Winckler, 234 AD2d at 309; Matter of Baxter [Gaynor], 196 AD2d at 190; Matter of Della Chiesa, 23 AD2d 562). Accordingly, the Supreme Court erred in granting that branch of the Sirignano defendants’ motion which was to dismiss the fourteenth cause of action, which sought disgorgement and restitution of attorneys’ fees from them."

Here is a case about the attempt to re-make a movie.  It did not go well.  Plaintiff had invested $ 4.5 million in order to put together, or remake, or work with "Dance Cuba"  She retained Davis & Gilbert to handle the transfer of ownership. The transfer went well, but someone forgot to take care of obtaining consents from a number of "sampled" copyright holders. 

Candela Entertainment, Inc. v Davis & Gilbert, LLP  2014 NY Slip Op 30977(U)  April 11, 2014
Sup Ct, New York County  Docket Number: 150553/2011  Judge: Eileen Bransten  tells us the story of what happens when a corporate individual (usually an entrepreneur) sues along with the company.

"Relevant to the instant litigation, significant portions of the "Dance Cuba" film incorporate copyrighted materials for which Illume had signed licensing agreements. (Am. Compl. . 15.) These licensing agreements required that Illume obtain consent from the licensors before any transfer of intellectual property rights could be made. (Am. Compl. 19.) While there is a dispute as to whose duty it was to obtain the consents, the Complaint alleges that no licensor ever granted consent to any assignment. (Am. Compl.  19.) The Amended Complaint further alleges that Defendant’s failure to advise that obtaining consents was necessary created a cloud on the film’s title, which prevented Plaintiffs from seeking new investors and completing the film. (Am. Compl. 3.)  Plaintiffs filed the Amended Complaint on June 10, 2013, asserting that Defendant’s "failure[] to properly understand and advise Plaintiffs as to the structure, the transactions and the effect of the documents utilized in the transactions," constituted (i) negligence, (ii) breach of contract, and (iii) breach of fiduciary duty. Defendant now seeks dismissal of the Amended Complaint. Plaintiffs oppose. "

"As a threshold matter, to maintain a cause of action for legal malpractice, the plaintiff must plead the existence of an attorney-client relationship. See, e.g., AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d 582, 595 (2005) (affirming dismissal of legal malpractice claim for failure to plead facts showing actual privity, near privity, or an exception to privity). In order to defeat a motion to dismiss, a party must plead facts showing the privity of an attorney-client relationship, or a relationship so close as to approach privity. Cal. Pub. Employees Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427, 434 (2000) (affirming dismissal of legal malpractice claim for failure to plead actual privity or near privity). t. Newport Cannot Establish Express Privity While it is undisputed that D&G represented Candela, Newport alleges that she too was represented by D&G. Newport argues that privity existed because she signed D&G’s retainer agreement. Defendant argues that documentary evidence refutes the Amended Complaint’s claims of express privity between Newport and D&G, and thus Newport fails to state a cause of action for legal malpractice. Defendant argues that there can be no privity because the retainer agreement is addressed solely to Candela and that Newport signed all pertinent documents simply on behalf of Candela. When dealing with issues of contract interpretation, courts must construe the
agreement according to the parties’ intent, and the best evidence of what parties to a written agreement intended is what was said in the writing. See, e.g., Slatt v. Slatt, 64 N.Y.2d 966, 966 (1985). Courts may not fashion a new contract for the parties under the guise of interpreting the writing. See, e.g., Tanking v. Port. Auth. of N. Y. & N.13 N.Y.3d 486, 490 (2004) (holding that a court may not "rewrite the contract and supply a specific obligation the parties themselves did not spell out") "

Here is a familiar scenario.  Plaintiff litigates case for a period of time. Something goes wrong, or it appears that some element is missing from the mix, and the case is settled.  Better settled than lost, but when that happens, the question becomes, why was it settled.  Was it a good move, or was it required because of some mistake of counsel.  An example might be that when the case is ready for trial, and the note of issue has already been filed, it is discovered that a witness will be excluded because no pre-note notice was given.  Settlement of the case is essential, because plaintiff knows it cannot win without the witness.  It can be said that settlement was effectively compelled by mistakes of counsel.

In Benishai v Epstein   2014 NY Slip Op 02404   Decided on April 9, 2014   Appellate Division, Second Department  we see an analogous situation.
 

"To recover damages in a legal malpractice action, a plaintiff must establish "that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a [*2]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, quoting McCoy v Feinman, 99 NY2d 295, 301, 302; see Held v Seidenberg, 87 AD3d 616, 617; Kennedy v H. Bruce Fischer, Esq., P.C., 78 AD3d 1016, 1018). "To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 442). " A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel’" (Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083, quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430). Nonetheless, a plaintiff’s conclusory allegations that merely reflect a subsequent dissatisfaction with the settlement, or that the plaintiff would be in a better position but for the settlement, without more, do not make out a claim of legal malpractice (see Boone v Bender, 74 AD3d 1111, 1113; Holschauer v Fisher, 5 AD3d 553, 554).

""In determining a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’" (Sierra Holdings, LLC v Phillips, Weiner, Quinn, Artura & Cox, 112 AD3d 909, 910, quoting Leon v Martinez, 84 NY2d 83, 87-88). A complaint in a legal malpractice action will be dismissed pursuant to CPLR 3211(a)(7) where "it fails to plead specific factual allegations demonstrating that, but for the . . . defendant’s alleged negligence, there would have been a more favorable outcome in the underlying proceeding or that the plaintiff would not have incurred any damages" (Keness v Feldman, Kramer & Monaco, P.C., 105 AD3d 812, 813). Here, viewing the complaint in the light most favorable to the plaintiff (see Leon v Martinez, 84 NY2d at 87-88), it failed to plead specific factual allegations demonstrating that, but for the defendant’s alleged negligence, there would have been a more favorable outcome in the underlying action or that the plaintiff would not have incurred any damages (id.; Tortura v Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d at 1083). Moreover, nowhere does the complaint allege that the settlement was compelled by the mistakes of counsel".

We often see a "pot and the kettle" issue in legal malpractice cases.  Example:  Plaintiff trips and falls, and her attorney sues the City.  City successfully shows that it had no big apple notice, and that it did not create the defect in the street.  Plaintiff then sues in legal malpractice arguing that photos show that other construction entities were involved, and that attorney departed when he did not sue those entities.  Plaintiff criticizes attorney for not doing thorough investigation.  It later turns out that not only the two construction companies shown in the photo were working there, but others were as well.  Legal malpractice case is lost on the same grounds as the underlying case.  Ironic?

Dalewitz v Gropper  2014 NY Slip Op 30892(U)  April 7, 2014  Supreme Court, New York County
Docket Number: 100198/2007  Judge: Jeffrey K. Oing leads us to this conclusion.  In order to avoid "speculation" you must cover all the bases.  "In bringing the instant action, plaintiff contends that
defendant committed legal malpractice because he sued the City, when Empire City Subway ("ECS") and/or Consolidated Edison ("Con Ed") may have been the responsible parties. Plaintiff bases her claim on the fact that attached to the complaint in the underlying action were two photographs of the accident site (Klein Affirm., Ex. P). According to plaintiff, a review of the
two photographs reveals the letters "CS" spray-painted on the roadway and a metal plate in the crosswalk with the letters "ECS" etched onto the plate. Another photograph of the accident scene
shows a barricade with the letters "ECS" stenciled across it (Id., Ex. Q).

Plaintiff ‘s claim is simply too speculative and attenuated. The record indicates that no fewer than four different entities were issued permits to open the roadway at or near the intersection, and plaintiff’s inability to identify which of these entities was responsible for or created the depression renders her contentions entirely conjectural. Additionally, the record does not support a finding that the depression in t.he crosswalk constitute an actionable, dangerous condition. Plaintiff’s testified at her EBT in underlying action that she was unsure if she actually fell or just twisted her ankle, that she did not know whether her foot was partially or completely in the depression at the time her ankle twisted, and that she did not even know if her foot got "caught" in the depression.

Moreover, plaintiff fails to raise a triable issue of fact. Instead, rather than proffer sufficient evidentiary proof, plaintiff s attorney argues that, "upon information and belief," ECS and Con Ed are responsible for the alleged defect. Her arguments are based entire on speculation and conjecture and are insufficient to preclude a finding of summary judgment in favor of defendant."