There can be liability for negligent referrals to other attorneys, and there can be vicarious liability for the acts of attorneys who are hired together or at the behest of one another.  Moncho v Miller  2021 NY Slip Op 06960
Decided on December 14, 2021, Appellate Division, First Department makes this point.

“Plaintiff 261 East 78 Realty Corp. (Realty) commenced a bankruptcy proceeding on December 6, 2011. On January 4, 2013, Realty retained defendants Pasternak and DelBello to represent it in the proceeding. Plaintiffs then commenced this action, asserting claims for, inter alia, fraud and legal malpractice against defendants Pasternak and DelBello arising out of their representation of Realty in the bankruptcy proceeding.”

“The ninth cause of action alleges malpractice based on Pasternak’s breach of his duty of loyalty to plaintiffs. “It is well settled that the [attorney-client] relationship imposes on the attorney the duty to deal with undivided loyalty”] (Ulico, 56 AD3d at 9 [internal quotation marks and some brackets omitted]).

The vicarious liability claim against DelBello should not be dismissed. DelBello does not dispute that it employed Pasternak or that Pasternak was acting within the scope of his employment (see Riviello v Waldron, 47 NY2d 297, 302 [1979]). Its only argument is that it cannot be vicariously liable if all claims against Pasternak are dismissed. In view of our reinstatement of some claims against Pasternak, this argument is unavailing.

By contrast, the negligent supervision claim against DelBello cannot proceed, because DelBello will already be held liable for damage caused by any negligence of Pasternak, who was acting within the scope of his employment (see Weinberg v Guttman Breast & Diagnostic Inst., 254 AD2d 213 [1st Dept 1998]; Segal v St. John’s Univ., 69 AD3d 702, 703 [2d Dept 2010]).”

While negligent selection of experts has been rejected as a legal malpractice claim many times on the explanation that selection of experts is a strategy choice, in Moncho v Miller  2021 NY Slip Op 06960
Decided on December 14, 2021, Appellate Division, First Department determined that selection of a litigation funder can be the basis for a legal malpractice claim.

“The eighth cause of action (malpractice against Pasternak based on his failure to conduct due diligence on Sprei and defendant Harry Miller) and the ninth cause of action (malpractice against Pasternak based on his breach of the duty of loyalty) should not have been dismissed. Plaintiffs allege that Pasternak recommended that they use Sprei as their bankruptcy plan funder, discouraged them from using an alternate funder, and received a $25,000 kickback from Sprei for successfully recommending him. They further allege that before 2014 there were at least seven lawsuits filed against Sprei and/or Miller based on causes of action similar to the instant causes of action and that most if not all of the suits resulted in judgments adverse to Sprei and Miller.

Pasternak accurately notes that the actions involving Sprei and/or Miller were a matter of public record. However, a lawyer like Pasternak is in a better position than nonlawyers like plaintiffs to discover whether someone (e.g., Sprei and/or Miller) has been sued and judgment entered against them. Moreover, a client is entitled to trust his/its lawyer when the latter recommends a plan funder (see Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 9 [1st Dept 2008]). Pasternak is also correct that recommending one among several reasonable courses of conduct does not give rise to a legal malpractice claim. However, we cannot conclude as a matter of law that recommending Sprei — who had the above-discussed litigation history and gave Pasternak $25,000 for recommending him to plaintiffs — was a reasonable course of conduct.

With respect to whether Pasternak’s negligence was a proximate cause of plaintiffs’ losses, we cannot conclude as a matter of law, — in view of Pasternak’s urging plaintiffs to use Sprei — that Sprei’s misconduct was independent of Pasternak’s (compare Excelsior Capitol LLC v K&L Gates LLP, 138 AD3d 492 [1st Dept 2016] [malpractice claim dismissed for lack of proximate cause where trial court’s error in underlying action was an intervening cause, breaking any proximate cause by defendant attorneys], lv denied 28 NY3d 906 [2016]).

As for the damages element of malpractice, it is reasonable to infer that if Pasternak had not pushed plaintiffs to use Sprei, they would have used the alternate funder and would not have sustained injury (see Fielding v Kupferman, 65 AD3d 437, 442 [1st Dept 2009]). At the motion to dismiss stage, this is not speculative (see id.).”

Moncho v Miller  2021 NY Slip Op 06960 Decided on December 14, 2021 Appellate Division, First Department illustrates a number of bedrock principles in legal malpractice.  Who has standing to sue an attorney when a bankruptcy is involved is the first, which we will discuss today.

Plaintiffs filed a bankruptcy claim using attorneys who worked both pre-and post-petition.  The complaint was dismissed in its entirety.  The A.D. reversed in part.

“The motion court erred in dismissing Realty’s claims for lack of capacity to bring those claims. The Bankruptcy Code provides that “[t]he commencement of a case . . . creates an estate, which] is comprised of . . . (1) . . . all legal or equitable interests of the debtor in property as of the commencement of the case” (11 USC § 541[a]). Neither plaintiffs nor defendants dispute that any claims which arose prior to the filing of the bankruptcy petition belong to the estate. Rather, the parties dispute whether Realty, as debtor, or the estate owns the claims asserted against Pasternak and DelBello, which arose after the filing of the bankruptcy petition.

This Court has previously held that a claim which arose after the filing of a bankruptcy petition was the property of the estate (see Barranco v Cabrini Med. Ctr., 50 AD3d 281, 282 [1st Dept 2008]; Williams v Stein, 6 AD3d 197, 198 [1st Dept 2004]). When those cases were decided, there was a split among the federal courts which had addressed the issue. However, there is now uniformity among the Federal Courts of Appeals, which have held that pursuant to section 541(a) of the Bankruptcy Code, a claim which arose after the filing of a bankruptcy petition belongs to the debtor and not the estate (Davidkin v Rizzuto, 55 Misc 3d 528 [Sup Ct, Kings County 2017]; see Cadle Co. v Schlichtmann, 267 F3d 14 [1st Cir 2001], cert denied 535 US 1018 [2002]; In re Jackson, 593 F3d 171 [2d Cir 2010]; In re Majestic Star Casino, LLC, 716 F3d 736 [3d Cir 2013]; In re Avis, 178 F3d 718 [4th Cir 1999]; In re Burgess, 438 F3d 493 [*2][5th Cir 2006]; In re Shelbyville Rd. Shoppes, LLC, 775 F3d 789 [6th Cir 2015]; In re Stinnett, 465 F3d 309 [7th Cir 2006]; In re Vote, 276 F3d 1024 [8th Cir 2002]; In re Mwangi, 764 F3d 1168 [9th Cir 2014]; Patrick A. Casey, P.A. v Hochman, 963 F2d 1347 [10th Cir 1992]; In re Witko, 374 F3d 1040 [11th Cir 2004]). As this Court is bound by federal law when making a determination on this issue (see Lane v Marshall, 89 AD2d 579, 580 [2d Dept 1982], appeal dismissed 57 NY2d 955 [1982]), we follow the aforementioned federal holdings and find that because the claims at issue arose after the filing of the bankruptcy petition, the claims belong to Realty. Thus, Realty has the capacity to sue Pasternak and DelBello.”

Rudovic v Law Off. of Timothy A. Green  2021 NY Slip Op 06873 Decided on December 8, 2021 Appellate Division, Second Department states the bedrock principles upon which a good legal malpractice is based.  How they apply to the underlying case is left to the reader’s imagination.  The Appellate Bench would aid the legal malpractice bar in giving slightly more explanation of why the proximate cause pled in the complaint was insufficient or why there could be no better hypothetical outcome versus the actual outcome.

“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” (Leon v Martinez, 84 NY2d 83, 87-88; see Katsoris v Bodnar & Milone, LLP, 186 AD3d 1504, 1506). A cause of action alleging legal malpractice should set forth facts showing 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 the plaintiff to sustain actual and ascertainable damages (see Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1505; Dempster v Liotti, 86 AD3d 169, 176). The plaintiff must plead actual ascertainable damages resulting from the attorney’s negligence (see Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1506; Dempster v Liotti, 86 AD3d at 177).

Here, the Supreme Court properly determined that the complaint failed to state a cause of action to recover damages for legal malpractice. 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 [*2]allegations as to proximate cause. The plaintiff failed to allege facts that would demonstrate that, but for the defendants’ alleged negligence, there would have been a more favorable outcome in the underlying action or that the plaintiff would not have incurred any damages (see Benishai v Epstein, 116 AD3d 726, 728; see also Cohen v Hack, 118 AD3d 460, 460). The complaint also failed to adequately allege actual, ascertainable damages (see Denisco v Uysal, 195 AD3d 989, 991; Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1506).”

Over the years, settlement agreements, multi-pages of releases and representations have come to be the norm.  No longer is a Blumberg release sufficient.  In Stolper v Burbacki  2021 NY Slip Op 06822 Decided on December 07, 2021 Appellate Division, First Department the agreement contained typical language such as releasing “lawyers, and all others who may take any interest in the matters herein released (the Stolper Releasees) and (the Carey Releasees), collectively (the Releasees), hereby fully and forever release, acquit, and discharge each other and each other‘s . . . lawyers and all others who may take any interest in the matters herein . . .” was present.  Did that language doom a legal malpractice case?

“Defendant moved to dismiss claiming that she worked as an assistant to the primary client, not as plaintiff’s lawyer. Alternatively, she argues that even if she were deemed plaintiff’s lawyer, plaintiff is bound by a settlement and Mutual Release Agreement she entered in settlement of a separate New York action brought against the primary client in 2018. She argues that because a carve out provision was made for a different assistant in the Settlement and Mutual Release Agreement, a similar carve out provision was necessary to exclude defendant from the terms of the Mutual Release Agreement.

Supreme Court denied defendant’s motion to dismiss. The court found that the language in Section 4(a) of the Settlement and Mutual Release Agreement, which states in relevant part that the parties and all their respective “lawyers, and all others who may take any interest in the matters herein released (the Stolper Releasees) and (the Carey Releasees), collectively (the Releasees), hereby fully and forever release, acquit, and discharge each other and each other‘s . . . lawyers and all others who may take any interest in the matters herein . . .” only released the parties and each other’s lawyers. The Court further determined that the parties did not release any claims each party might have against their own lawyers and any carve out provisions in the Mutual Release Agreement – in sections 4(c) and 4(d) – do not otherwise expand the provisions of the release itself.

Accepting plaintiff’s allegations that defendant acted as her personal attorney as true, as is required on a motion to dismissthe Court properly denied defendant’s motion to dismiss the complaint based upon a mutual releaseA release may not be read to cover matters which the parties did not desire or intend to dispose of (see Enock v National Westminster Bankcorp., Inc. 226 AD2d 235 [1st Dept 1996]). Contrary to defendant’s contention, the record does not demonstrate that the Mutual Release Agreement between plaintiff and a third party, in which plaintiff agreed to release claims against the third party’s agents including their lawyers, barred plaintiff’s instant claims against defendant arising out of her alleged misconduct while she was employed as plaintiff’s attorney (see generally Linn v New York Downtown Hosp., 139 AD3d 574, 575 [1st Dept [*2]2016]).”

It is not often that a court allows reargument, states that it misapplied the law, and reverses itself as took place in Orlando v Robinson Brog Leinwand Greene  Genovese & Gluck, P.C.  2021 NY Slip Op 32235(U)
November 9, 2021  Supreme Court, New York County  Docket Number: Index No. 155048/2020  Judge: Phillip Hom. However, plaintiff’s earlier success is now a dismissal.

“A motion for reargument allows a party to demonstrate that the court overlooked or  misapprehended the law or facts pertinent to the original motion (See CPLR 2221[d][2]; see also Delgrosso v 1325 Limited Partnership, 306 AD2d 241 [2d Dept. 2003]); Foley v Roche, 68
AD2d 558 [!81 Dept. 1979] app denied by 56 NY2d 507 [1982]). Its purpose is not to serve as a vehicle to permit the  unsuccessful party to argue once again the very questions previously decided or to present arguments different from those originally presented. (See Gellert & Rodner v Gem Community Management, Inc., 20 AD3d 388 [2d Dept. 2005]; see also McGill v Goldman, 261 AD2d 593 [2d Dept. 1999]; Foley v Roche, supra).

Upon reargument, Gallett LLP’ s motion to dismiss is granted. The Court finds that it misapplied the law relative to the cause of action for legal malpractice. Upon reargument, this Court recalls and vacates the portion of its prior Order denying the branch of the motion dismissing the cause of action for legal malpractice and in its stead finds as follows:

“An action for legal malpractice requires proof of three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff’s losses; and (3) proof of actual damages” (Global Bus. Inst. v Rivvkin Radler LLP, IOI AD3d 651,651 [1st Dept 2012]
citation omitted). Courts consistently dismiss legal malpractice claims when a plaintiff fails to plead facts supporting causation (Perkins v Norwick, 257 AD2d 48, 51 [1 st Dept 1999]).

In this case, the Orlandos cannot establish causation. The “but for” Gallett LLP’ s malpractice the court would have ruled in the Orlandos favor cannot be established given Justice Engoron’ s holding in the underlying action. Justice Engoron found that even if the tax maps
were considered it is of no consequence because the Appellate Division held that the “unambiguous and clear Declaration and Offering plan to be definitive and dispositive” on the issue of ownership of the Basement Area. Gallett LLP was also appellate counsel and could not have used the tax maps to defend the underlying action because the tax maps were not part of the
appellate record. Since the Orlandos cannot establish that “but for” Gallett LLP’ s negligence, the disposition in the underlying action would have been different, they fail to establish an essential
element of a legal malpractice claim.

Accordingly, Motion Sequence Number 3 for leave to reargue is granted and upon reargument, the remaining branch of Gallett LLP’ s motion to dismiss the cause of action for legal malpractice is granted and the complaint against Gallett LLP is dismissed in its entirety. “

In what is this decade’s most unique Judiciary Law 487 claim, plaintiff in A.M.P. v Benjamin  2021 NY Slip Op 06589  Decided on November 24, 2021 Appellate Division, Third Department alleged that the deceit was coupled with gender discrimination and bias-related violence.

“As for plaintiff’s thirteenth cause of action, we agree with Supreme Court that [*5]plaintiff has sufficiently pleaded a violation of Judiciary Law § 487. As relevant here, “Judiciary Law § 487 permits recovery of treble damages in a civil action against an attorney who intentionally deceives the court or a party during the pendency of a judicial proceeding” (Lavelle-Tomko v Aswad & Ingraham, 191 AD3d 1142, 1147 [2021]) or who “[w]illfully delays his [or her] client’s suit with a view to his [or her] own gain” (Judiciary Law § 487 [2]). In her thirteenth cause of action, plaintiff alleged, among other things, that defendants deceitfully stated that they would represent her in the matrimonial action “without a fee to her,” but that they later retained her settlement award as a fee. Plaintiff further alleged that Benjamin delayed and prolonged her custody proceeding for his own personal gain and sexual gratification. According the complaint a liberal construction, accepting the allegations contained therein as true and providing plaintiff with the benefit of every favorable inference, we find that plaintiff sufficiently alleged a violation of Judiciary Law § 487 (compare Lavelle-Tomko v Aswad & Ingraham, 191 AD3d at 1147-1148; Krouner v Koplovitz, 175 AD2d 531, 533 [1991]). Accordingly, Supreme Court properly declined to dismiss plaintiff’s thirteenth cause of action.”

Generally speaking, fraud claims in a legal malpractice setting are dismissed as duplicitive of the legal malpractice claim.  For years, litigants have used the longer statute of limitations period for fraud as a way around a stale legal malpractice claim along with a discovery onset of the statute.  In addition, fraud allows for greater damage calculations.  Courts have sometimes said that any claim against a professional requires that it be translated into malpractice, rather than fraud.  Federal Ins. Co. v Lester Schwab Katz & Dwyer, LLP  2021 NY Slip Op 32305(U)  November 15, 2021 Supreme Court, New York County
Docket Number: Index No. 151093/2021 Judge: Shawn T. Kelly is that rare case where the claims survive dismissal.

“Plaintiff alleges that Lester Schwab made ( a) a false representation of fact to the Insured that the conflict check returned negative results; (b) defendants had knowledge of the falsity as shown by their internal e-mails; (c) the misrepresentation was made to induce plaintiff’s reliance
that Lester Schwab did not have any conflict of interest and so could continue its representation of the Insured in the underlying case; ( d) the Insured and its insurers justifiably relied on the misrepresentation as it is known that performing a conflict check in the context of litigation,
especially with multiple parties, is required to be done so that the Insured and its insurers could rely on Lester Schwab to advocate and protect their interests solely; and (e) the Insured and its insurers were injured by the reliance on the misrepresentation.

On this pre-Answer motion to dismiss, Plaintiff’s allegations are sufficient to sustain a fraud cause of action distinct from the legal malpractice claim. Accordingly, Defendants’ motion to dismiss is denied as to the fraud cause of action.”

I.M.P. Plumbing & Heating Corp. v Munzer & Saunders, LLP  2021 NY Slip Op 06544 Decided on November 23, 2021 Appellate Division, First Department stands for the unremarkable proposition that  it is a departure from good practice if an attorney fails to answer a complaint and fails to seek additional time to answer the complaint.  it also finds that the failure to return $ 200,000 held in escrow when promised can be a breach of contract.  However, these clear findings are well composed and clear.

“Defendants’ failure to interpose answers on behalf of plaintiffs in the A.M. Concrete Action and the A.M. Concrete Proceeding or to seek an extension of time to answer constitutes a breach of the standard of professional care (Shapiro v Butler, 273 AD2d 657, 658 [3d Dept 2000]). Plaintiffs may seek to recover from defendants any legal fees they paid to oppose the resulting contempt motion and to seek vacatur of the default judgment in the A.M. Concrete Proceeding, and to oppose the motion for a default judgment, seek vacatur of the default judgment, and appeal from the order granting a default judgment in the A.M. Concrete Action. In this connection we note that, “[d]amages in a legal malpractice case are designed to make the injured client whole” (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 443 [2007] [internal quotation marks omitted]). Therefore, a legal malpractice “plaintiff’s damages may include litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney’s wrongful conduct” (id.[internal quotation marks omitted]). Issues of fact exist as to the amounts, if any, that plaintiffs paid for the above noted services.

With respect to defendants’ representation of plaintiffs in two other actions, titled Impagliazzo v Heena Hotel, LLC (NY County index No. 155403/14) and Impagliazzo v Shivbhakti LLC (NY County index No. 652437/14), the only negligence that plaintiffs claim on appeal is defendants’ failure to oppose the motion to dismiss [*2]in the Heena action. However, any negligence on defendants’ part in failing to oppose that motion was not a proximate cause of damages to plaintiffs since the Heena complaint failed to state a cause of action and was refuted by documentary evidence, and plaintiffs do not contend that this was a “remediable defect” (see Dempster v Liotti, 86 AD3d 169, 179-180 [2d Dept 2011]).

Insofar as the breach of contract cause of action is based on alleged overbilling, described as billing for legal services that defendants allegedly performed negligently, it is duplicative of the legal malpractice cause of action (see Courtney v McDonald, 176 AD3d 645, 645-646 [1st Dept 2019]). However, a cause of action for breach of contract is stated by the allegations that defendants retained $200,000 held in escrow for the purchase of real property in violation of an agreement to return the money if the purchase did not go through (see Postiglione v Castro, 119 AD3d 920, 922 [2d Dept 2014]). Contrary to defendants’ contention that the complaint does not allege a breach of contract based on their alleged retention of the $200,000 held in escrow, the breach of contract cause of action incorporates all the previous factual allegations in the complaint. The breach of fiduciary duty cause of action based on defendants’ retention of the funds held in escrow must be dismissed as duplicative of the breach of contract cause of action (see William Kaufman Org. v Graham & James, 269 AD2d 171, 173 [1st Dept 2000]).”

Allstar Elecs., Inc. v DeLuca  2020 NY Slip Op 07018 [188 AD3d 1121]
November 25, 2020 Appellate Division, Second Department demonstrates the danger of discovery failures.  Here, the entire case was dismissed over the failure to give what the Court termed a “failure to provide court-ordered discovery.”

“”The nature and degree of the penalty to be imposed pursuant to CPLR 3126 against a party who refuses to comply with court-ordered discovery is a matter within the discretion of the court” (Smookler v Dicerbo, 166 AD3d 838, 839 [2018]; see Pastore v Utilimaster Corp., 165 AD3d 685, 686 [2018]; Quinones v Long Is. Jewish Med. Ctr., 90 AD3d 632 [2011]). The striking of a pleading may be appropriate where there is a clear showing that the failure to comply with discovery demands or court-ordered discovery was the result of willful and contumacious conduct (see Ozeri v Ozeri, 135 AD3d 838, 839 [2016]; McArthur v New York City Hous. Auth., 48 AD3d 431 [2008]). “The willful and contumacious character of a party’s conduct can be inferred from the party’s repeated failure to respond to demands or to comply with discovery orders, and the absence of any reasonable excuse for these failures” (Tos v Jackson Hgts. Care Ctr., LLC, 91 AD3d 943, 943-944 [2012]; see Smookler v Dicerbo, 166 AD3d at 839; Commisso v Orshan, 85 AD3d 845 [2011]).

Here, contrary to the plaintiff’s contention, the willful and contumacious character of its conduct could properly be inferred from its repeated failures, without an adequate excuse, to timely respond to discovery demands and to comply with the Supreme Court’s orders to provide outstanding discovery and set a date for the plaintiff’s deposition (see Marino v Armogan, 179 AD3d 664, 666 [2020]; Broccoli v Kohl’s Dept. Stores, Inc., 171 AD3d 846, 847-848 [2019]; Smookler v Dicerbo, 166 AD3d at 839-840; Montemurro v Memorial Sloan-Kettering Cancer Ctr., 94 AD3d 1066, 1066-1067 [2012]).”