Jingyi Ni v Shenlaw, LLC 2024 NY Slip Op 51148(U) Decided on August 1, 2024 Supreme Court, New York County Lebovits, J. is a fascinating case. To start it is not really a legal malpractice case, and might have been brought for the purpose of saving an EB5 immigration application rather than for money damages.

Nevertheless, the facts are startling, and Judge Lebovits’ decision is so shocking, that it requires a full read for the facts. Here are some of the highlights:

“In December 2022, plaintiff, Jingyi Ni, brought this action for declaratory judgment against defendant Shenlaw, LLC, and its sole member and principal, defendant Jianming Shen,, based on an alleged breach of fiduciary duty. Ni now moves to strike defendants’ answer, for the entry of declaratory judgment in his favor, and for punitive damages and attorney fees. (See NYSCEF No. 78.) The motion is granted in part and denied in part.

BACKGROUND

In January 2014, Ni retained Shen to assist Ni with filing an EB-5 Immigrant Investor Program petition. (NYSCEF No. 51 at ¶ 24; NYSCEF No. 49 at ¶ 2.) In March 2014, Shen submitted the EB-5 petition on Ni’s behalf. (NYSCEF No. 49 at ¶ 4; NYSCEF No. 51 at ¶ 33.) [*2]Ni claims that he was not given a copy of the petition at the time. (NYSCEF No. 49 at ¶ 4; NYSCEF No. 51 at ¶¶ 33, 36.)

Several years later, in November 2019, Ni filed an application to register as a permanent resident. (NYSCEF No. 49 at ¶ 14; NYSCEF No. 51 at ¶ 49.) But in October 2022 Ni received a notice of intent to deny (NOID). The NOID indicated that Ni’s application to register as a permanent resident would be denied, because the United States Citizenship and Immigration Services (USCIS) determined that Ni had submitted false documents in his EB-5 petition. (NYSCEF No. 49 at ¶ 13; NYSCEF 51 ¶ 50.)

Ni later learned that Shen had submitted false source-of-funds documentation in connection with Ni’s EB-5 petition. (NYSCEF No. 51 at ¶¶ 51-53.) This is undisputed. Shen admits that the source-of-funds materials were false and that Ni is “100% innocent.” (NYSCEF No. 56; NYSCEF No. 79 at 1-2.) But the parties disagree on the extent of Shen’s culpability. Shen claims that he engaged non-party TPC, Inc., to prepare the materials for Ni’s EB-5 petition. (NYSCEF No. 56; NYSCEF No. 79 at 1-2.) Shen claims that TPC’s owner, Taiping Chen, created the fabricated materials. (NYSCEF No. 79 at 1, 6; NYSCEF No. 52 at ¶ 56; NYSCEF No. 56.) Shen claims that his responsibility is limited to “having believed Taiping Chen’s work products to be true and credible.” (NYSCEF No. 79 at 6.) Ni disputes this; he alleges that Shen himself created the false documents. (See e.g. NYSCEF No. 51 at ¶¶ 45, 59-61, 66.)

In the current motion, Ni claims that Shen has perpetrated fraud on the court by committing perjury, fabricating evidence, and destroying evidence. Ni urges the court to strike defendants’ answer and enter default judgment in Ni’s favor. Ni also seeks an award of punitive damages and attorney fees (NYSCEF No. 78 at 27-28.)”

“

A. Fraud on the Court

A court has the power to strike pleadings and enter default judgment in response to “clear and convincing evidence” of fraud on the court. (See CDR Créances S.A.S. v Cohen, 23 NY3d 307, 311 [2014].) This power derives from CPLR 3126 and the court’s “inherent power to address actions which are meant to undermine the truth-seeking function of the judicial system.” (Id. at 318.) To warrant such an extreme sanction, the fraudulent conduct must be pervasive and concern “issues that are central to the truth-finding process.” (Id. at 320, quoting McMunn v Memorial Sloan-Kettering Cancer Ctr., 191 F Supp 2d 440, 445 [SD NY 2002].) Ni alleges that Shen has perpetrated on the court a fraud that warrants striking defendants’ answer. Specifically, Ni alleges that Shen fabricated two documents produced in discovery and committed perjury through his sworn statements related to those documents.

Ni bears the burden of proving the alleged fraudulent conduct by clear and convincing evidence. (Id.) “The clear and convincing evidence standard is satisfied when the party bearing the burden of proof has established that it is highly probable that what he or she has claimed is actually what happened.” (Home Ins. Co. of Ind. v Karantonis, 156 AD2d 844, 845 [3d Dept 1989].) Ni has satisfied that burden.

In his first request for production, Ni asked Shen to produce any prior communications [*3]with TPC or Taiping Chen. In response, Shen produced two documents labeled Defendants’ Exhibits 4.4 and 4.5. (See NYSCEF No. 63 at 8-10; NYSCEF No. 61; NYSCEF No. 62.) In Shen’s response to plaintiff’s second deficiency letter, Shen stated that these documents were “print-to-PDF” copies of emails he had sent via a Yahoo email account to Taiping Chen on February 27, 2014, and March 5, 2015, respectively. (NYSCEF No. 64.) Each document includes a footer with a date and time stamp corresponding to the dates Shen claimed to have sent the emails. (See NYSCEF No. 61; NYSCEF No. 62.) Shen stated that he had converted each email to PDF on the same day displayed in the footer of each document. (NYSCEF No. 64.)

Shen was questioned extensively about the documents during his August 16, 2023, deposition. Consistent with his written responses, Shen testified that he had sent and converted each email on the date shown in its the respective footer. (See e.g. NYSCEF No. 17 at 66:24-67:7, 70:13-71:14.) Ni’s counsel then showed Shen the affidavit of Michael Bierut, a designer who worked on the 2019 rebranding of Yahoo’s logo. (See id. at 76:5-15; NYSCEF No. 65.) Bierut’s affidavit states that the Yahoo logo, which appears in Defendants’ Exhibits 4.4 and 4.5, did not exist until 2019. (NYSCEF No. 65 at ¶¶ 4, 9.) After being shown Bierut’s affidavit, Shen said at the deposition that he was “withdraw[ing]” his prior testimony related to the documents. He then refused to answer any further questions about them. (See NYSCEF No. 53 at 82:4-86:12.)

Shen has since conceded that Bierut is credible; and he does not challenge Bierut’s affidavit. (NYSCEF No. 68 at ¶ 10; NYSCEF No. 79 at 8.) Instead, Shen states that he now believes that the emails must have been converted to PDF sometime after September 2019. (NYSCEF No. 68 at 12-13.) Shen claims that after the deposition he recalled that some computers in his office “automatically backdated” documents. (NYSCEF No. 68 at ¶ 11; NYSCEF No. 79 at 9.) Shen suggests this “automatic backdating” explains the discrepancy between date/time stamps and the logos. Shen further claims that his prior false statements are the result of a chronic memory problem, stemming from a head injury he suffered nearly 40 years ago. (NYSCEF No. 68 at ¶¶ 1-3.)

During oral argument on this motion, Shen offered to speak on these matters under oath. The court swore him in. The court finds Shen’s new (sworn) explanations incredible. As Ni notes, Shen testified at his deposition that his only memory problems were those normally caused by age. (NYSCEF No. 53 at 12:9-16.) And Shen has not produced any evidence of his supposedly decades-long serious memory problem.[FN1] Furthermore, an affidavit submitted by Ni’s forensics expert notes that it is “highly improbable” that the computers would have automatically backdated the documents to dates “coincidentally aligning with the specific dates that support [Shen’s] position.” (NYSCEF No. 66 at ¶ 7.) Shen has not offered any explanation for how the “automatic backdating” coincides with the events at issue in this case.

Ni has satisfied the burden of showing by clear and convincing evidence that Defendants’ Exhibits 4.4 and 4.5 are fabricated. The inconsistency between the 2019 Yahoo logo and the date stamps on the two documents make it highly probable that Defendants’ Exhibits 4.4 and 4.5 are [*4]fabricated. The probability that Defendants’ Exhibits 4.4 and 4.5 are fabricated is further strengthened by other authenticity concerns. On their face, the documents are drafts, not sent emails, as Shen has represented them to be. (See e.g. NYSCEF No. 53 at 65:19-66:18; NYSCEF No. 66 at ¶ 5.) At Shen’s deposition, Ni’s counsel also noted that the documents appeared to be screenshots, rather than PDFs. (See NYSCEF No. 55:25-56:7.) These inconsistencies, together with the anachronistic logo, convincingly prove Ni’s showing that the documents were fabricated.

The court also finds that Ni has shown by clear and convincing evidence that Shen’s sworn statements relating to Defendants’ Exhibits 4.4 and 4.5 were perjurious. The only explanation for Defendants’ Exhibits 4.4 and 4.5 is that Shen himself fabricated them. Shen has repeatedly attested to their authenticity in both written and oral sworn statements. (See e.g. NYSCEF No. 64 at 1-2; NYSCEF No. 53 at 58:17-59:24.)

Shen’s pervasive and fraudulent conduct relates to central issues in this case. Shen does not dispute that he submitted fraudulent source-of-funds documents in connection with Ni’s EB-5 application. Shen disputes only Ni’s allegation that Shen fabricated the source of funds documents. Shen’s defense in the underlying action is that TPC and Taiping Chen were responsible for creating the fraudulent documents submitted in Ni’s EB-5 application. Defendants’ Exhibits 4.4 and 4.5 are the only support for Shen’s claim that TPC, rather than Shen, prepared those fraudulent documents. (See NYSCEF No. 53 at 4-16.) Therefore, the authenticity of Defendants’ Exhibits 4.4 and 4.5 is relevant to a central issue in this case. Shen’s fraudulent conduct warrants striking defendants’ answer.”

Law firms frequently insert arbitration clauses into their retainer agreements, and require arbitration of all claims concerning potential malpractice. In an unusual setting, the clients sue their attorneys for failing to tell them to basically do the same thing,

Signature Cleaning Servs., Inc. v Grimaldi 2024 NY Slip Op 32966(U) August 23, 2024 Supreme Court, New York County Docket Number: Index No. 157238/2021 Judge: Judy H. Kim is a case in which “Plaintiff Signature Cleaning Services, Inc. (“Signature”) alleges that defendants—plaintiff’s former law firm and its lawyers—engaged in malpractice by failing to advise plaintiff to require its employees to sign arbitration agreements and class action waivers as a condition of their employment (NYSCEF Doc No. 6 [Compl. at ¶8]). Plaintiff asserts that, as a result, its employees were able to file a class action lawsuit against plaintiff in New York State Supreme Court asserting violations of New York State’s Labor Law and the Fair Labor Standards Act (“FLSA”) (the “Class Action”), which plaintiff ultimately settled for over one million dollars (Id. at ¶¶9-12).”

“Defendants now move for summary judgment dismissing this action, submitting affirmations from members of the defendant law firm, Carmelo Grimaldi, and Thomas J. McGowan, attesting that “it was strategically determined that [p]laintiff would not provide rbitration and class action waiver agreements to [plaintiff’s employees because, inter alia, the expense of addressing potentially a thousand or more individual arbitration demands by current and former employees would greatly exceed the likely cost of settling a class action lawsuit involving those same former and current employees” (NYSCEF Doc. Nos. 13 [Grimaldi Affirm. at ¶7] and 14 [McGowan Affirm. at ¶21]). Defendants also submit an affirmation by Raymond Nardo, Esq., an expert in Employment Law, attesting that defendants did not fail to exercise the ordinary reasonable skill and knowledge in employing this strategy and notes that if the Class Action plaintiffs had proceeded through arbitration, the costs to Signature from filing fees alone would have been substantially greater than the settlement of the Class Action (NYSCEF Doc. No. 32 [Nardo Affirm. at ¶¶9-11, 18]). Defendants argue that the foregoing establishes that plaintiff will not be able to prove its prima facie case and seek the dismissal of this action and sanctions pursuant to 22 NYCRR §130-1.1.1”

“In this case, defendants have established that they were not negligent in advising plaintiff not to mandate that its employees execute arbitration agreements and class action waivers and, in any event, this advice was not the proximate cause of plaintiff’s losses.
To wit, the affirmations of Grimaldi, McGowan, and Nardo establish that defendants’ advice was reasonable (See Yang v Pagan Law Firm, P.C., 228 AD3d 547, 547-48 [1st Dept 2024] [“Defendants met their prima facie burden on a motion for summary judgment by submitting the affidavit of their legal expert, who averred that defendants did not depart from the applicable standard of care”]; see also Orchard Motorcycle Distributors, Inc. v Morrison Cohen Singer & Weinstein, LLP, 49 AD3d 292, 292-93 [1st Dept 2008]), and it is well-settled that an attorney’s “selection of one among several reasonable courses of action does not constitute malpractice” (Rosner v Paley, 65 NY2d 736, 738 [1985]).
Defendants have also established that plaintiff cannot prove that their advice was not the proximate cause of the harm alleged by plaintiff. “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 438, 442 [2007] [internal citations omitted]). However, “[c]ontentions underlying a claim for legal malpractice which are couched in terms of gross speculations on future events … are insufficient as a matter of law to establish that defendants’ negligence, if any, was the proximate cause of [plaintiff’s] injuries” (Phillips-Smith Specialty Retail Group II, L.P. v Parker Chapin Flattau & Klimpl, LLP, 265 AD2d 208, 210 [1st Dept 1999]”

“This speculation on a hypothetical sequence of events is insufficient to establish causation on a malpractice claim (See Brooks v Lewin, 21 AD3d 731, 734-35 [1st Dept 2005] [plaintiff’s assertion “that a number of events which occurred after she severed her relationship with MSI could have been prevented if the law firm made the motion for the injunction” was “speculation on future events” and therefore insufficient to establish that the defendant lawyer’s malpractice, if any, was a proximate cause of any such loss”]; see also Kaplan v Conway and Conway, 173 AD3d 452, 452-53 [1st Dept 2019] [allegations that plaintiffs were subject to a FINRA investigation because defendants failed to timely advocate for a “formal closure” of an internal investigation by plaintiffs’ employer or secure “more favorable language” in FINRA U-5 Forms filed upon plaintiffs’ resignation were vague, speculative, conclusory and failed to “fit [into] any cognizable legal theory”]).”

Reem Contr. v Altschul & Altschul 2024 NY Slip Op 32915(U) August 19, 2024 Supreme Court, New York County Docket Number: Index No. 104202/2011 Judge: David B. Cohen presents the interesting question of whether a party may make a second motion for summary judgment, and if so, under what circumstances. Here, Defendants are denied a second motion and plaintiffs are permitted a second motion. Neither succeeds on summary judgment.

“This is a legal malpractice action brought by plaintiffs Reem Contracting Corp. (Reem Contracting), Jona Szapiro (Szapiro ), Reem Plumbing and Heating Corp. (Reem Plumbing), and the Estate of Steven Stein (Stein) ( collectively, plaintiffs) against defendants Altschul & Altschul, Mark Altschul, Esq. (Altschul), and Cory Dworken, Esq. (Dworken) ( collectively, defendants). Defendants represented plaintiffs in a federal action seeking recovery under section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC§ 1145 (the underlying action). Defendants move, pursuant to CPLR 3212, for summary judgment: (1) dismissing the complaint; and (2) granting judgment on their counterclaims for an account stated (motion sequence number 016).”

“Defendants again move for summary judgment, arguing that they have good cause for their second motion for summary judgment, relying on Executive Order No. 202.9 (9 NYCRR 8.202.8), issued during the COVID-19 pandemic, which allegedly prevented them from filing their motion until after the deadline to file motions had already expired. Further, defendants maintain that, as the court previously held that plaintiffs’ expert report was not in admissible form, plaintiffs do not have an expert opinion that they can rely on to prove their case, and plaintiffs previously conceded that the Reem entities were alter egos of each other. In response, plaintiffs contend that defendants have failed to demonstrate good cause for their second motion for summary judgment, as their initial motion for summary judgment was timely filed in compliance with the court’s deadline of February 28, 2020. They assert that defendants should have raised the purported admission that the Reem entities were alter egos in opposition to plaintiffs’ first motion for summary judgment. Finally, plaintiffs maintain that defendants have failed to obtain an expert and cannot serve as their own expert witness, and, thus, are unable to meet their burden of proving that plaintiffs’ legal malpractice claim is without merit.

“‘Successive motions for summary judgment should not be entertained without a showing of newly discovered evidence or other sufficient justification”‘ (Maggio v 24 W 57 APF, LLC, 134 AD3d 621, 625 [1st Dept 2015], quoting Jones v 636 Holding Corp., 73 AD3d 409,409 [1st Dept 2010]; see also Pough v Aegis Prop. Servs. Corp., 186 AD2d 52, 53 [1st Dept 1992] [“[A]s a matter of policy, multiple summary judgment motions are discouraged in the absence of newly discovered evidence or ‘other sufficient cause”‘]).”

“A party seeking summary judgment should anticipate having to lay bare its proof and should not expect that it will readily be granted a second and third chance”] [internal quotation marks omitted]). Accordingly, defendants’ motion for summary judgment is denied.”

“Plaintiffs contend that they have good cause for their second motion, as the court previously denied their motion primarily because their expert report was unswom. They now submit an affidavit from their expert, Bennett J. Wasserman, which annexes his report offered on the prior motion (NYSCEF Doc No. 359, Wasserman aff), and Wasserman opines therein that defendants’ conduct fell below the standard of care in the underlying action in that, among other things: (1) defendants failed to investigate and marshal appropriate lay and expert evidence in a timely fashion; (2) defendants stipulated to the fact that the Reem entities were alter egos, notwithstanding the fact that Stein testified to the contrary; (3) defendants never advised plaintiffs about the existence of potential conflicts of interest; and ( 4) defendants failed to communicate with plaintiffs (id., ,i 10 [c], [d], [e], [f], [k]).”

“Here, plaintiffs have demonstrated good cause for their second motion for summary judgment (see Darwick v Paternoster, 56 AD3d 714, 715 [2d Dept 2008]), as the prior denial was based, in part, on the fact that their expert report was unswom and therefore inadmissible. Now, plaintiffs have, in effect, moved to renew their prior motion for summary judgment to correct a procedural oversight and have submitted their expert’s affidavit in admissible form (see Feuerman v Marriott Intl., 201 AD3d 566, 567 [1st Dept 2022]; Shaw v Looking Glass Assoc., 8 AD3d 100, 102 [1st Dept 2004]). The court, therefore, must determine whether plaintiffs are entitled to summary judgment.”

“Even considering Wasserman’s affidavit, the court finds that plaintiffs are still not entitled to summary judgment. First, there are issues of fact as to proximate cause (see Birnbuam v Misiano, 52 AD3d 632, 634 [2d Dept 2008]). Plaintiffs argue that by conducting their own informal audit, they “met the proximate cause element of this litigation, through the ‘case within a case’ standard, as they successfully refuted the Funds’ audit and refuted the uncontested judgment against Plaintiffs” (NYSCEF Doc No. 360 at 28). However, they concede that the audit is inadmissible at trial, and thus, as previously held on plaintiffs’ first summary judgment motion, the audit is insufficient to demonstrate proximate cause (see CPLR 4547; CNP Mech., Inc. v Allied Bldrs., Inc., 66 AD3d 1340, 1340 [4th Dept 2009] [subcontract summary prepared by defendants’ counsel “was prepared for the purpose of settlement negotiations and was therefore inadmissible as proof of the amount of damages”]). “

Csutkai v Baisley 2024 NY Slip Op 32884(U) August 15, 2024 Supreme Court, New York County Docket Number: Index No. 151083/2020 Judge: Debra A. James is an odd example of blaming the attorney where the attorney never agreed to take on certain work.

“This action arises out of a promissory note, dated August 17, 2007, executed by non-party Donald Baechler (“Baechler”) to memorialize a debt of $250,0000 owed by Baechler to Edit Deak, now deceased ( the “Note”) . (NYSCEF Doc. No. 004.) Non-party Baechler does not deny the existence of the Note, and it is undisputed that the Note was not paid. The plaintiff Daniel Csutkai, as Administrator of the Estate of Edit Deak (“Csutkai”), commenced this action against the defendants Margaret Baisley and Baisley Law Group, P.C. (collectively, “Baisley”) seeking damages arising from the nonpayment of the Note. Baisley represented both Baechler and Deak on the Note transaction. Despite the conflict, Deak agreed to the representation, pursuant to a conflict waiver executed by Deak (the “Waiver”). (NYSCEF Document Number 013). Prior to his filing of the instant action, Csutkai commenced an action entitled Csutkai v Baechler, Index No. 651615/2018, in which he sought payment of the Note (the “Baechler Action”). The Baechler Action was discontinued, with prejudice, by stipulation dated March 26, 2021. (Csutkai v Baechler, Index No. 651615/2018, NYSCEF Document Number 032.)”

“The allegations of legal malpractice fail to identify how Baisley was negligent. Cstukai fails to allege that Baisley was ever instructed by Deak to enforce the Note or to seek recovery of the amount due thereunder, or that Baisley otherwise had a duty to do so under the legal engagement. Furthermore, to the extent that Cstukai alleges that Baisley willfully allowed the statute of limitations to expire, this court ruled in the Baechler Action, by Order dated November 1, 2019, that the claim for payment of the Note was still viable and not time-barred under General Obligations Law§ 17-101. (Csutkai v Baechler, Index No. 651615/2018, NYSCEF Document Number 016.) Thus, Cstukai fails to allege any factual basis for tort liability against Baisley. Accordingly, the first cause of action for legal malpractice must be dismissed. Gopstein v Bellinson Law, LLC, 227 AD3d 465 (1st Dept 2024).”

In Jobar Holding Corp. v Halio 2024 NY Slip Op 32650(U) July 10, 2024 Supreme Court, New York County Docket Number: Index No. 655689/2017 Judge: Joel M. Cohen, plaintiff attempted to use a subsequent case decision to revive a dismissed case via amendment, The attempt failed.

“By order dated September 23, 2019, the Court (Scarpulla, J.) dismissed without prejudice Plaintiffs Complaint as against T &E for aiding and abetting fraud, aiding and abetting breach of fiduciary duty, accountant malpractice, fraud, and negligent misrepresentation due to the “mixing of derivative and individual claims … ” (Johar Holding Corp. v Halio, 2019 N.Y. Slip Op. 32813[U], 7 [N.Y. Sup Ct, New York County 2019]). Plaintiffs subsequently filed an Amended Complaint asserting claims against T &E for Civil RICO, fraud, aiding and abetting fraud, aiding and abetting breach of fiduciary duty and breach of the covenant of good faith and fair dealing. By order dated October 7, 2020, the Amended Complaint was dismissed as against T &E on the grounds that the RICO claims were conclusory; that Plaintiffs continued to mix derivative and individual claims; and because certain claims were untimely (NYSCEF 184, NYSCEF 235 [Transcript at 41-466). Plaintiffs now move for leave to amend on based on the First Department’s decision in 1650 Broadway Assoc., Inc. v Sturm, 210 NYS3d 19 [1st Dept 2024] [“1650 Broadway”]). In 1650 Broadway, the First Department reinstated claims for accounting malpractice and aiding and abetting fraud based on allegations that the defendant did not comply with the “standard of a reasonable accountant under similar circumstances … ” (id.). Plaintiffs argue that their Third Amended Complaint (NYSCEF 280) seeking to re-assert claims from their previously dismissed Complaint and Amended Complaint should be accepted because it pleads claims consistent with those in 1650 Broadway. T &E was not served with a copy of the motion to amend. However, T &E learned of the motion in connection with Plaintiffs request for an extension of time to perfect an appeal. T &E subsequently submitted a letter dated July 1, 2024, in opposition to Plaintiffs motion.

While styled as a motion to amend, Plaintiffs motion is actually a motion to reargue the Court’s prior dismissal order based on new case law (Mears v Chrysler Fin. Corp., 243 AD2d 270,272 [1st Dept 1997] citing George W Collins, Inc. v Olsker-McLain Indus., Inc., 22 AD2d 485,488 [4th Dept 1965] [a motion affecting a prior order must be made pursuant to CPLR 2221 ]). CPLR 2221 ( e )(2) provides, in relevant part, that the Court may grant leave to renew if the movant can “demonstrate there has been a change in the law that would change the prior determination … ” A new decision that applies existing law is not a “change in the law” that warrants renewal (Kreisler v B-U Realty Corp., 198 AD3d 568, 568 [1st Dept 2021]). Similarly, a new decision that is decided on inapposite facts is not sufficient to warrant renewal (Lucente v Riverbay Corp., 58 AD3d 451,452 [1st Dept 2009]). Contrary to Plaintiffs assertions, 1650 Broadway, does not warrant renewal or leave to amend. 1650 Broadway applied the law as it existed at the time of the Court’s dismissal order and does not concern derivative claims or timeliness concerns. Accordingly, leave to renew and leave to amend are not warranted.”

Slifka v Paul, Weiss, Rifkind, Wharton & Garrison, LLP 2024 NY Slip Op 32788(U) August 9, 2024 Supreme Court, New York County Docket Number: Index No. 155742/2023 Judge: Melissa A. Crane is yet another in the vast universe of legal malpractice cases associated with real estate, and in this case in a big way. Joseph Slifka constructed a building at 477 Madison Avenue and in 1954 made provisions for his wife and children through trusts. Today, the trusts and the individuals are mired in litigation over the sale of that building and the ground lease associated with it.

The details are too involved to set forth in this blog post, but here is a short portion of them. “Joseph constructed a commercial office building on land at 4 77 Madison A venue (the Property), and in 1954, he divided the property interests in two – the Fee, comprised of the land and the building, and the Leasehold, which is the ground lease (id.,~ 45). Prior to June 2019, nominal defendant 477 Madave Holdings, LLC (Madave Holdings), a New York limited liability company, held title to the Fee (id., 10, 40 and 48; NYSCEF Doc No. 19, Bardavid affirmation, exhibit 10). 4 77 Madave Management Corp. (Madave Management), a Delaware corporation (NYSCEF Doc No. 20, Bardavid affirmation, exhibit 11), owns a 0.5% membership interest in Madave Holdings (NYSCEF Doc No. 1, ~ 10). Nominal defendant 477 Madave Associates (Madave Associates) (together with Madave Holdings, the Nominal Defendants) (the Nominal Defendants with Madave Management, collectively, the Madave Entities), a New York general partnership, owns a 99.5% interest in Madave Holdings and was the ground lessor for the Property (id., 39 and 49). Joseph, Sylvia, Alan and Barbara were Madave Associates’ original partners (id.,~ 74). Upon his death, Alan’s partnership interest transferred to his children’s trusts and to Alan’s Trust (id.,~ 76). Madave Associates’ present partners and their ownership interests are as follows: Barbara, individually (33.5%); Barbara’s Trust (16.5%); Alan’s Trust (16.5%); Randy’s Trust (11.1667%); Michael’s Trust (11.1667%); and, David’s Trust (11.1667%)1 (id.,~ 50). The partnership agreement dated November 5, 1984, provides that the managing partner shall make the decisions affecting the partnership, including the sale of any assets, the proceeds of which would be distributed in accordance with each partner’s proportionate share (id., 39, 69 and 77). Barbara is Madave Associates’ sole managing partner (id., 2-3 and 70).”

“Defendants contend that plaintiffs are not proper derivative plaintiffs for three reasons. First, defendants assert that Randy is motivated by personal animus. Randy has repeatedly sued, or threatened to sue, Barbara related to the sale of the Property and the allocation of the proceeds. After having recovered the Arbitration A ward, Randy has now sued Hecht with respect to the allocation (NYSCEF Doc No. 12 at 40-45). As recently as July 14, 2023, Randy, through counsel, demanded that Barbara transfer $19,307,649.58 to Barbara’s Trust and $12,871,766.10 to Alan’s Trust to make them “whole” and urged her to “retain counsel . . . so that we can resolve this amicably without the need for further proceedings” (NYSCEF Doc No. 18, Bardavid affirmation, exhibit 9 at 2). Second, defendants contend that plaintiffs are situated differently from the Nominal Defendants’ other owners because Randy’s Trust has been made whole, and therefore, plaintiffs lack an incentive to pursue claims on behalf of the other owners. Third, those other owners have settled their claims with respect to the allocation and have released defendants from liability.”

“

Villaver v Paglinawan 2024 NY Slip Op 04159 Decided on August 7, 2024
Appellate Division, Second Department concerns a situation where plaintiffs sued defendants who moved to dismiss based upon an arbitration clause. The arbitration was closed when Plaintiff said he could not afford the arbitration and Defendants did not respond.

“Thereafter, the plaintiff commenced this action (hereinafter the present action) against the defendants to recover damages for legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress, and for a judgment declaring that the defendants waived their right to arbitrate the plaintiff’s claims, that arbitration would be prohibitively expensive, and that requiring the plaintiff to pursue her claims in arbitration would violate her due process rights. The defendants moved, inter alia, to dismiss the complaint pursuant to CPLR 3211(a)(5) on the ground that the doctrine of collateral estoppel precluded the plaintiff from relitigating issues against the defendants that were previously dismissed by the Supreme Court in the prior action. In an order entered May [*2]12, 2021, the Supreme Court, Queens County (Frederick D.R. Sampson, J.), granted that branch of the defendants’ motion. The plaintiff appeals.

Pursuant to CPLR 3211(a)(5), a party may move to dismiss a cause of action based on the doctrine of collateral estoppel (see 23 E. 39th St. Dev., LLC v 23 E. 39th St. Mgt. Corp., 172 AD3d 964, 967). Under the doctrine of collateral estoppel, or issue preclusion, a party is precluded “from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same” (Ryan v New York Tel. Co., 62 NY2d 494, 500; see Cullen v Moschetta, 207 AD3d 699, 700). “This doctrine applies only ‘if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action'” (City of New York v Welsbach Elec. Corp., 9 NY3d 124, 128, quoting Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349; see Jaber v Elayyan, 191 AD3d 964, 966). “The party seeking to invoke collateral estoppel has the burden to show the identity of the issues, while the party trying to avoid application of the doctrine must establish the lack of a full and fair opportunity to litigate” (Matter of Dunn, 24 NY3d 699, 704; see HSBC Bank USA, N.A. v Pantel, 179 AD3d 650, 651).

Here, the defendants failed to establish that the issue decided in the prior action was identical to the issues raised in the present action (see Simmons v Jones Law Group, LLC, 214 AD3d 835, 837). The only issue decided in the prior action was whether the retainer agreement signed by the parties contained a valid agreement to arbitrate. Although the plaintiff raised the issues of legal malpractice, breach of fiduciary duty, and intentional infliction of emotional distress in both the prior and present actions, the defendants failed to establish that these issues were “actually litigated, squarely addressed, and specifically decided” in the prior action (M. Kaminsky & M. Friedberger v Wilson, 150 AD3d 1094, 1095). Furthermore, the determination in the prior action does not preclude the plaintiff from raising in the present action whether the defendants waived their right to arbitrate and whether the cost of arbitration was prohibitively expensive, since these issues stem from events that occurred after the prior action had been dismissed. Thus, the Supreme Court should not have granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(5) to dismiss the complaint on the ground of collateral estoppel.”

Gordon v Vladislav Tsirkin CPA & Co., LLC 2024 NY Slip Op 03682 Decided on July 3, 2024 Appellate Division, Second Department is one of those appellate cases where the Court basically did not like the complaint. The decision uses the general language of a “failure to sufficiently allege” the claims. No particular facts are set forth or discussed.

“ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs, and those branches of the defendants’ motion which were pursuant to CPLR 3211(a) to dismiss the causes of action alleging accounting malpractice and breach of contract are granted.

The plaintiffs commenced this action, inter alia, to recover damages for accounting malpractice and breach of contract against the defendants, who are accountants, alleging that they failed to prepare and file K-1 statements and tax returns for Sapphire Agriculture, LLC, and ONYX, LLC. The defendants moved, among other things, pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court, inter alia, denied those branches of the defendants’ motion which were to dismiss the causes of action alleging accounting malpractice and breach of contract. The defendants appeal.

“On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint must be afforded a liberal construction, the facts therein must be accepted as true, and the plaintiff must be accorded the benefit of every possible favorable inference” (Angeli v Barket, 211 AD3d 896, 897; see Leon v Martinez, 84 NY2d 83, 87). “Although the facts pleaded are presumed to be true and are to be accorded every favorable inference, bare legal conclusions as well as factual claims flatly contradicted by the record are not entitled to any such consideration” (Garendean Realty Owner, LLC v Lang, 175 AD3d 653, 653 [internal quotation marks omitted]). “Where evidentiary material is submitted and considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), and the motion is not converted into one for summary judgment, the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one, and unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate” (Rabos v R & R Bagels & Bakery, Inc., 100 AD3d 849, 851-852; see Guggenheimer v Ginzburg, 43 NY2d 268, 274-275; Nassau Operating Co., LLC v DeSimone, 206 AD3d 920, 926). “Dismissal of the complaint is [*2]warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery” (Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 142; see Nassau Operating Co., LLC v DeSimone, 206 AD3d at 925).

In order to succeed on a claim for accounting malpractice, a plaintiff must demonstrate a departure from accepted standards of practice and that the departure was a proximate cause of injury (see Alskom Realty, LLC v Baranik, 189 AD3d 745, 747; Kristina Denise Enters., Inc. v Arnold, 41 AD3d 788, 789). “Injury is an element of the cause of action” (see Alskom Realty, LLC v Baranik, 189 AD3d at 747). Here, the plaintiffs failed to adequately plead a cause of action alleging accounting malpractice. The plaintiffs failed to sufficiently allege that the defendants departed from accepted standards of practice and that the defendants proximately caused the plaintiffs’ injuries (see Kristina Denise Enters., Inc. v Arnold, 41 AD3d at 789; see also Ecker v Zwaik & Bernstein, 240 AD2d 360, 362).”

Peck v Milbank LLP 2024 NY Slip Op 32596(U) July 29, 2024 Supreme Court, New York County Docket Number: Index No. 152290/2022 Judge: Andrew Borrok describes why the claim for violation of Judiciary Law 487 resisted a dismissal motion.

“The defendants are not however entitled to dismissal of the claim sounding in violation of Judiciary Law§ 487. Judiciary Law§ 487 provides that An attorney or counselor who: 1. Is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party; or, 2. Wilfully delays his client’s suit with a view to his own gain; or, wilfully receives any money or allowance for or on account of any money which he has not laid out, or becomes answerable for, Is guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action. (Judiciary Law § 487). As discussed more fully below, the judicial proceedings privilege does not serve to shield the testimony of Georgiana Slade in the Surrogate Court’s proceeding where she was representing the Estate because, as alleged, this testimony was not given to assist the truth seeking process and she was not merely a fact witness. In fact, as alleged, she was not merely a fact witness and her testimony was given to undermine the truth seeking process ( Oakes v Muka, 56 AD3d 1057, 1058 [3d Dept 2008]). To wit, the First Amended Complaint (the FAC; NYSCEF Doc. No. 59) alleges that defendant Ms. Slade deliberately and vindictively (i) abused her position to have plaintiff Ian Peck cut out of a certain portion of his inheritance and (ii) lied to a tribunal all to get even for her father (Jarvis Slade)’s loss of a $100,000 investment some years ago after entrusting the funds to Ian Peck. Stated differently, at bottom, the F AC alleges that Ms. Slade deceived (and intended to deceive) a court in the State of New York when she was acting as an attorney for the Estate. This is sufficient to make out a Judiciary Law § 487 claim and to articulate why the judicial proceedings privilege does not apply at this stage of the litigation.”

“Ms. Slade’s father, Jarvis Slade, and Ian Peck’s father, Norman Peck, were business partners (NYSCEF Doc. No. 59, ,i,i 23-27). One of their co-investments involved an investment in an Ian Peck venture. In that venture, Jarvis Slade lost $100,000. When Mr. Slade requested “special treatment” as to the return of his money, Ian Peck refused. (Id., ,i,i 30-31.) Mr. Slade apparently became angry and never wanted his family to do business with Ian Peck again (id., ,i 32). Ms. Slade was a trust and estates attorney who represented Norman Peck. In 2006, as alleged, Ms. Slade recommended changes to one of Norman Peck’s trusts that held certain co-investment interests with Mr. Slade (i.e., the Horseneck Trust). As a result of these recommended changes to the revocable Horseneck Trust, Ian Peck was removed as a beneficiary. (Id., ,i,i 42-43, 49-50.) According to the PAC, Ms. Slade did not disclose to Norman Peck her father’s alleged animus or her potential personal contingent interest in the same assets (id., ,i,i 45-47). Separate from the co-investments, and as relevant to the instant dispute, Norman Peck also lent Ian Pack various sums of money over the years. In connection with those loans, Ian Peck executed a number of notes (the Notes) evidencing his obligation for repayment. The plaintiffs allege that Norman Peck’s intent (as embodied in certain estate planning) was that the Notes would be forgiven at his death, rather than repaid out of Ian Peck’s inheritance (id., ,i,i 59-71). Norman Peck passed away on April 16, 2016. He left a Will, the Horseneck Trust, and The Norman L. Peck Revocable Trust (the Peck Trust). After Norman Peck’s death, the Peck Trust also became irrevocable and Ian Peck’s interest in it vested (id., ,i 71). Within two weeks of Norman Peck’s death, the defendants filed a probate petition in the Surrogate’s Court of New York County (id., ,i,i 75-76). Ms. Slade and Milbank (hereinafter defined) represented the Estate in the proceeding before that court. Ms. Slade did not disclose (i) the alleged animus her father (and she) held against Ian Peck, (ii) that she had allegedly abused her position as Norman Peck’s attorney to have Ian Peck cut out of the revocable Horseneck Trust, or (iii) that a 2016 amendment executed by Norman Peck impacted (i.e., impaired) the estate’s ability to collect on the Notes (id., ,i,i 71-79, 126-131). Ms. Slade submitted an affidavit in the Surrogate’s Court action on April 27, 2016 (id., ,i 74-75, 90; NYSCEF Doc. No. 88). Ian Peck maintained that the Notes were intended to be forgiven under his late father’s testamentary plan. The Estate however brought two separate actions to collect on the Notes on the Estate’s behalf pursuant to CPLR § 3213 which the Surrogate’s Court granted (NYSCEF Doc. No. 59, ,i,i 80117.) On appeal, the Appellate Division reversed holding that (i) the Notes were not the type of instrument that was subject to CPLR § 3213 and (ii) there are issues of fact as to whether the Notes are inconsistent with the estate plan (In the Matter of the Estate of Norman L. Peck v Ian S. Peck, Case No. 2019-04713 [1st Dept, February 16, 2021]; NYSCEF Doc. No. 93). On February 15, 2022, the defendants filed a notice in the Surrogate’s Court formally withdrawing as counsel of record (NYSCEF Doc. No. 59, ,i 123).”

“The defendants are not correct that they are entitled to dismissal of the Judiciary Law § 487 cause of action based on the judicial proceedings privilege. To further the public policy goal of permitting persons involved in a judicial proceeding to write and speak about it freely among themselves, pertinent statements made in the course of such proceedings are protected by the judicial proceedings privilege (Front, Inc. v Khalil, 24 NY3d 713 [2015]). Whether a statement is at all pertinent to the litigation is determined by an extremely liberal test, and any doubts are to be resolved in favor of pertinence (Casa de Meadows Inc. [Cayman Is.] v Zaman, 76 AD3d 917, 920 [1st Dept 2010]). The privilege is chiefly directed at protecting allegedly defamatory statements. Allowing such statements to be a basis for a defamation action “would be an impediment to justice, because it would hamper the search for truth and prevent making inquiries with that freedom and boldness which the welfare of society requires.” (Front, Inc. v Khalil, 24 NY3d 713, 718 [2015], citing Youmans v Smith, 153 NY 214,220 [1897].) The privilege does apply to causes of action other than defamation, but it does not apply to malpractice or malicious prosecution (Hadar v Pierce, 111 AD3d 439,440 [1 st Dept 2013]). The privilege may apply to a cause of action for breach of fiduciary duty that is based on allegations of defamation, but it does not apply when such cause of action does not exclusively rely on allegedly defamatory statements made in the course oflitigation (Fletcher v Dakota, Inc., 99 AD3d 43, 54-55 [1st Dept 2012]) or when the actions giving rise to the claim take place before the statement in question (Toaspern v LaDuca Law Firm LLP, 154 AD3d 1149, 1152 [3d Dept 2017]).”

Jones Law Firm, P.C. v Keep Healthy, Inc. 2024 NY Slip Op 32519(U) July 15, 2024 Supreme Court, New York County Docket Number: Index No. 653385/2023 Judge: Kathleen Waterman-Marshall is the story of a law firm which has a captive arbitration firm and requires arbitrations for attorney fee claims to be arbitrated before the captive arbitrator. Supreme Court permits this arrangement.

“Petitioner Jones Law Firm, P.C. (“Jones Law Firm”) seeks to confirm the arbitration award dated July 7, 2023 (the “Award”) (NYSCEF Doc. No. 5) and for costs associated with the underlying arbitration proceeding and this motion. Respondents Keep Healthy, Inc, FMF Corp, Harbor Park Realty, LLC, and Jacob Adoni (“Respondents”)1 oppose and cross-move to vacate the Award on the bases that: the arbitrator engaged in misconduct, the arbitrator was partial, the arbitrator exceeded her authority, and the Respondents were not notified of the arbitration proceeding. Alternatively, Respondents seek to modify the Award on the basis that there was a miscalculation of figures and a mistake in the corporate entities referred to in the Award.”

“The retainer agreements (“Retainer Agreements”) between Jones Law Firm and Respondents provide, in relevant part:

In the event a dispute should arise under this contract, including but not limited to disputes over payment fees [sic], malpractice claims, or defamation claims relating to representation, the Firm and Clients agree to resolve the dispute by binding arbitration through Professional Arbitration and Mediation LLC (“PAM”). (NYSCEF Doc. No. 3 at pp. 4-5 and 13-14).”

“Respondents contend that the arbitration proceeding was marred by partiality and improper conduct. Respondents allege that the professional relationship between Mr. Porges and Mr. Jones of Jones Law Firm tainted the proceedings. As evidence of this claim, Respondents cite Jones Law Firm’s offer to “front” the costs of arbitration as an improper payment to the arbitrator. Similarly, Respondents allege that the second arbitrator also engaged in improper conduct, as Respondents contend they never received any communication from PAM following Mr. Porges’ recusal, including notice that a second arbitrator had been assigned, that the second arbitrator “rushed, at light speed” to render the Award, and the second arbitrator committed numerous errors of law and fact in calculating the award.”

“Respondents have failed to establish any of the limited grounds for vacating the Award, as provided by CPLR 7 511. At bottom, Respondents were aware of the arbitration proceedings, defaulted in these proceedings, and were not entitled to additional notice prior to the issuance of the arbitration award. Contrary to Respondent’s claims, there is no evidence of improper conduct by the arbitrators, nor was the Award issued against improper or omitted parties. Finally, to the extent that Respondents allege the arbitrator committed errors in calculating the award, Respondent’s should have raised arguments surrounding appropriate credits and calculation before the arbitrator, as errors of fact are not a sufficient basis to vacate or modify the award. Accordingly, the cross-motion is denied and Court turns to Jones Law Firm’s petition to confirm the Award.”