Reading decisions of the Appellate Division in legal malpractice cases involving attorneys on both sides often shows the AD dismissing the complaint on "but for" grounds.  The AD will look closely at the underlying transactions which led to the underlying litigation, and will decide whether there would have been a better or different outcome.

In contrast, and especially in this pro-se v. defendant attorney case, the AD took a more gentle approach and affirmed the denial of summary judgment to the attorney.  Rodolico v Rubin & Licatesi, P.C. 2014 NY Slip Op 01308  Decided on February 26, 2014  Appellate Division, Second Department discussed pre-discovery summary judgment motions.
 

"The plaintiff’s sister worked for the defendant law firm, in which the individual defendants are partners. During his sister’s employment, the plaintiff came to learn of an investment opportunity being organized by the defendants, which involved providing high interest, short-term loans for the development of real estate. The plaintiff and his wife decided to participate. Two bank checks, one of which was purchased by the plaintiff’s wife and bore only her name, were forwarded to the defendants for the purpose of making two loans. When these two loans were not repaid in full, the plaintiff commenced this action seeking to recover from the defendants the money that he was owed, claiming that the defendants effectively borrowed the money from him (first and second causes of action). In the alternative, the plaintiff sought damages for legal malpractice (third cause of action). The plaintiff made a pre-discovery motion for summary judgment on the complaint, and the defendants cross-moved, inter alia, to dismiss the second cause of action pursuant to CPLR 3211(a)(3), for lack of standing, and to dismiss the complaint pursuant to CPLR 3211(a)(1), based upon documentary evidence. The Supreme Court denied the motion and the cross motion.

In support of that branch of their cross motion which was to dismiss the second cause of action for lack of standing, the defendants argued that the plaintiff had no interest in the loaned funds because the funds were provided by his wife. However, the plaintiff established, through his affidavit, that the funds provided for the subject loan belonged to both him and his wife (see Rodolico v Rubin & Licatesi, P.C., 112 AD3d 608, 609-610). The defendants presented no evidence to the contrary. The plaintiff, therefore, had standing to seek the return of the funds (see id.; see generally Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242), and the Supreme Court properly denied that branch of the defendants’ cross motion which was to dismiss the second cause of action for lack of standing. [*2]

The Supreme Court also properly denied that branch of the defendants’ cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(1). A motion pursuant to CPLR 3211(a)(1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff’s factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; see Parkoff v Stavsky, 109 AD3d 646; Benson v Deutsche Bank Natl. Trust, Inc., 109 AD3d 495). Further, the evidence submitted in support of a motion pursuant to CPLR 3211(a)(1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary’ or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714, quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [internal quotation marks omitted]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610). " [N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1)’" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Suchmacher v Manana Grocery, 73 AD3d 1017; Fontanetta v John Doe 1, 73 AD3d at 86).

Here, with respect to the first and second causes of action, the defendants submitted two checks that the plaintiff and his wife provided for the investments, which were written to the defendants’ IOLA account. Those checks do not "utterly refute" the plaintiff’s allegations that the defendants borrowed funds from the plaintiff and his wife or "conclusively establish[ ] a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326).

The only other evidence submitted by the defendants pertaining to these causes of action as well as the legal malpractice cause of action was affidavits, which do not constitute " documentary evidence within the intendment of CPLR 3211(a)(1)’" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d at 997; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610).

Accordingly, that branch of the defendants’ cross motion which was to dismiss the complaint pursuant to CPLR 3211(a)(1) was properly denied (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326; Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714; Integrated Constr. Servs., Inc. v Scottsdale Ins. Co., 82 AD3d 1160, 1163; Fontanetta v John Doe I, 73 AD3d at 86). "

Schlam Stone & Dolan, LLP v Poch  2014 NY Slip Op 30415(U)  February 17, 2014  Supreme Court, New York County  Docket Number: 105769/11  Judge Shlomo S. Hagler presents the question of whether an attorney may be hired to represent an entity, and then represent the individual officers or members, without their knowledge.  What happens when things do not go so well?

In a housing court proceedings, Arfa and Shpigel came to be represented by defendants.  Arfa and Shpigel say that they did not know there was a case, did not know that they were represented, nor did they know that things were going badly in landlord-tenant court.  Indeed, things did go badly.

"Plaintiff’s assignors, Arfa and Shpigel, claim that Poch, an  attorney, committed malpractice when he purported to represent  them without authority in five Housing Court proceedings, wherein 
numerous violations were brought against Arfa and Shpigel, among  others, in their role as owners of the properties subject to the  violations and which Poch settled by five Consent Orders dated
June 24, 2008 (“Consent Orders”) .Arfa and Shpigel complain that Poch committed malpractice by failing to inform them that he was  representing them in the Housing Court matters (of which they
claim to have been ignorant), failing to discuss the matters with  them including exploring possible defenses, failing to inform  them that they were personally named and liable for fines arid  repairs, and by entering into the Consent Orders allegedly  without their knowledge or consent.  Arfa and Shpigel state that they only became aware of the existence of the Consent Orders when they were  called into court to answer contempt proceedings…. "

Arfa and Shpigel litigated through the Civil Court and to the Appellate Term.  Both courts determined that the defendant attorneys had apparent authority.  Is that Collateral Estoppel?  No.

Judge Hagler determined that "To establish collateral estoppel, there must have been an “identical issue . . . necessarily decided in the prior action or  proceeding [which] is decisive of the present action” and a  showing chat “the party who is attempting to relitigate the issue  had a full and fair opportunity to contest it in the prior action  or proceeding” (Matter of Howard v Stature Elec. Inc., 20 NY3d  522, 525 [2013]  citing Kaufman v Eli Lilly & Co., 65 NY2d 443,  455 [1985]; see also Matter of Hoffman, 287 AD2d 119 [lst Dept  2111).  In the present motion, defendants assert that the Appellate Term Decisions have completely resolved the issues in this case  and that they should not be relitigated here. To properly apply  the doctrine of collateral estoppel, this Court must determine  whether Judge Klein and the Appellate Term decided the “identical issue” which is “decisive” of this legal. malpractice act ion.  The issue before Judge Klein and the Appellate Term was limited to whether defendants had the authority ‘to represent Arfa and Shpigel in two discrete  housing Court proceedings which were  ]settled by two Consent Orders. The issue in this case, however,  is whether defendants’ committed legal malpractice in  representing Arfa and Shpigel in five Housing Court proceedings.  More specifically, Arfa and Shpigel not only allege that
defendants did not have authority to act on their behalf, but  defendants also failed to advise and explore with them any  possible defenses prior to entering into the Consent Orders in  all five Housing Court proceedings.  As such, the only issue that the Appellate Term conclusively
determined is that defendants had the authority to represent Arfa  and Shpigel in those two Housing Court Proceedings and are bound by the resulting two Consent Orders. The Appellate Term never determined the issue as to whether defendants committed legal  malpractice in the five Housing Court proceedings. Irrespective  of the doctrine of collateral estoppel, this Court must also  address whether defendants have met their burden in demonstrating  entitlement to summary judgment dismissing this legal malpractice  action. "

Personal injury and legal malpractice cases have many strong bonds. Because a sizable portion of the litigation world is devoted to personal injuries (on both the plaintiff’s and defendant’s side), one correctly expects significant legal malpractice litigation after-wards. How the legal malpractice case proceeds along with or after the PI case is a not well understood procedure. In Simoni v Costigan 2012 NY Slip Op 07882  Appellate Division, First Department andSimoni v Napoli 2012 NY Slip Op 08639 Decided on December 13, 2012 Appellate Division, First Department we see two sides of the same issue.
 

Costigan: Although the personal injury actions and the legal malpractice action involve "a common question of law or fact" (CPLR 602[a]), consolidation could engender jury confusion and [*2]prejudice the defendants in the malpractice action (see Addison v New York Presbyt. Hosp./Columbia Univ. Med. Ctr., 52 AD3d 269, [1st Dept 2008]; Brown v Brooklyn Union Gas Co., 137 AD2d 479 [2nd Dept 1988]).

Napoli: The motion court providently exercised its discretion in denying defendants’ request for a stay of the legal malpractice action pending resolution of plaintiff’s personal injury action (see CPLR 2201). The proceedings do not share complete identity of parties, claims and relief sought (see 952 Assoc., LLC v Palmer, 52 AD3d 236 [1st Dept 2008]; Esposit v Anderson Kill Olick & Oshinsky, P.C., 237 AD2d 246 [2d Dept 1997]).

The motion court also properly permitted plaintiff to amend the complaint (see CPLR 3025[b]). The amended complaint and the documents submitted in support of the cross motion allege facts from which it could reasonably be inferred that defendants’ negligence caused plaintiff’s loss (see Garnett v Fox, Horan & Camerini, LLP, 82 AD3d 435 [1st Dept 2011]). At this stage of the proceedings, plaintiff does not have to show that he actually sustained damages as a result of defendants’ alleged malpractice (id. at 436).

Real estate broker is asked to find a buyer. Broker presents a buyer, but no deal ensues. Broker papers the transaction and sits back. Later transaction goes through and Broker eventually seeks commission. Sellers attorney is sued. Is he liable?

Land Man Realty, Inc. v Faraone 2012 NY Slip Op 08218 Appellate Division, Third Department tells us the following: it’s not enough to say " I did not commit malpractice," so please let me out of the case!
 

"The facts of this case are more fully set forth in our prior decision of this matter (70 AD3d 1246 [2010]), as well as another related decision of this Court (Land Man Realty, Inc. v [*2]Weichert, Inc., 94 AD3d 1221 [2012]). Briefly, defendants owned a 54-acre parcel of land in the Town of Wilton, Saratoga County, and entered into an exclusive listing agreement with Weichert Realtors Northeast Group to sell the property. Shortly thereafter, plaintiff’s counsel sent multiple letters to, among others, defendants, claiming that it had previously presented Capital District Property, LLC (hereinafter CDP) as purchaser of the property prior to the property being listed with Weichert. Therefore, in the event that CDP purchased the property, plaintiff would be entitled to a 10% commission pursuant to an alleged oral agreement with defendants. Weichert ultimately sold the property to CDP.

Thereafter, plaintiff commenced this action against defendants, claiming that it was the procuring cause of the sale of the property and is entitled to a 10% commission pursuant to an alleged agreement with defendants. As is relevant herein, defendants, in turn, commenced a third-party action against third-party defendant, Robert W. Pulsifer, an attorney who represented defendants in the real estate transaction. Defendants claim that Pulsifer (1) failed to respond or take any action regarding plaintiff’s letters asserting a claim for a commission, and (2) negotiated the contract for the sale of property to CDP in a manner that did not sufficiently protect defendants against plaintiff’s commission claim. Defendants moved for summary judgment dismissing the complaint and Pulsifer moved for summary judgment dismissing the amended third-party complaint. Supreme Court denied both motions. Pulsifer now appeals.

We affirm. A legal malpractice action requires a showing that an attorney "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession [and] the attorney’s breach of this professional duty caused the plaintiff’s actual damages" (McCoy v Feinmann, 99 NY2d 295, 301-302 [2002] [internal quotation marks and citations omitted]; see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; M & R Ginsberg, LLC v Segal, Goldman, Mazzotta & Siegel, P.C., 90 AD3d 1208, 1208-1209 [2011]). Here, although Pulsifer himself avers that based upon his legal experience he was not negligent in the advice and representation he provided to defendants, he failed to submit adequate proof establishing the applicable standard of care and whether he breached that standard. As Pulsifer failed to meet his initial legal burden of establishing his entitlement to summary judgment as a matter of law (see Jack Hall Plumbing & Heating, Inc. v Duffy, AD3d , ___, 2012 NY Slip Op 07249, *2 [2012]), his summary judgment motion was properly denied.

It was not said by Lord Acton that control of the bank account corrupts, and that absolute control of it  corrupts absolutely, but United States Fire Ins. Co. v Raia  2014 NY Slip Op 00987 Decided on February 13, 2014  Appellate Division, Second Department does show that guardians who control their ward’s bank accounts can wreak havoc.
 

The surety insurance company came to be plaintiff after "defendant Camille A. Raia was appointed guardian of the property of Andrea S., an incapacitated person (hereinafter the IP). Raia obtained a guardianship bond through the plaintiff, United States Fire Insurance Company (hereinafter US Fire), as surety. During the course of the guardianship, Raia retained the defendant Cavalcante & Company (hereinafter C & C), an accounting firm, to prepare annual tax returns on behalf of the IP. Ultimately, Raia was removed as the guardian of the IP’s property as a result of a criminal investigation. The court accepted an account-stated as [*2]Raia’s final account for the period she acted as guardian of the IP’s property, and surcharged her in a certain amount. US Fire and the IP, through a successor guardian, entered into a stipulation by which the IP released US Fire from further liability under the bond and assigned all rights and causes of action to it in exchange for a payment in the amount of $1,100,000.

US Fire, on its own behalf and as the IP’s subrogee/assignee, commenced this action against Raia, Raia & Rondos, P.C. (hereinafter the R & R firm), Steven T. Rondos, C & C, and another defendant. US Fire alleged, with respect to C & C, that it committed professional malpractice by failing to detect unlawful withdrawals made from the IP’s investment account and to report the accounting irregularities.

US Fire settled with Raia, Rondos, and the R & R firm, and thereupon executed a release in favor of Raia, and a separate release in favor of Rondos and the R & R firm.

Raia moved, inter alia, for summary judgment dismissing C & C’s cross claims insofar as asserted against her and pursuant to 22 NYCRR 130-1.1 for an award of attorney’s fees.  The Supreme Court, in effect, granted those branches of the separate motions and denied the cross motion.

Raia, Rondos, and the R & R firm demonstrated their prima facie entitlement to judgment as a matter of law dismissing C & C’s cross claim for contribution insofar as asserted against them. "A release given in good faith by the injured person to one tortfeasor as provided in [General Obligations Law § 15-108(a)] relieves him [or her] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules" (General Obligations Law § 15-108[b]). Here, US Fire, upon settling with Raia, Rondos, and the R & R firm, executed a release in favor of Raia, and a separate release in favor of Rondos and the R & R firm, and there is no evidence in the record indicating that the releases were not given in good faith. Thus, Raia, Rondos, and the R & R firm are relieved from liability to C & C for contribution (see Balkheimer v Spanton, 103 AD3d 603; Ziviello v O’Boyle, 90 AD3d 916, 917; Boeke v Our Lady of Pompei School, 73 AD3d 825, 826-827; Kagan v Jacobs, 260 AD2d 442, 442-443; Brown v Singh, 222 AD2d 392). In opposition, C & C failed to raise a triable issue of fact.

However, because C & C did not engage in frivolous conduct within the meaning of 22 NYCRR 130-1.1, the Supreme Court improvidently exercised its discretion in awarding attorney’s fees pursuant to 22 NYCRR 130-1.1 (see South Point, Inc. v Redman, 94 AD3d 1086, 1087-1088; Joan 2000, Ltd. v Deco Constr. Corp., 66 AD3d 841, 842). "

One attorney represents a group of tenants / tenants-in-common in a construction project that runs afoul of the Department of Transportation in NYC.  The sticking point was whether a retaining wall, which the project sought to move was on City or private property.  In Wadsworth Condos LLC v Dollinger Gonski & Grossman   2014 NY Slip Op 00930   Decided on February 13, 2014   Appellate Division, First Department we see how plaintiff weaves a conflict of interest and affiadvits about how the attorneys sided with others, as well as demonstrating capacity to sue.
 

"Defendants preserved the defense that plaintiff lacked the capacity to sue derivatively on behalf of its co-tenant-in-common by asserting the defense in their answer (see CPLR 3211[a][3], 3211[e]; see also Security Pac. Natl. Bank v Evans, 31 AD3d 278 [1st Dept 2006], appeal dismissed 8 NY3d 837 [2007]). However, plaintiff adequately alleged injuries to the common entity and the futility of a demand thereon. "

"Plaintiff’s belatedly asserted grounds for alleging legal malpractice may be entertained since they involve no new factual allegations and no new theories of liability, and there is little or no basis on which defendants could claim surprise or prejudice (see generally Alarcon v UCAN White Plains Hous. Dev. Fund Corp., 100 AD3d 431 [1st Dept 2012]; Valenti v Camins, 95 AD3d 519 [1st Dept 2012]). The new claims raise issues of fact whether defendants were negligent in their legal representation of the tenants-in-common, and whether, but for the alleged negligent representation, the tenants-in-common would have been able to avoid the extensive delays in project construction that resulted in the loss of the construction loan, construction delay expenses, and increased attorneys’ fees. The tenants-in-common retained defendants initially to advise them with respect to a stop work order issued by the Department of Transportation (DOT) that prohibited further demolition until an appropriate permit was secured from DOT or the Department of Buildings. Rather than trying to secure a permit or obtain a definitive statement of the ownership of the retaining wall sought to be demolished, defendants reviewed a survey and deed and accepted DOT’s position that the wall was on city property, and entered into what became protracted negotiations with DOT. In moving for summary judgment, defendants did not submit an expert legal opinion as to the ownership of the wall (which is not clear from the record) or whether the failure to seek a demolition permit rather than engage in negotiations constituted negligence, issues that are beyond the ken of the ordinary person (see Nuzum v Field, [*2]106 AD3d 541 [1st Dept 2013]; Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 141 [1st Dept 2013], lv denied 22 NY3d 855 [2013]).

As to the conflict of interest claim, while plaintiff was aware that defendants were representing the co-tenant-in-common, issues of fact exist whether defendants’ actions on behalf of the co-tenant-in-common were in conflict with the interests of the tenants-in-common, particularly since the tenant-in-common management agreement called for unanimous consent on material changes in the project. For example, an affidavit submitted by plaintiff says that plaintiff was not given notice of the switch from a condominium project to a rental project, which the co-tenant-in-common undertook while being advised by defendants. "

What is the difference between legal malpractice in tort and legal malpractice in contract, and how might an individual attorney in a LLP be liable for the fraud of another attorney?  Salazar v Sacco & Fillas, LLP   2014 NY Slip Op 00980   Decided on February 13, 2014   Appellate Division, Second Department has a simple fact pattern. 
 

"The plaintiff retained the defendants Sacco and Fillas, LLP (hereinafter the law firm), and attorneys Tonino Sacco and Elias Nikolaos Fillas, who allegedly were partners in the law firm, to represent him as a plaintiff in a personal injury action and to represent two corporate entities that he controlled, Always First, Inc., and Always Fast, Inc. (hereinafter together the Always companies), in connection with certain commercial litigation.

The law firm settled the personal injury action on behalf of the plaintiff, and received certain settlement proceeds on the plaintiff’s behalf. Thereafter, the plaintiff and the Always companies, as "the client," and the law firm entered into an agreement (hereinafter the Settlement Agreement). The Settlement Agreement provided that, in exchange for the law firm’s agreement to "discount outstanding balances" due the law firm from the Always companies, "the client" agreed to give up all rights to certain sums due "the client" from three enumerated litigations.

The plaintiff thereafter commenced the instant action, seeking to recover damages he allegedly sustained as a result of the defendants’ legal malpractice, breach of contract, and fraud. The plaintiff alleges, inter alia, that the defendants breached the retainer agreement relating to the personal injury action in that they intentionally failed to pay him the settlement funds from that [*2]action. The plaintiff also alleges that he was fraudulently induced into signing the Settlement Agreement. "
 

Legal malpractice was dismissed because "Supreme Court, upon concluding that the complaint alleged intentional acts only, granted the defendants’ motion only insofar as it sought to dismiss the first cause of action, sounding in legal malpractice."

But what of Breach of Contract and Fraud?  "The complaint adequately states a cause of action against the defendants sounding in breach of contract.

To state a cause of action sounding in fraud, a plaintiff must allege that "(1) the defendant made a representation or a material omission of fact which was false and which the defendant knew to be false, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) there was justifiable reliance on the misrepresentation or material omission, and (4) injury" (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d 1077, 1078; see McDonnell v Bradley, 109 AD3d 592, 592-593). In the instant matter, the complaint alleged that Fillas, one of the attorneys representing the plaintiff and the Always companies, made certain false statements, including, inter alia, misrepresenting the amount of past-due attorney’s fees owed by the Always companies, and falsely stating, in effect, that he could sue the plaintiff personally for the sums allegedly owed by the Always companies. The complaint further alleged that these statements were known by Fillas to be false at the time they were made, and were intended to deceive, coerce, and induce the plaintiff into entering into the Settlement Agreement, and that the plaintiff relied on these statements to his detriment. Accordingly, these allegations were sufficient to state a cause of action alleging fraud against Fillas and the law firm (see Partnership Law §§ 24, 25, 26[e]; Rabos v R & R Bagels & Bakery, Inc., 100 AD3d 849)."

When might the individual attorney be responsible for the fraud of another partner in an LLP? 

"However, the complaint fails to state a cause of action sounding in fraud against Sacco. As a general matter, Partnership Law § 26(a)(1) imposes joint and several liability upon all individual partners in a partnership for all obligations chargeable to the partnership under Partnership Law §§ 24 and 25, which are referable to wrongful acts committed by one or more partners of the partnership acting in the ordinary course of partnership business. Partnership Law § 26(b), however, immunizes from individual liability any partner in a partnership registered as a limited liability partnership who did not commit the underlying wrongful act, except to the extent that Partnership Law § 26(c) imposes liability on that partner where he or she directly supervised the person who committed the wrongful act and Partnership Law § 26(d) imposes liability on that partner where he or she had previously agreed to assume individual liability for wrongs committed by another partner. Although, at this stage of the litigation, the plaintiff " need only set forth sufficient information to apprise defendants of the alleged wrongs’" (Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079, quoting DDJ Mgt., LLC v Rhone Group L.L.C., 78 AD3d 442, 443), the complaint fails to allege facts apprising Sacco of the basis of his individual liability. The complaint does not allege that Sacco personally committed a fraudulent act. Nor does the complaint allege that the law firm is a general partnership or that, as such, Sacco may be held individually liable pursuant to Partnership Law § 26(a)(1). Furthermore, the complaint does not allege that the law firm is a registered limited liability partnership, but that Sacco supervised Fillas in the commission of a fraudulent act, thus rendering Sacco individually liable pursuant to Partnership Law § 26(c), or that Sacco had previously agreed to assume personal liability for fraudulent acts committed by Fillas, thus rendering Sacco individually liable pursuant to Partnership Law § 26(d). The allegations in the complaint particularizing Fillas’s fraudulent conduct, standing alone, are insufficient to state a cause of action sounding in fraud against Sacco (see Partnership Law § 26[b], [d]; Selechnik v Law Off. of Howard R. Birnbach, 82 AD3d at 1079). Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was to dismiss the fraud cause of action insofar as [*3]asserted against Sacco. "

W.S. Corp. v Cullen and Dykman LLP  2014 NY Slip Op 30353(U)  February 5, 2014  Sup Ct, New York County  Docket Number: 654176/12  Judge: Marcy S. Friedman is a CPLR 3211 decision based upon a large number of claims.  Basically, its sibling v. sibling, each of which have enjoyed the benefits of a trust and income from a company.  Now they are at odds.  One law firm has helped for years and sided with the more alpha of the siblings.  Now, there is litigation.

"The action arises out of a dispute between siblings. The Baugher plaintiffs and their brothers, Jeffrey and Kirk Baugher, were all presumptive remainder beneficiaries of a trust. (Complaint 23.) Their mother, Phebe Baugher, was lifetime income beneficiary of the trust and a de facto trustee until her death on November 4, 2008. (Id., 22, 27.) Jeffrey was appointed by Phebe as a trustee and served in that capacity without official appointment by the Surrogates Court. (Id., 28.) In addition, he was a director of the Company’s board, and was appointed as its president in January 2007′ after the death of another brother who had been president. (Id.,46.) The complaint alleges that Cullen engaged in conflicted simultaneous representation of the Company on the one hand, and Jeffrey and Kirk on the other. (Id., 12.)

More particularly, the complaint alleges:
"Cullen aided and abetted Jeff in breaching his fiduciary duties as an officer and director of W.S. Wilson, and as a trustee of the trust that owned the Company, by engaging with him and/or Kirk to develop a strategy ("the Strategy") to exclude the Baugher Plaintiffs from the operation and management of the Company in order to ensure that a claim for more than $22 million of its retained earnings would be preserved for Phebe or Phebe’s Estate, of which Kirk and Jeff became
the primary beneficiaries under a will that Cullen drafted and had Phebe execute days after being discharged from the hospital." (Id., 14.) Cullen allegedly gave legal advice to Jeffrey which he used as a basis for the Company not to hold meetings of the board of directors on which the Baugher plaintiffs had previously served. (Id., 16, 32-33, 56-70.) Cullen also allegedly gave legal advice to Jeffrey on the basis of which the Company did not recognize the Baugher plaintiffs as shareholders after the termination of the trust. (Id.,16.) As the complaint further alleges, Cullen’s conflict of interest caused plaintiffs to become embroiled in numerous litigations and to incur legal fees that would not otherwise have been incurred. (Id., 237-241.)" 

"An attorney’s conflict of interest, as a result of dual representation of clients in violation of the Code of Professional Responsibility (22 NYCRR 1200.24), does not alone support a cause of action for legal malpractice. However, ‘"liability can follow where the client can show that he … suffered actual damage as a result of the conflict."’ (Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008], Iv denied 12 NY3d 715, quoting Tabner v Drake, 9 AD3d 606, 610 ‘
[2d Dept 2004]; Pillard v Goodman, 82 AD3d 541, 542 [t5t Dept 2011]; Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 10 [1st Dept 2008].) In seeking dismissal, Cullen argues that its conduct was not the proximate cause of the cited litigations. (D. ‘s Memo. In Support at 14.) This issue cannot be determined as a matter of law on this record. The pleadings on their face allege Cullen’s conflict of interest and damages in the form of attorney’s fees incurred by the Company as a result. The documentary evidence, which consists of selected pleadings, decisions, or other papers in the various litigations in which Cullen allegedly had a conflict, does not demonstrate that the conflict did not result in damage to the Company. At least some of the litigations arguably involved a conflict of interest. For example, in July 2009, one month before Cullen withdrew as counsel for the Company, it filed a petition on behalf of Kirk, as preliminary executor of Phebe’s Estate, seeking turnover of the Company’s retained earnings from the trust. (Complaint, 186, 187.) While the lawsuit was brought against the trust rather than the Company,1 the estate and the Company arguably had differing interests with respect to the disposition of the retained earnings. Another example of a lawsuit that apparently involved a direct conflict was an Article 78 proceeding brought by plaintiffs Laraine and Lisa Baugher to compel Jeffrey, as president of the Company, to call a special meeting of the board of directors. The complaint alleges that although Cullen did not formally appear for Jeffrey in this proceeding, it assisted him in opposing the petition. (Id., 139-145.) Moreover, Jeffrey, in his official capacity as an officer of the Company, defended this proceeding based on advice that Cullen allegedly gave to him not to call a meeting of the board. (Id., 56- 70.)3 In contrast, some of the lawsuits arguably did not involve a conflict. For example, it is undisputed that Cullen did not represent Jeffrey in an arbitration of a wrongful termination claim (Arbitration) that he filed after some or all of the Baugher plaintiffs gained control of the board and terminated him. (Rice Aff., 33.)"