Wherever attorneys do their work the question of legal malpractice may arise. In today’s New York Law Journal, Joel Cohen and James Bernard present an excellent compilation of potential legal malpractice issues in the ESI area.  Investigation of electronically stored information has become a central issue in litigation since the Zabulake v. USB Warburg decision.  As the country becomes more involved in social media, further sophistication is required.  Even the question of when an attorney may use public Wi-Fi is discussed.   From the article "The ‘Ethic’ of Getting up to Speed ‘Technologically’ by Cohen and Bernard:

"When things end up poorly in a case, whether the client deserved to win or not, the client may decide to come after his criminal lawyer claiming malpractice, either in a civil action or in a post-conviction proceeding claiming "ineffectiveness." He may argue that the lawyer 1) didn’t explain all of the litigating options to me; or 2) was "ineffective" in investigating the case, or in cross-examining key witnesses; or 3) did not let me, or mistakenly encouraged me to, take the witness stand in my own defense.

Examples may range from a lawyer’s failure to obtain text messages (we all know about emails), to a failure to obtain posts on a Facebook page, to a more common failure to adequately preserve electronic materials. Which disgruntled client, particularly one sitting in a jail cell, wouldn’t use the judge’s remarks to try to nail to the wall his now or soon-to-be-terminated lawyer for malpractice or—maybe, worse for his reputation at the bar—by claiming "ineffective assistance of counsel" in a post-conviction appeal or collateral attack on his conviction? For in such a lawsuit, appeal or collateral attack he will "name [his lawyer’s] name" as ineffectually having tried the case by tying his own arm behind his back against—perhaps a younger—prosecutor more in tune with modern Internet technology.

The origins of the modern technological revolution in the art of lawyering can probably trace itself back to a number of milestones: the first Westlaw/Lexis terminals, the advent of the Internet and, on the judicial front, Judge Shira A. Scheindlin’s decisions in the seminal Zubulake case. Whether you believe that the decisions opened up a Pandora’s box of litigation costs and burdens for defendants, or whether you believe they gave plaintiffs access to critical evidence which would have otherwise been destroyed, there is no question that Zubulake changed the way litigators think about and prepare cases. It also required us to learn more about technology issues. As Scheindlin wrote in Zubulake V: "[C]ounsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel and the actual (as opposed to theoretical) implementation of the firm’s recycling policy."1 In other words, counsel had to get tech savvy.

And it is worth asking, if a lawyer fails to "get smart," what are the consequences? Of course, there are the potential sanctions that might be available to the aggrieved party. But can, after this new Comment 8, a lawyer face an ethics charge for this sort of lapse in knowledge? It is quite possible that it could be the basis for a malpractice claim if the failure to discuss these issues with a client resulted in a serious enough sanction, such as dismissal of a claim or defense.

Given all of the resources which have been devoted to educating the bar about the need to preserve electronic information, emails, documents, etc., it is not too hard to imagine a client claiming that the failure to do so in this day and age amounts to malpractice, even though that would not have been the case however many years ago. In the criminal context, could it rise to the level of ineffective assistance of counsel resulting in a possible conviction reversal? Not too many years ago, the U.S. Supreme Court held that a lawyer provided ineffective assistance of counsel when the lawyer failed to tell a client about the likelihood of deportation if a client pleaded guilty to drug distribution charges.2

There are obvious differences between working with a client on e-discovery issues and informing a client of the legal consequences of pleading guilty to a felony, but it is not impossible to imagine a scenario in which the failure to learn about a client’s technological infrastructure is egregious enough and results in a serious enough sanction so as to bring the attorney’s behavior within the realm of a constitutional claim of ineffectiveness. After all, constitutional ineffectiveness under Strickland is triggered when counsel’s conduct falls "below an objective standard of reasonableness."3 What is "reasonable" in terms of what counsel is expected to know about e-discovery is rapidly changing, and only in the direction of requiring greater knowledge."
 

It seems that Lacher & Lovell-Taylor PC were attorneys working for Lloyd’s of London.  They ran into disputes with the carrier, and in this New York county case, not only had to pay back monies, but were also found not to be covered for a malpractice case.  Here the AD determines that a demand for the return of legal fees paid to a law firm is not "legal malpractice."

Certain Underwriters at Lloyd’s London Subscribing to Policy No. SYN-1000263 v Lacher & Lovell-Taylor, P.C.   2013 NY Slip Op 08112   Decided on December 5, 2013   Appellate Division, First Department 
"Order, Supreme Court, New York County (Anil C. Singh, J.), entered March 26, 2012, which granted plaintiff’s motion for summary judgment declaring that it was not obligated to defend or indemnify defendants in the underlying estate proceeding, and on its cause of action for reimbursement of its defense costs, and order, same court and Justice, entered October 9, 2012, which, to the extent appealable, granted plaintiff’s motion to modify the order to include summary judgment on its supplemental complaint, and order and judgment (one paper), same court and Justice, entered March 13, 2013, awarding plaintiff the total sum of $166,968.90 in defense costs from defendants, unanimously affirmed, with costs.

A claim for the return of legal fees is not a claim for "damages" in a legal malpractice action, as defined in the professional liability policy issued by plaintiff to defendants (see Shapiro v OneBeacon Ins. Co., 34 AD3d 259, 260 [1st Dept 2006], lv denied 9 NY3d 803 [2007]). In support of each of the causes of action, the complaint alleges only that defendants overbilled their client in the underlying estate proceeding; it does not allege facts tending to show that but for their negligence, they could have achieved a better result for him (see Allstate Ins. Co. v Mugavero, 79 NY2d 153, 162-163 [1992]; Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423 [1st Dept 2007]). Moreover, plaintiff reserved its right to seek reimbursement of its defense costs in the event of a finding of no coverage (see American Guar. & Liab. Ins. Co. v CNA Reins. Co., 16 AD3d 154 [1st Dept 2005]). "

Legal Malpractice, we often think, is a body of law, written by lawyers, concerning lawyers, judged by lawyers and results in decisions concerning solely lawyers.  However, sometimes this is simply not true.  Venecia V. v August V.  2013 NY Slip Op 08140  Decided on December 5, 2013 Appellate Division, First Department  Saxe, J., J.  is one such example. 
 

Pro-se Husband and pro-se wife are engaged in divorce and custody dispute, and huge  legal malpractice law changes follow.  "This appeal, arising in the context of a contentious post-divorce dispute, raises a variety of challenges to the court’s determinations involving custody, visitation and expenses. While the bulk of these issues may be briefly addressed seriatim, we must address at greater length the unresolved question of whether parents who are directed to pay the fees of the attorney appointed to represent the children may raise the defense of legal malpractice to that attorney’s claim for fees. Determination of this issue requires us to decide whether, as defendant father claims, Mars v Mars (19 AD3d 195 [1st Dept 2005], lv dismissed 6 NY3d 821 [2006]) gives him legal standing to assert the legal malpractice defense.

In Mars v Mars (19 AD3d at 196), this Court held that a parent may assert legal malpractice as an affirmative defense to a Law Guardian’s fee application "to the extent of challenging that portion of the fees attributable to advocacy, as opposed to guardianship." Our ruling was limited by the then-prevailing view that attorneys appointed as law guardians for children in divorce cases often functioned in a role similar to a guardian ad litem, advocating for [*3]what they believed to be the best interests of the child, as opposed to what the child desired. Accepting the rule of Bluntt v O’Connor (291 AD2d 106 [4th Dept 2002], lv denied 98 NY2d 605 [2002]), which held that absent special circumstances, a parent in a visitation dispute lacks standing to bring a legal malpractice claim against a child’s court-appointed law guardian, we limited our ruling to the portion of the law guardian’s fee representing the work that consisted of advocacy rather than guardianship.

Accordingly, after 2007, the distinction made by our ruling in Mars is no longer necessary in cases such as this; where the child is capable of decision-making, the task of the attorney for the child is generally solely advocacy, rather than guardianship, as long as the child is capable of knowing, voluntary and considered judgment. The portion of the Mars decision allowing a parent to raise malpractice as a defense to a fee application for that portion of the fee earned by advocacy has become applicable to the attorney’s entire fee claim. Rule 7.2 does not in any way vitiate the Mars ruling; on the contrary, it renders it more generally applicable.

We reaffirm the essence of the Mars v Mars ruling, namely that a parent may assert legal malpractice as an affirmative defense to the fee claim of an attorney for a child. The attorney for the child, no less than the attorneys for the parties, is serving as a professional and must be equally accountable to professional standards. That the children cannot hire and pay for their own attorneys, leaving it to the court to make the necessary appointment, does not alter the applicable standards, or the means by which they may be raised.

The attorney for the children protests that if this type of defense is allowed generally, parents dissatisfied with the results of their custody claims will use malpractice challenges to avoid paying, resulting in a proliferation of applications for enforcement of ordered fees. She also suggests that the threat of malpractice claims from disgruntled parents will have a negative impact on the effectiveness of attorneys for children, by giving those parents control over the representation of their children.

We disagree. The possibility that a parent who feels aggrieved over the developments in a custody or visitation dispute may claim malpractice as a means of avoiding payment of the attorney’s fee does not warrant granting these attorneys complete immunity against the defense of [*4]legal malpractice. "

Small closely held corporations abound in New York, and they present a special issue for the principal of standing in legal malpractice.  Who actually hired the attorney…was it the president / owner / sole shareholder, or was it the corporate entity.  While the law is clear, Rodolico v Rubin & Licatesi, P.C. 2013 NY Slip Op 08068  Decided on December 4, 2013  Appellate Division, Second Department  shows us a third way the case can be resolved.  Note the lack of "documents" in defendant’s attack on the complaint.
 

"The plaintiff’s daughter worked for the defendant law firm, in which the individual defendants are partners. During her 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, Joanne Rodolico, decided to participate. Several bank checks were purchased by Joanne and a corporation owned by the plaintiff and Joanne, C & R Door and Frame Corporation (hereinafter C & R), and forwarded to the defendants for the purpose of making loans. When five of the 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. Alternatively, the plaintiff sought damages for legal malpractice. The plaintiff made a pre-discovery motion for summary judgment on the complaint, which motion is not the subject of this appeal, and the defendants cross-moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (3), for lack of standing and based upon documentary evidence. The Supreme Court denied the motion and cross motion, and also directed that Joanne and C & R be joined as plaintiffs in the action.

In support of that branch of their cross motion which was to dismiss the complaint [*2]for lack of standing, the defendants argued that the plaintiff had no interest in the loaned funds because two of the loans, for which the plaintiff sought recovery in the second and fourth causes of action, were funded by C & R, and three of the loans, for which the plaintiff sought recovery in the first, third, and fifth causes of action, were funded by Joanne. The plaintiff does not deny that the funds for two of the loans were provided by C & R, but merely asserts that he and Joanne own C & R. However, "[f]or a wrong against a corporation a shareholder has no individual cause of action, though he loses the value of his investment" (Abrams v Donati, 66 NY2d 951, 953; see Citibank v Plapinger, 66 NY2d 90, 93 n; Elenson v Wax, 215 AD2d 429; General Motors Acceptance Corp. v Kalkstein, 101 AD2d 102, 106). Here, the plaintiff’s action was brought in his own name, and there is nothing in the complaint to indicate that the plaintiff brought this action in a derivative capacity, on behalf of C & R. Accordingly, since the plaintiff does not have standing, individually, to seek the return of funds purportedly borrowed from C & R by the defendants, the second and fourth causes of action should have been dismissed insofar as they were asserted by the plaintiff in his individual capacity.

The same is not true, however, of the first, third, and fifth causes of action, which sought the return of funds that the defendants allege were provided by Joanne. The plaintiff and Joanne averred that, although Joanne went to the bank to purchase the bank checks, they do not keep their finances separate, and the funds belonged to both of them. The defendants presented no evidence to the contrary. The plaintiff, therefore, had standing to seek the return of the funds (see generally Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242), and the Supreme Court properly denied the branch of the defendants’ motion which sought dismissal of the first, third, and fifth causes of action for lack of standing.

The Supreme Court also properly denied the branch of the defendants’ motion which was to dismiss the sixth cause of action, alleging legal malpractice, pursuant to CPLR 3211(a)(1). 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]). " [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., 78 AD3d 966, 997; see Suchmacher v Manana Grocery, 73 AD3d 1017; Fontanetta v John Doe 1, 73 AD3d at 86).

Here, the only evidence submitted by the defendants that pertained to the legal malpractice cause of action were affidavits. Accordingly, since the defendants failed to support the branch of their motion seeking to dismiss the legal malpractice cause of action pursuant to CPLR 3211(a)(1) with "documentary" evidence, it was properly denied (see 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 1, 73 AD3d at 86). "

Battling over the "but for" portion of the legal malpractice requirements is generally where commercial cases such as Garten v Shearman & Sterling LLP 2013 NY Slip Op 00035
Appellate Division, First Department end up. Here, in a surprisingly clear recitation, the AD tells us why this case was doomed.
 

"On an appeal from a denial of a dismissal motion, this Court found that plaintiff "has stated a cause of action for malpractice by alleging that but for’ defendant’s failure to prepare and procure documents necessary to provide him with a first-priority security interest, he would have been able to recover the amounts owed to him by the defaulting borrower" (52 AD3d 207 [1st Dept 2008]).

Now, after discovery, it is clear that plaintiff cannot establish either a breach of duty or causation, both of which are necessary to proceed with the claim (see Wo Yee Hing Realty Corp v Stern, 99 AD3d 58, 62-63 [1st Dept 2012]).

Plaintiff’s own deposition testimony establishes that he understood that at the time he was advancing a loan to Pacific Jet, there was a superior lien on the accounts receivable, which were also being used to collateralize his loan. He knew the identity of the senior creditor and fully understood that his position would be junior when his loan was first made and would remain so, unless and until the first lien was paid off. He was, however, under a mistaken impression about the amounts owed to the senior creditors because his friend, Tim Prero, Pacific Jet’s principal, misled him by significantly understating those amounts. Plaintiff’s assumptions about his business risk in getting repaid were based upon false factual information about the financial health of Pacific Jet and how quickly the senior creditors would be paid off. Defendant established a prima facie case warranting dismissal of the complaint by showing that plaintiff’s losses were caused by Pacific Jet’s poor financial condition and plaintiff’s misjudgment of risk based upon the false factual information provided to him by Prero. (see A & R Kalimian v Berger, Gorin & Leuzzi, 307 AD2d 813 [1st Dept 2003]).

Plaintiff failed to raise any factual disputes in opposition. There is no evidence that defendant was retained to review Pacific Jet’s private corporate records. The undisputed evidence reveals that plaintiff alone reviewed Pacific Jet’s private financial records and negotiated the material terms of the transaction. The public UCC records, which defendant searched, revealed a prior security interest, a fact known to all, but no lien amount was recorded. [*2]Although plaintiff asked defendant to "document" his first priority interest, he did not have a first priority interest at the time he advanced the loan and had no expectation of a first priority interest before the senior creditor was paid. Subordination agreements or releases from the senior creditor at the time the loan was made, therefore, were not in order. Plaintiff has not elucidated what other documents defendant could have procured or prepared that would have altered the outcome of what was in hindsight a bad business deal.

Plaintiff no longer claims that defendant could have taken actions that would have allowed him to recover the amounts owed. He currently argues that he would not have entered into the transaction had he known his friend was misleading him about the amounts owed to prior creditors. This position is different from the position he prevailed upon on the motion to dismiss. It is also contrary to his deposition testimony, when in answer to a direct question about whether he considered not making any loans because his friend had failed to show him any documentation, plaintiff could not "speak to his mindset" at the time. Plaintiff’s new claim does not create an issue of fact that would defeat summary judgment (see Madtes v Bovis Lend Lease LMB, Inc., 54 AD3d 630 [1st Dept 2008]). Finally, the undisputed evidence reveals that plaintiff was aware that there were risks associated with having a junior security position at the time he advanced the loan proceeds and negotiated his own remedy of enhanced interest. "
 

Sometimes events take place long after the attorney – client relationship has ended.  There are two arguments over whether the statute of limitations has run.  One is that the statute commences when the mistake is made and might be tolled by the continuous representation doctrine.  The other is that  the statute cannot commence to run until all the elements of a case exist, including damage.  Plaintiff loses either way in Adeli v Ballon Stoll Bader & Nadler, P.C.  2013 NY Slip Op 32993(U)  November 22, 2013  Sup Ct, NY County  Docket Number: 154685/12  Judge: Saliann Scarpulla.

"Adeli commenced this action in or about July 2012. In her complaint, Adeli alleged that on or about December 17, 2003, Richard Sachs, an investor in her company and holder of a defaulted loan which Adeli had personally guaranteed, sued both Adeli and her company for breach of personal guarantee and fraud ("Sachs action"). In or about early 2004, Adeli retained BSBN to represent her in the Sachs action, and in or about April 2005, the First Department granted Sachs judgment against Adeli. 

BSBN sought an interim stay while it appealed the First Department’s decision. Adeli alleged that BSBN advised her that Sachs’ lawyers would not abide by a stay, and would nevertheless, seek to enforce the judgment against her. According to Adeli, BSBN then advised her to move her assets to friends of hers to protect them from judgment; Adeli transferred her assets in or about early summer of2005, and subsequently filed for bankruptcy in or about early September 2005. The bankruptcy court granted her bankruptcy discharge on or about March 27, 2008, but, based on her transfer of assets in 2005, the Bankruptcy Panel of the Ninth Circuit Court of Appeals reversed that
bankruptcy discharge on or about March 24, 2009.

Adeli asserted a legal malpractice claim, alleging that because she followed BSBN’s advice and transferred her assets to her friends, she was denied a bankruptcy discharge and suffered monetary damages. BSBN now moves to dismiss the complaint. First, BSBN argues that the action should be dismissed because Adeli lacks legal capacity to bring suit. Second, BSBN
argues that the action should be dismissed because it was commenced beyond the applicable statute of limitations. Finally, BSBN argues that the action should be dismissed because Adeli’s complaint fails to establish the damages element for legal malpractice. In support of its motion, BSBN provides a court document relieving BSBN as attorney for Adeli’s company in 2006. BSBN also submits two affidavits from BSBN attorneys stating that the relationship between BSBN and Adeli ended in 2005.

Here, Adeli’s legal malpractice claim accrued in or about April 2005 when BSBN allegedly told her to transfer her assets so that they would be protected from judgment in the Sachs matter, and thus the statute of limitations for this claim expired in or about April 2008.

Contrary to Adeli’s assertions, the continuous representation doctrine does not apply here because her attorney-client relationship with BSBN ended in 2005. Her allegations of malpractice are predicated upon BSBN’s advice in the Sachs matter, and are unrelated to the bankruptcy proceeding, thus it cannot be said that BSBN continued to represent her after 2005. Even if the continuous representation doctrine did apply, it only tolled the statute of limitations until March 24, 2009, when the Ninth Circuit reversed the bankruptcy court’s decision and denied Adeli her bankruptcy discharge. Therefore, at the latest, the statute of limitations expired on March 24, 2012, months before Adeli filed this action in July 2012."

In this legal malpractice case which was dismissed and then affirmed on appeal, the decision reveals so wide a difference in analysis of the corporate and loan documents that it is astonishing.  In Manus v Flamm   2013 NY Slip Op 07683   Decided on November 19, 2013   Appellate Division, First Department plaintiff presents a claim that is not merely a shade different from that of defendant, it is night and day.
 

"The complaint alleges that defendant committed legal malpractice while representing plaintiff in a replevin action brought against her in October 1998 by nonparty Family M. Foundation, Ltd., a Cayman Islands corporation formed by the late Allen Manus, plaintiff’s former husband.

The first cause of action, which alleges that defendant was negligent in failing to assert certain defenses or move to dismiss the complaint in the replevin action, is belied by the seventh and eighth affirmative defenses, which assert that the loan agreement imposed no personal liability on plaintiff.

The second cause of action alleges that plaintiff "felt compelled" to sign the stipulation of settlement in the replevin action, which converted a $1,000,000 obligation from the corporation to her into a $400,000 obligation from her to the corporation. However, plaintiff’s obligation arose in the context of the loan agreement she executed, not the stipulation of settlement. The stipulation did not impose personal liability on plaintiff for the debt created under the loan agreement; it merely directed that her shares in her cooperative apartment be substituted for her jewelry as collateral for the loan.

The third cause of action alleges that, but for defendant’s insistence that the corporation’s president and sole director, Elizabeth (Libby) Manus, had to execute the corporation’s release of plaintiff’s obligations to it and that Allen Manus’s execution of the release would not be sufficient, Allen Manus would have signed the release and plaintiff would have been free of her obligations under the stipulation. However, this Court has found that the action by the corporation to enforce the stipulation upon plaintiff’s default was properly maintained under Libby Manus’s authority (see Family M. Found. Ltd. v Manus, 71 AD3d 598 [1st Dept 2010], lv dismissed 15 NY3d 819 [2010]). Even assuming that Allen Manus, who held a power of [*2]attorney for the corporation, was authorized to release plaintiff’s obligations to the corporation, Libby Manus’s refusal to sign the release would have revoked his authority (see Zaubler v Picone, 100 AD2d 620, 621 [2d Dept 1984]). "