The essentials of legal malpractice litigation, including standing and ascertainable pecuniary loss come up over and over in the Appellate Division cases. Young v Quatela  2013 NY Slip Op 02243
Decided on April 3, 2013   Appellate Division, Second Department is an example.  Plaintiff’s father either suffered the loss or paid for it, and there is some question whether a pecuniary loss happened at all.  Result is is dismissal.
 

"The plaintiff commenced this action against the defendants, inter alia, to recover damages for legal malpractice. The defendants met their prima facie burden of establishing entitlement to judgment as a matter of law (see Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1068). In opposition, the plaintiff failed to raise a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324). As the plaintiff correctly concedes, nonpecuniary damages may not be recovered in an action alleging legal malpractice (see Dombrowski v Bulson, 19 NY3d 347, 349). Moreover, the plaintiff failed to raise a triable issue of fact as to whether he sustained any pecuniary damages, as the pecuniary losses described in the complaint were incurred by the plaintiff’s father, who is not a party to the action (see Radcliffe v Hofstra Univ., 200 AD2d 562). The plaintiff’s professed intention to repay his father for the expenses incurred on the plaintiff’s behalf amount to a moral obligation, which does not support a viable claim for damages (see Coyne v Campbell, 11 NY2d 372, 375). Accordingly, the Supreme Court properly granted the defendants’ motion for summary judgment dismissing the complaint.
SKELOS, J.P., LEVENTHAL, HALL and SGROI, JJ., concur. "

Breach of Fiduciary Duty has two separate statutes of limitation, six and three years.  Which applies in a legal malpractice case?  Generally the rule is that the choice of six or three years depends on the substantive remedy sought.  If it is for money damages the limit is three years.  If for equitable remedy, then the limit is six years.  Which is disgorgement of attorney fees in a legal malpractice setting?

Access Point Med., LLC v Mandell   2013 NY Slip Op 02208   Decided on April 2, 2013  Appellate Division, First Department    Saxe, J.  says that it is an economic remedy at law, and the limit is three years, regardless of earlier cases which held to the contrary.
"Plaintiffs rely on this Court’s statement that "[d]isgorgement is an equitable remedy" (see J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 91 AD3d 226, 230 [1st Dept 2011], lv granted 19 NY3d 806 (2012). However, the disgorgement remedy referred to in J.P. Morgan Sec. and the cases it discusses is a fundamentally different than the "disgorgement" plaintiff seeks here. Claims for disgorgement most commonly arise in actions brought by the Securities and Exchange Commission in which the agency seeks an order directing a party to disgorge its ill-gotten gains for the recompense of injured investors or some entity other than the prosecuting agency (see J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 91 AD3d 226, 230 [1st Dept 2011], lv granted 19 NY3d 806 [2012] and cases discussed therein). Other types of government agencies or quasi-governmental entities also have sought the disgorgement of wrongfully obtained funds to third parties (see e.g. Morgan Stanley Capital Group Inc. v Pub. Util. Dist. No. 1 of Snohomish County, 554 US 527, 538 [2008]; Montana v Crow Tribe of Indians, 523 US 696 [1998]). Similarly, the equitable disgorgement relief sought by the plaintiff in IDT Corp. v Morgan Stanley (12 NY3d at 139) consisted of profits Morgan Stanley allegedly earned as investment banker for a third party through the third party’s allegedly improper financial dealings with IDT; consequently, the disgorgement of those profits could not necessarily be accomplished simply by awarding IDT a judgment against Morgan Stanley in the amount of funds that it had paid out.

In contrast, plaintiffs’ demand for the return of attorneys’ fees they paid to defendants is, essentially, a claim for monetary damages. The calculated use of the term "disgorgement" instead of other equally applicable terms such as repayment, recoupment, refund, or reimbursement, should not be permitted to distort the nature of the claim so as to expand the applicable limitations period from three years to six. We cannot allow a purely semantic distinction to control the application of the statute of limitations.

Nor do we accept plaintiffs’ alternative argument that the breach of fiduciary duty claim is essentially a fraud claim, to which the six-year statute would be applicable. The amended complaint is based on an alleged conflict of interest and allegedly impaired professional judgment, and it does not allege the elements of fraud (see Buller v Giorno, 57 AD3d 216 [1st Dept 2008]). The failure to disclose a conflict of interest does not transform a breach of fiduciary duty into a fraud.

Another new contention plaintiffs raise on appeal is that the statute of limitations must be treated as tolled, not only pursuant to the continuous representation doctrine, but also under the fiduciary tolling rule, also known as the open repudiation rule.

As the motion court found, no facts are alleged that would justify the application of the continuous representation doctrine to toll the statute of limitations.

Nor, we find, is the fiduciary tolling rule, or open repudiation rule, applicable to plaintiffs’ breach of fiduciary duty claims. Under that rule, the statute of limitations on claims against a fiduciary for breach of its duty is tolled until such time as the fiduciary openly repudiates the role (see Matter of Barabash, 31 NY2d 76, 80 [1972]). The cases in which this [*4]rule arose, and the cases applying it, reflect that the rule arose to protect beneficiaries in the event of breaches of duty by fiduciaries such as estate administrators (see Barabash, 31 NY2d at 80), trustees (see Matter of Ashheim, 111 App Div 176 [1906], affd 185 NY 609 [1st Dept 1906]), corporate officers (see Westchester Religious Inst. v Kamerman, 262 AD2d 131 [1st Dept 1999]), and receivers (see Golden Pac. Bancorp v Federal Deposit Ins. Corp., 273 F3d 509 [2d Cir 2001]), that is, in circumstances in which the beneficiaries would otherwise have no reason to know that the fiduciary was no longer acting in that capacity. In those circumstances, it is appropriate to toll the limitations period until the beneficiary has reason to know that the fiduciary relationship has unequivocally ended.

However, where one party’s fiduciary obligations to another arose out of their attorney-client relationship, and would not have existed without that relationship, there is no need for an open repudiation of the fiduciary’s role, because the attorney’s fiduciary duty to the client necessarily ends when the representation ends. Plaintiffs’ causes of action alleging breach of fiduciary duty specifically assert that defendants’ fiduciary duty to them arose out of their attorney-client relationship with them, thus, their fiduciary relationship ended when their attorney-client relationship ended, without any need for a declaration to that effect.

We recognize that in 212 Inv. Corp. v Kaplan (44 AD3d 332 [1st Dept 2007]), this Court accepted the premise, framed by the parties, that the open repudiation doctrine applies to equitable claims brought by clients against their attorneys, although not to claims for money damages. That decision states, without elaboration, that "the open repudiation’ doctrine tolls the statute of limitations on the [client’s] unjust enrichment claim [against the lawyer], which seeks equitable relief" (id. at 334, citing Matter of Kaszirer v Kaszirer, 286 AD2d 598, 599 [1st Dept 2001], and Westchester Religious Inst. v Kamerman, 262 AD2d 131 [1st Dept 1999]). However, we observe that neither of the cited cases concerned claims against attorneys for breach of their fiduciary duty to their clients arising out of the attorney-client relationship. Matter of Kaszirer concerned a claim by a trust beneficiary against a trustee, and Westchester Religious Inst. involved a claim by a nonprofit corporation against its officers for breach of their fiduciary duty; both of those claims form proper bases for application of the open repudiation rule. And unlike this case, in 212 Inv. Corp., neither party questioned the applicability of the fiduciary tolling rule to an attorney whose fiduciary duty arose out of the attorney-client relationship, so this Court was not required to decide that issue. Presented with the issue now, we reject the application of the fiduciary tolling rule to claims by a client against an attorney for breach of the fiduciary duty arising out of the attorney-client relationship, at least in the absence of a true entitlement to equitable relief. "

We wonder whether legal malpractice is treated differently than all other law suits?  Fielding v Kupferman  2013 NY Slip Op 02008   Decided on March 26, 2013   Appellate Division, First Department raises the question once again.  Compare this case to a garden or varietal slip and fall.  Example:  plaintiff trips over a defective step and breaks his leg.  Would the Appellate Division then discuss whether breaking a bone was better than what might have happened, were plaintiff to fall down an entire flight of stairs and break his neck?  We believe that it would not.
 

Nevertheless, this is what happens regularly in a legal malpractice case.  Take Fielding as an example.  "Defendants established their entitlement to judgment as a matter of law in this action alleging legal malpractice. Defendants submitted evidence showing that the divorce settlement, in which plaintiff achieved his goal of retaining the parties’ marital residence, was advantageous to plaintiff, and resulted in his receiving consideration that more than compensated him for the allegedly unforeseen tax consequences of liquidating his Keogh account (see e.g. Kluczka v Lecci, 63 AD3d 796, 798 [2d Dept 2009]). Defendants also submitted evidence demonstrating that the subject tax consequences were discussed with plaintiff during the course of the settlement negotiations.

In opposition, plaintiff failed to raise a triable issue of fact. His argument that if he had been properly advised on the tax consequences, he would have reached a better settlement or outcome after trial, is speculative (see Klucka at 798). Plaintiff failed to take into account the benefits he received in the actual settlement, including buying out his wife’s share of the marital residence based on an outdated appraisal that assigned a value that was significantly lower than the actual value at the time the agreement was executed. Moreover, plaintiff failed to provide proof of any ascertainable actual damages sustained as a result of the alleged negligence (see Lavanant v General Acc. Ins. Co. of Am., 212 AD2d 450 [1st Dept 1995]). [*2]

Under the circumstances presented, plaintiff’s claim for disgorgement of legal fees already paid was properly dismissed."
 

we’re proud to announce that our article on the Attorney Judgment Rule was published by the New York Law Journal today.

"Medicine and law have ancient parallel histories. Each practices self-regulation, and each has developed deep and extensive internal rules of professional conduct. Both have a tentative claim as one of the world’s oldest professions. Each requires extensive education and testing to join a prehistoric and socially revered cadre. Both require an extensive apprenticeship before acceptance into the guild.

Beyond the obvious ancient quality of the professions, there is a similar intellectual bias evident. Both claim that their decision-making apparatus is unique, internally regulated and virtually unassailable.

Medicine and law share a concept unknown to other professions: the "judgment rule." In medicine, it is aptly summed up in the well-known medical aphorism originally attributed to Armand Trousseau (1801-1867): "Medicine is an art and not a science." For lawyers, it was most forcefully stated by the Court of Appeals in Rosner v. Paley, 65 NY2d 736 (1985). A "mere error of judgment" need not rise to the level of malpractice. When several other alternatives might have been pursued, "selection of one among several reasonable courses of action does not constitute malpractice." For this concept the Court of Appeals looked back to 1897.

Byrnes v. Palmer, 18 AD 1 (2d Dept. 1897), was a Second Department case decided by Judge Edgar M. Cullen, later chief justice of the Court of Appeals, more than 100 years ago. In a conveyancing case the court held that "It is undoubtedly true that an attorney is only bound to exercise the ordinary reasonable skill and knowledge of his profession, and is not liable for every error of judgment or opinion as to the law." Byrnes at 5.

Byrnes itself looked further backward to Montriou v. Jefferys (2 Car. & P. 113 (1825)). There, Chief Judge Charles Abbot, 1st Baron Tenterden of England, stated that "No attorney is bound to know all of the law; God forbid that it should be imagined that an attorney, or a counsel, or even a judge, is bound to know all the law, or that an attorney is to lose his fair recompense on account of an error, being such an error as a cautions man might fall into." "In a litigation a lawyer is well warranted in taking chances. To some extent litigation is a game of chance. The conduct of a lawsuit involves questions of judgment and discretion as to which even the most distinguished members of the profession may differ. They often present subtle and doubtful questions of law. If in such cases a lawyer errs on a question not elementary or conclusively settled by authority, that error is one of judgment for which he is not liable."
 

Plaintiff is the administratrix of decedent’s estate.  This is a very sad story.  Decedent entered United Presbyterian Residence after a stroke, and was the victim of a most avoidable problem:  pressure ulcer, or more commonly, a bedsore.  It eventually, and after much suffering, killed her.  Her family hired an attorney to sue the residence, and the attorney failed to start the case.  Later the attorney was disbarred when he was convicted of a felony.

Corsiatto v Maddalone  2013 NY Slip Op 30553(U)  March 13, 2013  Supreme Court, Suffolk County  Docket Number: 2009-14305  Judge: John J.J. Jones Jr is mostly the story of bad medical care.  It was an inquest, so we guess that there was no legal malpractice insurance.  It may have been a Pyrrhic or a technical victory.

"The medical record indicates that although a wound care specialist was ordered, the decedent was never seen. No order was written for culture of the wound at the decubitus site; no orders were made to obtain blood cultures, both departures from good and accepted medical standards. According to Knieste, the poor management of the decedent’s Stage IV pressure sore was contrary to good and accepted medical practice and a contributing cause of the formation of a Stage IV pressure ulcer, the decedent’s continued suffering, and death. The decedent’s discharge note contained a diagnosis of sepsis."

"The issue of causation has been resolved in the plaintiffs favor due to the defendant’s default, that is, it is established that the plaintiff would have prevailed in the underlying action against UPR. However, it is not established that the plaintiff would have prevailed on all three claims: medical malpractice, negligence and the statutory claim under Public Health Law ij 2801 – d(1). At least one court has addressed the distinction between medical malpractice and negligence claims on the one hand, and a statutory cause of action under the Public Health Law on the other. See Butler v. Shorefront Jewish Geriatric Center, 33 Misc.3d 686, 693, 932 N.Y.S.2d 672 (Kings Sup. Ct. 2011)."

"The court is obliged to award an amount in compensatory damages that does not materially deviate from what would be considered “reasonable compensation” under the Circumstances given the plaintiffs injuries (CPLR 5501 (c); Slzurgan by Shurgan v. Tedesco, 179 A.D.2d 805, 578 N.Y.S.2d 658 [2d Dept.19921). Although the plaintiff assented to conduct the inquest “on papers”, the court has not been provided with any comparable awards or verdicts for similar injuries of comparable duration to assist the court’s determination of what can be considered reasonable compensation for the decedent’s pain and suffering. The court has found several cases where patients have endured pressure sores similar to that endured by the decedent. For example, in Parson v. Interfaith Medical Center, a jury verdict of $1,000,000 was reduced to $400,000 to compensate the plaintiffs decedent for the mismanagement of her numerous bedsores that were a cause of her death (Parson v. Interfaith Medical Center, 267 A.D.2d 367, 700 N.Y.S.2d 224 [2d Dept. 1999).

Client has a really horrible situation in her apartment.  First there is a flood of raw sewerage. She hires law firm 1 to sue.  They commence an action.  Then, she has a water flood from the neighbor upstairs.  She hires law firm 2 to handle that case.  They commence an action.  Law firm 2 settles the case for a big number.  A release is signed, and there the trouble begins.

in Strougo & Blum, Esqs. v Zalman & Schnurman, Esqs, 2013 NY Slip Op 30559(U) March 15, 2013Supreme Court, New York County  Docket Number: 603665/09  Judge: Eileen A. Rakower has to decide what happens after the release in case 2 ends case 1.  Was the law firm in case 1 injured by the acts of law firm 2?

"Defendant states that, in or about December 2006, a mediation was held in the 2004 Hixon Action before JAMS, the purpose of which was to resolve the claims Ms. Hixon asserted in the 2004 Hixon Action. As a result of the mediation, a settlement agreement was reached, whereby Ms. Hixon agreed to settle her action for payment in the amount of $1,450,000. On December 7,2006, Ms. Hixon executed a General Release in the 2004 Hixon Action, which released 12-14, Goodman, Inc., and the Adams’ from:
all actions, causes of action, suits . . . specifically with respect to damages that RELEASOR  sustained which were the subject of a lawsuit pending in the Supreme Court. . .

The defendants in the 2002 Hixon Action thereafter moved to amend their answer to add the release as an affirmative defense, and to dismiss the 2002 Hixon Action on collateral estoppel and res judicata grounds. By Order entered August 12, 2009, Judge Jose A. Padilla, Jr. granted all aspects of the motion and dismissed as to all defendants2 Thereafter, plaintiff brought the instant action against Defendant alleging that Defendant fraudulently induced Ms. Hixon to sign the General Release by reassuring her that it would not effect the 2002 Hixon Action. As such, plaintiff
alleges, Defendant tortiously interfered with the retainer agreement between plaintiff and Ms. Hixon, and alleges civil conspiracy with the former co-defendants by way of interference with plaintiffs retainer agreement.

“Tortious interference with contract requires the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s intentional procurement of the third-party‘s breach of the contract without justification,’ actual breach of the contract, and damages resulting therefkom” (Havana Cent. NY2 LLC v. Lunney ’s Pub, Inc., 2007 N Y Slip Op 10509, * 5 [ 1 st Dept. 2007), citing Lama Holding Co, v Smith Barney, 88 N.Y.2d 413,424 [ 19961).
A retainer agreement between an attorney and a client is terminable at will because the client has an “absolute right . . to terminate the attorney client relationship at any time without cause . . .” (Demov, Morris, Levin & Shein v. Glantz, 53 NY2d 553,556-557[ 198 13). When alleging tortious interference with a contract that is terminable at will, plaintiff must also show that the alleged interference was achieved through “wrongful means,” such as fraudulent misrepresentations (see
Guard-Life Corporation v, S. Parker Hardware Manufacturing Corp., 50 NY2d 183).

Defendant has made a prima facie showing of entitlement of summary judgment. Defendant submits the affidavit of Benjamin Zalman. Mr. Zalman states that the 2006 General Release which Ms. Hixon executed expressly states that the claims being released are those with respect to the 2004 Hixon Action, not the 2002 Hixon Action. Mr. Zalman states that at all times Defendant represented to Ms. Hixon that her execution of the Release would only serve to release the defendants from the 2004 Hixon Action and that at no time did Defendant intend to defraud
Defendant or interfere with the retainer agreement. In opposition, Plaintiff fails to raise a triable issue of fact. Plaintiff submits only the affirmation of Robert I. Strougo, which annexes previous orders of the Court on former defendants’ motions to dismiss, a copy of the 2006 General Release, Judge Padilla’s 2009 decision dismissing the 2002 Hixon Action, and contends without any merit that these orders preclude summary judgment. Nor does Plaintiff contend that
Defendant’s motion is premature or that Plaintiff needs to conduct discovery in order
to allow it to obtain facts to oppose Defendant’s motion."

Jurisdiction in US District Court is a serious matter, and may be based (in general)  upon diversity or upon federal question jurisdiction.  When a legal malpractice case is based upon some uniquely federal issue, ERISA or a FDA issue or a patent issue, does that allow the action to be brought in District Court?  We’ve argued in the past that mere incantation of the word "patent" does not allow a defendant to remove the case to District Court.  In Gunn v. Minton, 133 S.Ct. 1059 (Feb. 20, 2013) the US Supreme Court agreed. 

Well, perhaps it did not agree with us, but an article in today’s NYLJ talks about the decision.  Scheinfeld and Bagley write that "The Supreme Court, however, held unanimously in Gunn, that state courts indeed may hear legal malpractice claims involving federal patent questions, reversing the Texas Supreme Court’s decision that federal courts had exclusive jurisdiction." 

"Gunn originated in Texas state court, as the fallout from an underlying patent litigation in which respondent Vernon Minton sued Nasdaq for patent infringement in the Eastern District of Texas. That action was dismissed when the court there invalidated the patent in suit for violating the on-sale bar of 35 U.S.C. 102(b). Allegedly, the lawyers representing Minton neglected to assert the experimental use exception to the on-sale bar, and the decision was upheld on appeal.

Minton responded by filing a malpractice suit in Texas state court, alleging that the lawyer’s negligent failure to timely raise the experimental use exception to the on-sale bar cost him the opportunity of winning his federal patent infringement litigation. The trial court dismissed the action for lack of evidence, and Minton appealed to the state appellate court in Fort Worth. While the appeal was pending, the U.S. Court of Appeals for the Federal Circuit issued its opinions in Air Measurement v. Akin Gump1 and Immunocept v. Fulbright,2 holding that when a state-law malpractice case arises from a substantive issue of patent law, federal courts have jurisdiction over such claims. Minton then moved to dismiss his own case for lack of subject matter jurisdiction, hoping to re-file the malpractice suit in federal court. The appeals court was unmoved, however, and instead affirmed the trial court’s ruling dismissing the suit with prejudice.

On appeal to the Texas Supreme Court, Minton prevailed: The court held that, purportedly under U.S. Supreme Court precedent, Minton’s malpractice case belonged exclusively in federal court, and granted the motion to dismiss. The court agreed that because his legal malpractice claim was based on an alleged error in a patent case, it "aris[es] under" federal patent law for purposes of 28 U.S.C. §1338(a). And because, under §1338(a), no "state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents," the Texas court lacked subject matter jurisdiction to decide the case.
 

The Supreme Court disagreed, relying on its precedent set in Grable & Sons Metal Products v. Darve Engineering & Mfg., 545 U.S. 308, 314 (2005):

Does the "state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities?" Grable, 545 U.S., at 314, 125 S.Ct. 2363. That is, federal jurisdiction over a state law claim will lie if a federal issue is (1) necessarily raided, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirements are met we held, jurisdiction is proper because there is a "serious federal interest in claiming the advantages thought to be inherent in a federal forum," which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts.

Id., at 313-314, 125 S.Ct. 2363.

Applying Grable’s inquiry, the Supreme Court found that this particular legal malpractice claim does not "arise" under federal patent law and, indeed, state legal malpractice claims based on underlying patent matters will "rarely, if ever," arise under federal patent law for purposes of 1338(a).

In Minton’s case, although a federal patent question (i.e., whether the experimental use exception to an on-sale bar factually applied) was "necessarily raised," and "actually disputed," the federal issue, the court concluded, was "not substantial in the relevant sense:"

As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raises[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole. [emphasis in original]"
 

Hand in hand with legal malpractice cases are attorney fee cases.  We’ve commented that attorney fee disputes are of  biblical proportion, and have existed as long.  Today’s New York Law Journal reports that "DLA Piper Emails Reveal Firm Overbilled, Former Client Says"

In an article written by Christine Simmons, she reports that internal e-mails from DLA Piper are being used in an attorney fee dispute, and are said to show intentional and gleeful churning of a bankruptcy representation bill.  "According to court papers, Thomson replied to Eisenegger and Johnson: "What was our estimate? But Tim [Walsh] brought Vince [Roldan] [two other DLA Piper attorneys working on POA] in to work on the objection for whatever reason, and now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode. That bill shall know no limits."

Thomson, who no longer works at DLA Piper, could not be reached for comment.

Roldan was a senior associate at DLA Piper who now practices at Vandenberg & Feliu, according to the firm’s website. He did not return a call for comment.

Eisenegger, Johnson and Walsh are now all partners at McDermott Will & Emery. They did not return calls for comment. McDermott spokesman Christopher Rieck declined to comment.

Victor claims in his papers that Eisenegger, Thomson and Johnson continue the email thread, "with each joking about how many attorneys were over-staffed on the POA file and how little work those attorneys actually accomplished."

According to the attached exhibits, Thomson writes to Eisenegger and Johnson, "DLA seems to love to low ball the bills and with the number of bodies being thrown at this thing, it’s going to stay stupidly high and with the absurd litigation POA has been in for years, it does have lots of wrinkles."

Johnson allegedly replied: "Didn’t you use 3 associates to prepare for a first day hearing where you filed 3 documents?"

Thomson allegedly responded to Johnson and Eisenegger, "And it took all of them 4 days to write those motions while I did cash collateral and talked to the client and learned the facts. Perhaps if we paid more money we’d have more skilled associates."

According to the court exhibits, Johnson also allegedly said, "It’s a Thomson project, he goes full time on whatever debtor case he has running. Full time, 2 days a week.""