New York State Workers’ Compensation Bd. v SGRisk, LLC   013 NY Slip Op 50338(U)   Decided on March 1, 2013   Supreme Court, Albany County   Platkin, J. is an accounting malpractice and fraud case, but it has implications for legal malpractice, and the Court explains how causes of action for fraud, breach of fiduciary duty and unjust enrichment can be converted into malpractice claims, with a three year statute rather than the longer 6 year statute which might otherwise obtain.

"The Court begins with UHY’s contention that the breach of contract claim is time barred. The statute of limitations for a breach of contract claim generally is six years (CPLR 213 [2]). Under New York law, "a breach of contract cause of action accrues at the time of the breach"(Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399, 402 [1993];see CPLR 203 [a]). The date of the breach is controlling even where damages from the breach are not sustained until a later date and the injured party is "ignorant of the existence of the wrong or injury" (Ely-Cruikshank, 81 NY2d at 402-403 [internal quotation marks omitted]).

Notwithstanding the foregoing general principles, "[a] cause of action charging that [an accounting] professional failed to perform services with due care and in accordance with the recognized and accepted practices of the profession is governed by the three-year Statute of Limitations applicable to negligence actions" (Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]; see CPLR 214 [6]). Thus, the three-year statute of limitations of CPLR 214 (6) applies to claims that "arise out of the accounting services provided by the defendant pursuant to a contract . . . , and out of the accountant-client relationship which resulted therefrom" (Harris v Kahn, Hoffman, Nonenmacher, & Hochman, LLP, 59 AD3d 390, 391 [2d Dept 2009]; see Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co. Inc.], 3 NY3d 538, 542 [2004]). This is true even where the claimed breach of contract is based upon an express contractual promise, so long as the promise is of the sort that the professional would be expected to accomplish using due care even in the absence of a specific contractual provision (Kliment, 3 NY3d at 542; see Winegrad v Jacobs, 171 AD2d 525, 525 [1st Dept 1991]). Generally, "the [malpractice] claim accrues upon the client’s receipt of the accountant’s work product" (Ackerman, 84 NY2d at 541), but the accrual date is subject to tolling under the continuous representation doctrine (Giarratano v Silver, 46 AD3d 1053, 1055 [2d Dept 2007]).

To the extent that the WCB reads these cases, particularly Inter-Community, as holding that the accrual of a cause of action sounding in professional negligence is tolled until the plaintiff has knowledge of its damages, the Court must reject this reading as inconsistent with controlling precedent of the New York State Court of Appeals. Settled law hold that an accounting malpractice claim accrues upon the client’s receipt of the accountant’s work product since this is the point that a client reasonably relies on the accountant’s skill and advice and, as a consequence of such reliance, can become liable for tax deficiencies. This is the time when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court (Ackerman, 84 NY2d at 541).

Indeed, in Ackerman, the Court of Appeals rejected a discovery-based rule that would have tolled the statute of limitations until the accounting client receives a notice of tax deficiency, reasoning that "to base a limitations period on the potentiality of [a notice of tax deficiency] defies the essential premise of temporal finality embodied in Statutes of Limitation" (id. at 542). The Court of Appeals also emphasized the "utter lack of predictability" that would result from departing from "traditional principles governing negligence actions[, which] instruct that plaintiff was injured, and any claim accrued upon performance of the professional service" (id. at 542-543). A similar lack of predictability and temporal finality would be associated with measuring accrual from receipt of a forensic audit report.

Accordingly, except to the limited extent expressly indicated below in connection with plaintiff’s quasi-contract claim, the cause of action for breach of contract must be dismissed as time-barred."

Client is faced with a buy-out situation in which it must move a store.  Client hires attorneys to negotiate the buy-out and calculate how costs and taxes will affect the buy-out price.  The attorneys do not calculate all taxes, and the buy-out price does not cover the taxes.  Is this legal malpractice?

Leggiadro, Ltd. v Winston & Strawn, LLP   2013 NY Slip Op 50345(U)   Decided on March 1, 2013
Supreme Court, New York County   Kornreich, J. holds:  "In 2010, the Landlord notified Leggiadro that it wished to negotiate an early termination and buy-out of the Lease because it sought to convert [*2]the Building into residential and commercial cooperative units. ¶ 12. Leggiadro retained W & S to negotiate a buy-out with the Landlord whereby Leggiadro would obtain a "net settlement sum" that would provide an adequate amount of post-tax money to cover the costs of relocating its flagship store. ¶ 15. Brooks specifically requested that W & S advise plaintiffs of any and all tax liabilities arising from the buy-out. ¶ 16.

Leggiadro and the Landlord eventually executed a buy-out agreement, the terms of which were not disclosed to the court pursuant to a Confidentially and Nondisclosure Agreement. ¶ 24. Plaintiffs subsequently became aware that they incurred unexpected New York State and New York City tax liabilities by virtue of differences in how the State, the City, and the IRS treat S-Corporations for tax purposes. ¶ 25. Plaintiffs contend that W & S failed to inform them of these tax issues and, if they had, they would have negotiated a higher buy-out settlement amount with the Landlord that would have been sufficient to cover Leggiadro’s moving costs. ¶ 31.

The allegations in the AC and the documentary evidence establish that the scope of W & S’s representation was to negotiate a settlement sum that would cover Leggiadro’s moving costs. Such costs were not limited to increases in operational costs such as rent. Rather, the Calculation also considers (though it does not ascribe a dollar amount to) goodwill loss from the company leaving its Madison Avenue location. The Calculation does not account for out-of-pocket costs to the shareholders. While the Calculation does consider the federal long term capital gains tax, which all of the involved parties knew would be paid by the shareholders by virtue of Leggiadro’s S-Corporation status, this alone is not enough to expand the scope of W & S’s representation of the company to include the representation of its shareholders. If consideration of pass-through tax liability was sufficient to constitute the representation of shareholders, by this logic, a lawyer who represents a company necessarily also must represent its shareholders because all financial liabilities of a company ultimately impact the finances of the shareholders. This is not the law.

Nevertheless, the Rosses argue that the special circumstances of the representation created a near-privity relationship under the doctrine set forth in Good Old Days Tavern, supra, which arises from the principle that a provider of professional services is liable for negligent misrepresentations to third-parties where the "relationship is so close as to approach that of privity." Prudential Ins. Co. of America v. Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377 (1992). Critically, it is important to remember that reasonable reliance is an essential element of a claim based on a negligent misrepresentation or omission. See J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148 (2007). Thus, even assuming W & S had a duty to consider the tax liabilities of the Rosses, the Rosses cannot claim to have reasonably relied on any representation or omission made by W & S as to the existence of their individual pass-through tax liability because they knew that such liability existed by virtue of their long history of paying these taxes as stockholders of an S-Corporation. Therefore, the Rosses’ claims against W & S are dismissed.

However, Leggiadro may maintain its claim against W & S related to the New York City general corporation tax. See AC ¶ 26. The scope of W & S’s representation included obtaining a settlement sum from the Landlord that accounted for the company’s tax liabilities. Assuming, for the purposes of this motion to dismiss, that W & S failed to account for city taxes and that such failure led to a lower settlement amount with the Landlord, W & S might be liable to Leggiadro for the difference between the settlement amount that Leggiadro obtained and the [*4]amount it would have received if the amount accounted for city taxes. Contrary to W & S’s contentions, this damages calculation is not speculative. "
 

The Appellate Division, Second Department is a busy place and provides many many decisions every year.  Many of them are definite, but sparse on detail.  In Montero v Cohen , 2013 NY Slip Op 01382  Decided on March 6, 2013   Appellate Division, Second Department  we see that this was a matrimonial case, we see that it is an international case, but we have no idea of what plaintiff’s claims were.  We do see that they were dismissed on summary judgment and affirmed.
 

"The plaintiff and his former wife, Nives Montero, married in 1973 in Argentina. They had no children, and, in 2001, the former wife commenced an action for a divorce. In 2005, after several years of litigation, the parties entered into a stipulation of settlement, and they were divorced by a judgment entered in August 2005 and amended a month later (see Montero v Montero, 85 AD3d 986). The defendant attorneys represented the plaintiff at that time, but the plaintiff became dissatisfied with the terms of the stipulation and later discharged the defendants and commenced this action against them to recover damages for legal malpractice. The defendants moved for summary judgment dismissing the complaint, and the Supreme Court granted the motion. The plaintiff appeals.

The plaintiff failed to raise a triable issue of fact as to whether the defendants’ alleged breach of the duty of care proximately caused him to suffer actual and ascertainable damages (see McCoy v Feinman, 99 NY2d 295, 302; DeGregorio v Bender, 4 AD3d 385, 386). Accordingly, the Supreme Court properly granted the defendants’ [*2]motion. "
 

The legal malpractice statute of  limitations commences when the mistake is made.  It runs for three years from that date, although it may be tolled by the continuous representation doctrine.  That continuous representation doctrine requires that the attorney and client agree that more work needs to be done, that the attorney continues to work on the case, and that a relationship of trust and confidence ensues.  Here,in Singh v Edelstein  2013 NY Slip Op 01255   Decided on February 27, 2013 Appellate Division, Second Department  it looks like the post-nup agreement was the last act by the defendant, and that plaintiff did not discover the problem until too late.

"To dismiss a complaint pursuant to CPLR 3211(a)(5) on the ground that it is barred by the applicable statute of limitations, a defendant bears the initial burden of establishing, prima facie, that the time in which to sue has expired (see DeStaso v Condon Resnick, LLP, 90 AD3d 809, 812). The statute of limitations for a cause of action sounding in legal malpractice is three years (see Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co., Inc.], 3 NY3d 538). The three-year period of limitations runs from the day of the alleged malpractice (see Alicanti v Bianco, 2 AD3d 373, 374, citing McCoy v Feinman, 99 NY2d 295, 306). The statute of limitations for legal [*2]malpractice may be tolled by the continuous representation doctrine " where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim’" (Zorn v Gilbert, 8 NY3d 933, 934, quoting McCoy v Feinman, 99 NY2d at 306).

Here, the defendant met his initial burden by establishing that the alleged malpractice occurred in November 2007, when the postnuptial agreement was executed, and that the action was commenced in August 2011, more than three years thereafter. Accordingly, the burden then shifted to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether she actually commenced this action within the applicable limitations period (see Jalayer v Stigliano, 94 AD3d 702, 703; DeStaso v Condon Resnick, LLP, 90 AD3d at 812; Williams v New York City Health & Hosps. Corp., 84 AD3d 1358, 1359; Krichmar v Scher, 82 AD3d 1164, 1165). The plaintiff failed to meet that burden (see Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1, 11; Rodeo Family Enters. LLC v Matte, 99 AD3d 781, 784). "

Dealy-Doe-Eyes Maddux v Schur   2013 NY Slip Op 01309  Decided on February 28, 2013 Appellate Division, Third Department  is the remaining portion of a twin legal malpractice case that has suffered grievous injury.  "Plaintiff commenced two legal malpractice actions against defendant, the second of which proceeded to trial and was dismissed by Supreme Court at the close of her proof. She has repeatedly sought, without success, to vacate the order of dismissal in that case (Maddux v Schur, 83 AD3d 1156 [2011]; Maddux v Schur, 53 AD3d 738 [2008]). Plaintiff then moved for a variety of relief, including to "clarify" the status of the two actions. Supreme Court found that the first action remained pending and otherwise denied plaintiff’s motion, and plaintiff appeals.

We affirm. Initially, to the extent that plaintiff is asserting a claim relative to the second action, including claims pursuant to CPLR 2221 or 5015 in that action, we agree with Supreme Court that it has already "proceeded through a well litigated course," and find the application to be repetitive, lacking grounds that could not have been presented in the prior proceedings (see [*2]Maddux v Schur, 83 AD3d at 1157-1158; Maddux v Schur, 53 AD3d at 739; see also Lambert v Schreiber, 95 AD3d 1282, 1283 [2012]). Further, we discern no error in Supreme Court’s determination that there had been no prior application to consolidate and join the two actions (see CPLR 602 [a]), nor in its direction for the parties to proceed to a conference before the court [FN2]. Plaintiff’s remaining arguments have been considered and found to be without merit. "

Its becoming harder to discern when a Judiciary Law 487 pleading will withstand a motion to dismiss on the pleadings.  In Cohen v Kachroo  2013 NY Slip Op 30416(U)  February 22, 2013
Supreme Court, New York County  Docket Number: 111735/10  Judge: Eileen A. Rakower  the motion to dismiss was denied, unfortunately without significant comment by the Judge.

"As set forth in the Verified Second Amended Complaint, Plaintiff entered into a retainer agreement with Defendants on January 5,20 10, wherein Defendants agreed to represent Plaintiff in prosecuting her claims against her husband in federal court, and to defend any claims brought by the attorney who previously represented her in the federal action. Pursuant to the retainer agreement, Plaintiff was to pay a $25,000 initial retainer, and to supplement that amount in order “to cover minimal costs of litigation.” The agreement further states:

We shall be compensated upon recovery, whether by settlement or judgment. . . compensation shall be in the amount awarded by the Court, but, in no event, shall We seek contingency compensation in excess of 30% . . , of any recovery plus reasonable expenses less the
retainer amounts received , . , Plaintiff paid the retainer amount. On June 7,20 10, Defendant KLS resigned as Plaintiff’s attorney in the federal action allegedly due to Plaintiff’s inability to meet
her financial obligations, Plaintiff alleges that Defendants threatened to abandon her action if she not did pay additional money to them, and that they tried to coerce her into adding payment terms to the retainer agreement. Plaintiff alleges that, as she was only required to pay the initial $25,000, and a percentage of any recovery made in the federal action, Defendants misrepresented to the federal court judge that she failed to pay her legal fees when they sought withdrawal, and that they subsequently abandoned the action without cause. Defendants now move to dismiss certain causes of action contained in Plaintiffs Verified Second Amended Complaint pursuant to CPLR 321 1 (a)(7).

Defendants seek to dismiss Plaintiffs claims for legal malpractice, breach of fiduciary duty, breach of the New York Rules of Professional Conduct, Breach of New York Judiciary Law 487 for failure to state a claim, and punitive damages. Defendants contend that “this matter does not constitute anything more than a fee dispute.”

Plaintiff‘s sixth cause of action alleges that Defendants breached Judiciary law, Section 487. Judiciary Law, Section 487 permits a party to recover treble damages against an attorney 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. Willfully delays his client’s suit with a view to his own gain; or, willfully
receives any money or allowance for or on account of any money which he has not laid out, or becomes answerable for. Plaintiff’s allegations concerning the alleged deceit by Defendants to Plaintiff and to the Courts are sufficient to establish a violation of Judiciary law 487( 1). “Because damages for breach of a contract are allowed as compensation for the  injury or damage resulting from such breach rather than by way of punishment, the general rule in actions for breach of contract is that the damages are limited to the pecuniary loss sustained, and that exemplary damages are not recoverable. However, punitive damages are recoverable in an action to recover for breach of contract upon a showing of gross, wanton, or willful fraud or of high moral culpability of the defendant.” (36 N.Y, Jur. 2d Damages Section 188). Here, Plaintiff‘s allegations of alleged coercion by Defendants are sufficient to support Plaintiffs prayer of relief for punitive damages."

Coverage under a legal malpractice insurance policy, is the sole reason for paying premiums, and probably one good reason that litigating attorneys fall asleep at night. They are handling multi-million dollar cases, earning big fees and (hopefully) helping their clients.  If it all goes wrong, and in the field of human events there are always mistakes, then the insurance is there to cushion the blow.  However, in legal malpractice policies there is the reporting clause.  In Property & Cas. Ins. Co. of Hartford v Levitsky   2013 NY Slip Op 30273(U)  January 25, 2013  Supreme Court, New York County  Docket Number: 109550/11  Judge: Lucy Billings  the attorneys did not timely report a problem, and lost their coverage.

"Defendants represented Paul Rowland as a plaintiff in an action in Monroe County for personal  injuries sustained on October 24, 2003, while Rowland was performing construction work
at a mall. On August 29, 2006, less than two months before the statute of limitations of three years expired, C.P.L.R. § 214(5), defendants commenced an action on Rowland’s behalf against
Wllmorite, Inc. Defendant Levitsky believed that Wilmorite owned the Eastview Mall where Rowland was injured, based On a sign at the premises and on common knowledge that Wilmorite owns all the large malls in the Rochester area, including Eastview." Steven Levitsky (Nov. 30, 2011) Ex. 8, at 1. On October 19, 2006, five days before the statute of limitations expired, Wilmorite answered Rowland’s complaint, Aff. of denying ownership of the mall where Rowland was injured. Almost 14 months later, at a deposition December 12, 2007, a witness on behalf of Wilmorite again denied that it owned the mall and claimed Great Eastern Mall, LP, was the owner. That same witness, however, testified that Great Eastern Mall and Wilmorite worked closely together and shared an office address.

Wilmorite was the construction manager on the site when Rowland was injured under a contract with Great Eastern Mall. Only then did defendants undertake any investigation and eventually learn that that contract required Great Eastern Mall to maintain insurance for Wilmorite covering persona1 injuries arising from employees’ operations at the site. Based on that relationship between Great Eastern and Wilmorite, defendants believed Rowland still would be entitled to recover from Wilmorite, e.q., N.Y. Labor Law §§ 200, 240(1); Walls v. Turner Constr. Co., 4 N.Y.3d 861, 864 (2005); Rizzuto v. Wenqer Contr. CO., 91 N.Y.2d 343, 352-53 (1998), or, despite the expiration of the statute of limitations, . to join Great Eastern Mall under the relation back doctrine. C.P.L.R. § 203(b). e.g.., Buran v Cural, 87 N.Y.2d 173, 178 (1995); Cooley v. Urban, 6 A.D.3d 1077, 1078 (4th Dep’t 2004 ) .

On February 5, 2008, Wilmorite moved to dismiss Rowland’s claims against it. On May 28, 2008, defendants opposed Wilmorite’s motion and cross-moved to join Great Eastern Mall as
a defendant. On July 30, 2008, the Supreme Court, Monroe County, granted Wilmorite’s motion and denied Rowland’s cross-motion,

On August 19, 2008, Rowland’s new attorney informed defendants that he had been retained for purposes of a possible malpractice claim against defendants. On May 4, 2009, Rowland  commenced, through his new attorney, a malpractice action against defendants.Defendants first notified plaintiff of a possible malpractice claim . August 29, 2008. Levitsky Aff. Ex. 8, at 2. From defendants’

From defendants’ vantage point, defendants thus notified plaintiff of the potential claim 30 days after the Supreme Court granted Wilmorite’s motion to dismiss Rowland’s action and denied his cross-motion to join Great Eastern Mall, 10 days after Rowland’s new attorney informed defendants Rowland was pursuing a possible malpractice claim, and several months before he commenced an actual malpractice action. Nevertheless, defendants’ notice came more than one year and 10 months after Wilmorite’s answer informed defendants that, with less than a week remaining before the statute of limitations expired, defendants had not sued the premises’ owner and more than eight months after deposition testimony confirmed that fact, then more than a year after the statute of limitations expired.

The notice provisions are not ambiguous. Nothing in their plain language suggests that 2(b) supersedes 2(a) or that 2(a) applies only to a claim after the policy period has expired.
Although 1 provides that "claims subsequently made against an insured arising out of that circumstance will be considered to have been made and reported during the policy period nothing in 1 suggests that the requirement to report circumstances that may give rise to a claim is limited to post-policy period claims. Coploff Aff. Ex. D § III(A) , at 8 (emphases omitted). Nor do  1’s terms indicate any modification of  2(a).

Once they became aware of circumstances that might produce a claim, however, it is irrelevant whether eventually they learned of evidence regarding Wilmorite’s relationship with the owner of Rowland’s injury site that led to a reasonable, good faith belief in his right to recover from Wilmorite or to join the owner. between Wilmorite and the owner until the December 2007 deposition, 14 months after defendants became aware of a potential claim, obligating them to notify plaintiff within 60 days. By the time of the deposition, defendants already had  breached that policy requirement and lost entitlement to coverage."

Rather than try to boil this case down, we quote fromHadar v Pierce  2013 NY Slip Op 30185(U)
January 4, 2013 Sup Ct, New York County Docket Number: 652811/11 Judge: Eileen Bransten. 

"This action arises from an underlying dispute between Eric Hadar and his father Richard Hadar. Eric Hadar has been a successful real estate developer for over fifteen years. Affirmation of John S. Rand, Ex. A. ("Comp!."), ~ 3. Eric Hadar suffered from drug addiction, and, on October 3,2008, he was arrested for drug possession. Id. at ~ 26. Eric Hadar subsequently entered a rehabilitation program. Id. Richard Hadar offered to "hold down the fort" at Eric Hadar’s real estate business
until Eric Hadar completed his treatment. Id. at ~ 28. Plaintiffs claim that, rather than "hold down the fort," Richard Hadar took advantage of his son’s absence to attempt to wrest control of the real estate business from Eric Hadar. Id. Plaintiffs claim that Richard Hadar’s plan to accomplish this scheme was to accuse his son of mismanagement of the real estate company and the EDHFT. Id. at ~ 28. For example, Plaintiffs assert that, in January or February 2009, Richard Hadar and his attorney,Michael Rosenbaum, told partners in Lawrence One, L.P., which was one of Eric Hadar’s
real estate ventures and Robert Weir, who was then the trustee of the EDHFT, that Eric Hadar: (1) mismanaged and neglected various properties and trusts; (2) engaged in self dealing by taking interest-free loans and misappropriating assets from EDHFT; (3) along with Allied Partners, charged excessive and unauthorized management fees; (4) negligently managed a property near Kennedy Airport known as "Carlton House"; and (5) was no longer able to manage real estate competently. Id at ~ 30. Rosenbaum prepared a letter containing these alleged mis representations and had Weir and Yohalem sign the letter. Id. at ~ 31. On February 11,2009, Richard Hadar, Ira Yohalem as trustee of the Joshua D. Hadar Family Trust ("JDHFT") and several holding companies for Eric Hadar’s various real estate developments (the "Holding Company Plaintiffs") brought an action against Eric Hadar, Allied and JFK (the "Prior Action"). Winter Affirm., Ex. A, p. 1. Defendants Rosenbaum and Patterson served as plaintiffs’ attorneys. Id. The plaintiffs in the Prior Action accused Eric Hadar of mismanaging and wasting the plaintiffs’ assets and investments. Id. at p. 9. The Prior Action alleged breach of fiduciary duty, breach of contract, and sought to remove Eric Hadar from his position as a manager of the Holding Company Plaintiffs and to enjoin Eric Hadar from taking any further action as manager. Id at pp. 18-24.

Defendants assert that the "judicial proceedings privilege" shields them from liability for bringing the Prior Action and the Surrogates Action. Defendants argue that all of Plaintiffs’ claims derive from the filing of these lawsuits, and, because the filing of lawsuits is protected by the judicial proceedings privilege, the complaint should be dismissed in its entirety. Defamation Claim Against Rosenbaum Ordinarily, "a statement made in the course of legal proceedings is absolutely privileged ifit is at all pertinent to the litigation." Sexter & Warmflash, PC. v. Margrabe,
38 A.D2d 163, 171 (1st Dep’t 2007) (internal citations and quotation marks omitted). However, the "privilege may not be extended to a litigant who commences a sham lawsuit for the sole purpose of defaming his adversary." Sexter & Warmflash, P.C., 38 A.D2d at 173, n. 5. Plaintiffs have alleged that Rosenbaum commenced the Prior Litigation against Eric Hadar solely to harass and disparage Eric Hadar in an effort to alienate his partners and investors in his real estate business. PI. Memo, pp. 8-9. Plaintiffs further claim that the allegations in the Prior Action and Surrogates Court Action were patently false, and that Rosenbaum conspired with Richard Hadar to invent the allegations. Plaintiffs assert that Rosenbaum was assisting Richard Hadar in his ultimate goal of taking over Eric Hadar’s real estate business."

The balance of the motion to dismiss was denied.  Read on, in the decision, for privity, privilege and documentary evidence issues.