Yesterday we looked at Chibcha Rest., Inc. v David A. Kaminsky & Assoc., P.C. 2013 NY Slip Op 00281   Decided on January 22, 2013 Appellate Division, First Department  for the question of how much a plaintiff must show, and the difference between missing a deadline and almost all other claims.
 

Today, we look at the same case for a lesson in Judiciary Law 487.  For reasons, mostly unexplained, the JL 487 claim was dismissed, because it was brought in a plenary action, after arising in a fee dispute.  The AD affirmed Supreme Court’s dismissal and held that plaintiff’s remedy was to move to vacate the fee dispute result, rather than bring this plenary claim.

"The motion court properly dismissed the cause of action alleging a violation of Judiciary Law § 487. Plaintiffs’ allegations stem from defendants’ alleged misconduct in connection with a fee dispute in Civil Court. Accordingly, "plaintiff’s remedy lies exclusively in that lawsuit itself, i.e., by moving pursuant to CPLR 5015 to vacate the civil judgment due to its fraudulent procurement, not a second plenary action collaterally attacking the judgment in the original action" (Yalkowsky v Century Apts. Assoc., 215 AD2d 214, 215 [1st Dept 1995]). "

 

Although a demonstrated lack of skill and a failure to prepare for litigation might, on its face, seem proper fodder for a legal malpractice case, in Chibcha Rest., Inc. v David A. Kaminsky & Assoc., P.C.   2013 NY Slip Op 00281   Decided on January 22, 2013   Appellate Division, First Department the court held:  "Plaintiffs’ allegations that defendants made "no useful attempt" to argue against a TRO sought and obtained by the landlord, and that defendants were both unprepared and unskilled in defending them, do not suffice. As the motion court observed, plaintiffs do not allege, for example, that defendants missed any deadlines or otherwise failed to protect or preserve plaintiffs’ rights (see Mortenson v Shea, 62 AD3d 414, 414-415 [1st Dept 2009]). "

This case demonstrates the bold difference between a failure to file within a deadline, and almost all other shortcomings.  Presentation of a certain witness, selection of an expert, questions put in cross-exam.  All very important, but none of them a failure to file within a deadline or a failure to preserve a client’s rights.

The Court explains further: "Contrary to plaintiffs’ assertions, the record supports the motion court’s conclusion that plaintiffs’ damages, sustained from the closing of the subject premises after issuance of the TRO, were not caused by defendants’ conduct, but rather by plaintiffs’ failure to obtain the necessary insurance before the landlord brought its motion for a temporary restraining order. Plaintiffs concede that the insurance coverage required by the lease initially was not in place, and that the TRO against them was lifted only after the requisite insurance was obtained. As the premises were closed due to the lack of insurance, it cannot be said that plaintiffs would not have incurred any damages, but for defendants’ purported negligence (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007])."

 

In our article on Matrimonial Legal Malpractice and settlements in to days New York Law Journal we discuss the recent line of cases which disturb the well settled principal that a legal malpractice case after settlement is permitted where the settlement was "effectively compelled" by the mistakes of counsel.

This new line of cases, starting with Katebi v. Fink has upended a well understood principal of legal malpractice and created much uncertainty.  The rest can be seen in today’s New York Law Journal Outside Counsel Column.

 

 

 

We were recently asked whether an Expert, testifying in a legal malpractice case can commit legal malpractice during testimony in the case. We discussed whether there was an attorney-client relationship, and whether "absolute immunity" for in-court testimony applied. Now, Levine v Harriton & Furrer, LLP ; 2012 NY Slip Op 01401 ; Appellate Division, Third Department discusses the same subject, this time for an engineer.
 

"Plaintiff, a licensed professional engineer, was retained to provide services in connection with a personal injury claim in the Court of Claims against the State of New York arising from an alleged highway defect. The claim was subsequently transferred to defendant, a law firm in the Village of Round Lake, Saratoga County, and plaintiff was again retained. The parties initially proceeded upon an oral agreement. In February 2006, plaintiff submitted a written retainer agreement to defendant setting forth a retainer fee and establishing hourly charges and fees, among other things. Defendant paid the retainer fee and, on the claimant’s behalf, returned the agreement to plaintiff, without signature. Plaintiff subsequently provided services and submitted bills periodically to defendant. Defendant made payments through December 2007, when the trial was completed; thereafter, defendant made no further payments but did request continuing services, which plaintiff provided. In May 2008, the Court of Claims rendered a determination dismissing the claim upon the ground that negligence had not been proven. Plaintiff allegedly continued to submit invoices for payment of the outstanding balance due through October 2008, but received no response. After plaintiff’s counsel contacted [*2]defendant, defendant responded in writing in November 2008, refusing to pay and alleging that the unfavorable determination of the claim had resulted from plaintiff’s professional malpractice. "

"Defendant’s objections were not primarily grounded in the particulars of the invoices; instead, the central contention is that the failure to pay for plaintiff’s services was justified by his alleged malfeasance. However, this claim was not supported by an expert affidavit opining that plaintiff’s services "deviated from accepted industry standards" and that this failure proximately caused the loss of the claimant’s case (Columbus v Smith & Mahoney, 259 AD2d 857, 858 [1999]; see Travelers Indem. Co. v Zeff Design, 60 AD3d 453, 455 [2009]). Contrary to defendant’s claim, the decision of the Court of Claims does not replace such an expert opinion. Although that court criticized some of plaintiff’s methods, it made no finding as to his competence beyond the requisite assessment of the credibility of the conflicting expert opinions. The mere fact that the Court of Claims found plaintiff’s opinions less credible than those of the opposing experts is insufficient to present a factual issue as to whether his performance was substandard; such determinations are necessarily made whenever the opinions of experts are in conflict. Further, the court explicitly stated that its determination was not based solely on credibility, but also on its factual conclusion that the subject accident was proximately caused by driver error, and not by a highway defect.
 

State Court cases may be removed to Federal Court in two instances.  One is where there is complete diversity of citizenship and the requisite dollar-damage amounts; the second is where the claim "arises" under federal law.  One such instance may be questions of legal malpractice in the patents area.  We are certainly aware of case law in the SDNY in which such arguments were decided with mixed results.  Today, we read of a US Supreme Court case that may clear up the dispute.  In Gunn v. Minton, No. 11-1118, U.S. Sup Ct. the question is simply whether the legal malpractice case should be heard in state or federal court.

"The central question is whether legal malpractice claims against attorneys representing the inventors, for failing to raise an “experimental use” defense to the “on-sale bar” doctrine, constituted a question of exclusive state law, or one of exclusive federal jurisdiction and law – like traditionally all Patent Law issues. The issue turns on whether such a state court claim can create or affect Federal patent rights."

Lexis-Nexis writes: "At oral argument, Webre said the Federal Circuit’s rulings "improperly conflate the question of necessity of a federal issue with the question of whether that issue is substantial," representing a "total disregard [of] a proper balance of the state and federal interests."

"The Federal Circuit announced that there’s an interest in – federal interest in uniformity of patent law, and then that was that. That was the end of the inquiry. There is no balance if you don’t look at the state interest on the other side. And in legal malpractice cases in general and in Mr. Minton’s claim in particular, there are substantial state interests. There is the general interest, the right of a state to develop its own state claims, its own state law and its own state courts. But there is also a state interest in governing the relationship between attorney and client that happens through the legal malpractice process," Webre added.

When asked by Justice Sonia Sotomayor whether an allegation of malpractice involving the PTO would qualify for "arising under" jurisdiction, Webre answered in the negative. Though such a scenario would "be a more substantial federal question than the one presented here," Webre nonetheless said no "arising under" jurisdiction exists because "it involves only a hypothetical actual set of patent rights."

"No judgment that can happen in a state legal malpractice case actually impacts any patent rights," Webre replied.

Disputed, Substantial Issues

By contrast, Thomas M. Michel, representing Minton, urged the Supreme Court to affirm. The state district court "made holdings about . . . whether . . . the experimental use exception is a question of law or a question of fact," as well as a determination that "knowledge of the buyer is conclusive, rather than a factor" to be considered, Michel argued.

"Those are all . . . disputed, substantial issues of federal patent law," he added.

To reverse the Texas Supreme Court could also burden the PTO, Michel warned, because the agency "will have to take . . . as guidance" the state district court’s injection of a "brand-new requirement" that an expert witness must testify to establish an experimental use testing exception. In addition, Michel said a reversal would free state courts to choose whether they will interpret and apply Federal Circuit precedent; should they choose not to, it could subject patent attorneys to varying standards and regulations on a state-by-state basis. Justice Antonin Scalia was not persuaded by the argument, however, asking Michel, "Why is that worse than the fact that if it goes to federal court, all of the lawyers in the state in all malpractice cases are going to be supposedly bound by the federal court’s holding as to state issues of malpractice?"

"I mean, it seems to me it’s Twiddle Dum or Twiddle Dee, whichever court system you go to, you are going to terrorize the lawyers of that state on the basis of an opinion of a court that is not dispositive on those issues," Scalia added.

Minton is represented by Michel and Robley E. Sicard of Griffith, Jay & Michel in Fort Worth, Texas; Coyt Randal Johnston, Robert L. Tobey and Coyt Randal Johnston Jr. of Johnston Tobey in Dallas; Theodore F. Shiells of Shiells Law Firm in Dallas; Gregory W. Carr of Carr in Frisco, Texas; and Daniel R. Ortiz of Charlottesville, Va. The petitioners are represented by Webre of Scott, Douglass & McConnico of Austin, Texas."
 

Melcher v Greenberg Traurig, LLP   2013 NY Slip Op 00256   Decided on January 17, 2013
Appellate Division, First Department  is extraordinary.  It’s special for the facts, and for two holdings and the re-statement of a much overlooked principal all seriously affecting calculation of the statute of limitations. Now settled is the correct S/L statute for Judiciary Law 487, and whether there is a discovery statute applied.   Note the names of the appellate players.
 

First:  An "action to recover upon a liability, penalty or forfeiture created or imposed by statute . . ." must be commenced within three years (CPLR 214[2]). A cause of action under Judiciary Law § 487 is purely statutory in nature and therefore subject to the three-year statute of limitations. Judiciary Law § 487 "is a unique statute of ancient origin in the criminal law of England" (Amalfitano v Rosenberg, 12 NY3d 8, 14 [2009]).  

From the dissent:  While we previously held that a cause of action pursuant to Judiciary Law § 487 did not give rise to "a unique form of liability unknown at common law," and was thus governed by a six-year statute of limitations (Guardian Life Ins. Co. of Am. v Handel, 190 AD2d 57, 62-63 [1st Dept 1993]), it is now well settled that Judiciary Law § 487 "is not a codification of a common-law cause of action for fraud. Rather, section 487 is a unique statute of ancient origin in the criminal law of England" (Amalfitano v Rosenberg, 12 NY3d 8, 14 [2009]). Accordingly, pursuant to CPLR § 214(2), a cause of action pursuant to Judiciary Law § 487 is "an action to recover upon liability, penalty or forfeiture created or imposed by statute," and is thus governed by a three-year statute of limitations.
 

Second: An action seeking damages under Judiciary Law § 487 must be commenced within the longer of three years from the time of the underlying deceit or collusion or within two years from the time the deceit or collusion was discovered, or with reasonable diligence, could have been discovered (CPLR 214[2]; see CPLR 203[g]; cf. Sargiss v Magarelli, 12 NY3d 527, 532 [2009]).

Third:  Causes of action do not necessarily accrue at the time of occurrence;  they may accrue later when all facts necessary have occurred including damage.  "A cause of action accrues, for the purpose of measuring the period of limitations, when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court" (Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 221 [1996] [internal quotation marks omitted]).

In the past several years we’ve been given unprecedented access to court records.  No more is it necessary to travel to the courthouse to review a file, nor must we wait for the clerk to mail (or not mail) a decision.  However, access to written decisions is not universal.  in Bullfrog, LLC v Nolan
2013 NY Slip Op 00168  Decided on January 16, 2013  Appellate Division, Second Department
we are able to read the AD decision, but the Supreme Court decision is not on-line.  While we can look and see the date it was decided, and the type of motion which was decided, no scan of the decision is available, so we cannot say what the Supreme Court judge saw that the Appellate Division differed with.

"An action to recover damages for legal malpractice must be commenced within three years after the accrual of the cause of action (see CPLR 214[6]). Here, the defendant Kevin Barry (hereinafter the appellant) sustained his initial burden on that branch of his motion which was to dismiss the cause of action to recover damages for legal malpractice by demonstrating that the applicable limitations period had expired with respect to the alleged acts of legal malpractice. Contrary to the Supreme Court’s determination, the evidence submitted by the plaintiff in opposition was insufficient to raise a triable issue of fact as to whether the continuous representation doctrine tolled the running of the statute of limitations (see Hasty Hills Stables, Inc. v Dorfman, Lynch, Knoebel & Conway, LLP, 52 AD3d 566, 567-568; Melendez v Bernstein, 29 AD3d 872, 873; Dignelli v Berman, 293 AD2d 565, 566; Muller v Sturman, 79 AD2d 482, 486-487). Accordingly, the cause of action to recover damages for legal malpractice should have been dismissed as time-barred. [*2]

The appellant was also entitled to summary judgment dismissing the plaintiff’s cause of action for replevin insofar as asserted against him. The appellant established, prima facie, that he did not unreasonably refuse to return the documents requested by the plaintiff (see Khoury v Khoury, 78 AD3d 903, 904; Wiel v Curtis, Mallet-Prevost, Colt & Mosle, 66 Misc 2d 466, 469, affd 36 AD2d 1027, affd 30 NY2d 500). In opposition to the motion, the plaintiff failed to raise a triable issue of fact. The Supreme Court, therefore, should have granted that branch of the appellant’s motion which was for summary judgment dismissing the cause of action for replevin insofar as asserted against him. "

Plaintiffs in legal malpractice suits are often in financial distress, and bankruptcy filings loom.  When a petition in bankruptcy is filed, significant changes to the debtors’ estate may take place.  There are differences when the filing takes place, and each of the three major chapters have different results, whether Chapter 7,11 or 13.  Here, in a decision written by Justice Whelan is a well presented discussion.  West v Young   2013 NY Slip Op 23011   Decided on January 15, 2013   Supreme Court, Suffolk County   Whelan, J.
 

"The object of a bankruptcy proceeding commenced under Chapter 7 of the Bankruptcy Code is to provide the debtor with a "fresh start" upon discharge by the liquidation of all non-exempt property in the bankruptcy estate for the benefit of creditors. Pursuant to 11 USC §541(a)(1), the bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case" including, contingent civil claims for damages possessed by the debtor (11 USC §541[a][1]). It also includes "any interest in property that the estate acquires after the commencement of the case" (11 USC §541[a][7]). Referred to as a catchall provision, §541(a)(7) embodies the principle that the estate, having a separate legal identity from the debtor, is an active entity comprised of not only property interests the debtor held at the commencement of the case, but of property the estate itself generates while operating under the aegis of the Bankruptcy Code (see Wade v Bailey, 287 B.R. 874, 880—881 [S.D.Miss.2001]). It does not, however, serve as an independent basis for the creation of estate property. By its express terms, §541(a)(7) only operates when property is encompassed within the estate in the first instance, after which time any property generated by that estate property becomes, itself, included in the estate (see In re Doemling, 116 B.R. 48, 50 [Bankr.W.D.Pa.1991]).

Once an asset is deemed to belong to the bankruptcy estate, the asset may no longer be controlled by the debtor (see Matter of Educators Group Health Trust, 25 F.3d 1281, 1284 [C.A 5 1994]). It is thus clear that a bankruptcy trustee appointed in a Chapter 7 proceeding has the exclusive authority to prosecute a non-bankruptcy cause of action belonging to the estate (see Matter of New Era, Inc., 135 F.3d 1206 [C.A. 7 1998]; Matter of Educators Group Health Trust, 25 F.3d 128, supra; Matter of S.I. Acquisition, Inc., 817 F.2d 1142, 1153—54 [C.A. 5 1987]; Long Is. Forum for Tech. v New York State, 85 AD3d 791, 925 NYS2d 535 [2d Dept 2011]). It is equally clear that a debtor is required to schedule such causes of action as assets on the bankruptcy petition so that the trustee can determine whether the claims should be abandoned or administered by the bankruptcy court for the benefit of the creditors (see Dynamics Corp. of Am. v Marine Midland Bank—New York, 69 NY2d 191, 195—196, 513 NYS2d 91 [1987]; Tri-State Sol-Aire Corp. v Martin Assoc., Inc., 7 AD3d 514, 776 NYS2d 99 [2d Dept 2004]; Mehlenbacher v Swartout, 289 AD2d 651, 734 NYS2d 290 [3d Dept 2001]). If an estate cause of action is not listed in the schedule of [*3]assets, it cannot be deemed to have been abandoned by the trustee (see 11 USC §554), and such cause of action remains the property of the estate (see 11 USC §554[d]; First Natl. Bank of Jacksboro v Lasater, 196 U.S. 115, 25 S.Ct. 206 [1905]). A debtor has thus been held to lack the legal capacity to sue on all such undisclosed claims during or subsequent to the close of a Chapter 7 bankruptcy proceeding (see Dynamics Corp. of Am. v Marine Midland Bank—New York, 69 NY2d at 195—196, supra; Whelan v Longo, 23 AD3d 459, 808 NYS2d 95 [2d Dept 2005], affirmed 7 NY3d 821, 822 NYS2d 751 [2006]; Santori v Met Life, 11 AD3d 597, 599, 784 NYS2d 117 [2004]; Coogan v Ed’s Bargain Buggy Corp., 279 AD2d 445, 719 NYS2d 260 [2d Dept 2001]).

In contrast to Chapter 7 proceedings, the object of a Chapter 13 filing is the rehabilitation of the debtor under a plan that adjusts debts owed to creditors by the debtor’s regular periodic payments derived principally from income (see 11 USC §1301, et. seq.; First Capital Asset Mgt., Inc. v Satinwood, 385 F.3d 159 [C.A. 2 2004]). The bankruptcy estate under Chapter 13 is broader than the estate in Chapter 7 proceedings since a Chapter 13 estate continues to accumulate property following the filing of the petition. Under USC §1306, all property specified in §541 that the debtor acquires after the commencement of the action, but before the case is closed, dismissed or converted is the property of the estate. Inclusion of both pre-petition assets and post-petition assets in a Chapter 13 estate is due to the following: 1) that distribution of the estate assets administered by the trustee, principally income, must be made only in accordance with a plan that has been confirmed by the court; 2) except as to income and assets controlled by the trustee under the terms of the plan, the debtor is deemed to remain in possession of all property of the estate (see 11 USC §1306[b]; 1327[b]); and 3) the confirmation of the plan "vests all the property of the estate in the debtor" (see 11 USC §1327[b]). Assets acquired post-confirmation are not included as property of the estate, unless they are necessary to maintain the plan (see 11 USC §1306[a]; §1326]).
 

Unlike Chapter 7 cases, there is no real disconnect of the estate property from the debtor under a Chapter 13 filing, except to the extent that the plan, as confirmed by order of the court, places control over an asset in the hands of the trustee.

A filing under Chapter 13 thus changes the calculus in determining the issue of standing or the capacity to prosecute civil causes of action from that applied to Chapter 7 cases. "While Chapter 7 and Chapter 11 debtors lose standing to maintain civil suits – which must be brought and/or maintained by their bankruptcy trustees – it is clear that Chapter 13 debtors like plaintiffs are not subject to this restriction" (Murray v Board of Educ. of City of New York, 248 B.R. 484, 486 [S.D.N.Y.2000], citing Olick v Parker & Parsley Petroleum Co., 145 F.3d 513 [2d Cir.1998]). In Olick, the Second Circuit addressed for the first time the differences between Chapter 7 and Chapter 11 cases and found "that a Chapter 13 debtor, unlike a Chapter 7 debtor, has standing to litigate causes of action that are not part of a case under title 11" (id. 45 F3d at 515). This holding was premised, in part, upon the fact that the focus of a Chapter 13 bankruptcy is the repayment of debts, regularly, through future earnings rather than from a liquidation of assets owned by the debtor at the time of filing. The Olick court also relied upon the legislative history of §1303 of Chapter 13 as drawn from remarks in the Congressional Record: "[C]ertainly it is intended that the [Chapter 13] debtor has the power to sue and be sued" (id. at 516 quoting 124 Cong. Rec. H. 11,106; S. 17,423).

Numerous other federal cases have also held that Chapter 13 debtors are not deprived of [*4]standing to assert pre-petition causes of action and others accruing post-petition (see Ponton v AFSCME, 395 Fed.Appx. 867 [C.A.3 2010]; Smith v Rockett, 522 F.3d 1080 [C.A.10 2008]; Autos Inc. v Gowin, 244 Fed.Appx, 2007 WL 2269443 [C.A.10 2007]; Crosby v Monroe County, 394 F.3d 1328 [C.A. 11 2004]; Cable v Ivy Tech., 200 F.3d 467, 472-74 [C.A. 7 1999]; Bennett v Flagstar Bank, 2011 WL 6152940 [S.D. Ga. 2011]; M & T Mtge. Corp. v White, 736 F.Supp.2d 538 [E.D.N.Y 2010]; In re Stewart, 373 B.R. 801 [Bankr. S.D. Ga. 2007]; Snowden v Fred’s Stores of Tennessee, 419 F.Supp2d 1367 [M.D Al. 2006]; In re Bowker, 245 B.R. 192 [D.N.J. 2000]). While it is unclear from these case authorities whether a Chapter 13 debtor has an exclusive right to sue (see In re Bowker, 245 B.R. 192, supra) or possesses such right concurrently with the trustee (see In re Stewart, 373 B.R. 801, supra), that which is clear is that the debtor has standing to prosecute non-bankruptcy causes of action (see Looney v Hyundai Motor Mfg. LLC., 330 F.Supp.2d 1289 [M.D. Al. 2004]).

This court’s review of state case authorities that have addressed the capacity of a Chapter 13 debtor to sue reveals that the issue is less than settled. In Gray v City of New York, 958 AD3d 448, 449, 872 NYS2d 7 (1st Dept 2009), which was a breach of contract action prosecuted by a Chapter 13 debtor, the First Department unequivocally held that the "plaintiff’s failure to include his notice of claim in his bankruptcy petition deprived him of his capacity to sue (Whelan v Longo, 7 NY3d 821, 822 NYS2d 751[2006]), even if the omission was innocent (Dynamics Corp. of Am. v Marine Midland Bank – NY, 69 NY2d 191, 513 NYS2d 91 [1987])". In Quiros v Polow, 135 AD2d 697, 522 596 (2d Dept 1987), a legal malpractice action decided prior to Olick, the Second Department also held that a Chapter 13 debtor lacked capacity to sue citing Dynamics Corp. of Am. v Marine Midland Bank – NY, (69 NY2d 191, supra). However, neither Whelan nor Dynamics, involved a Chapter 13 debtor.

In contrast, the Second Department held in Giovinco v Goldman, 276 AD2d 469, 713 NYS2d 700 (2d Dept 2000), that a Chapter 13 debtor has capacity to sue on medical malpractice claims. As authority for its holding, the Giovinco court relied upon Olick v Parker & Parsley Petroleum Co., (145 F.3d 513, supra) and no fewer than ten other federal case authorities. Two cases emanating out of the Fourth Department also followed the Second Circuit’s holding in Olick v Parker & Parsley Petroleum Co., (145 F.3d 513, supra ) and found that a Chapter 13 debtor has capacity to sue on legal claims (see Kenney v National Fuel Gas Distrib. Corp., 8 AD3d 989, 778 NYS2d 352 [4th Dept 2004]; In re Miller, 1 AD3d 885, 767 NYS2d 729 [4th Dept 2003]).

There are a plethora of cases that fail to identify which Chapter of the Bankruptcy Code the plaintiff filed under (see Mathus v Bouton’s Bus. Mach., Inc., 78 AD3d 476, 910 NYS2d 633 [1st Dept 2010]; R. Della Realty Corp. v Block 6222 Constr. Corp., 65 AD3d 1323, 88 NYS2d 157 [2d Dept 2009]; Wright v Meyers & Spencer, LLP, 46 AD3d 805, 849 NYS2d 274 [2d Dept.2007]; Quinn v Guerra, 26 AD3d 872, 811 NYS2d 238 [4th Dept 2006]; Monson v Israeli, 35 AD3d 680, 828 NYS2d 424 [2d Dept 2006]; Santori v Met Life, 11 AD3d 597, supra; Whelan v Longo, 23 AD3d 459, supra; Martinez v Desai, 273 AD2d 447, 710 NYS2d 372 [2d Dept 2000]). While cited frequently by defendants desirous of non-suiting a plaintiff on lack of capacity grounds, these cases offer no authority that Chapter 13 debtors may likewise be non-suited. [*5]"

 

Attorneys automatically obtain a charging lien by commencing an action. There are several ways to lose that lien. One is to be terminated "for cause" and another is to withdraw voluntarily. This is different from being "consented out" or by withdrawing with mutual consent. In Nassour v Lutheran Med. Ctr. ;2010 NY Slip Op 07906 ;Appellate Division, Second Department we see the difference:
 

"Pursuant to Judiciary Law § 475, "[w]hen an action is commenced, the attorney appearing for a party obtains a lien upon his or her client’s causes of action . . . This lien attaches to any final order [*2]or settlement in the client’s favor" (Matter of Wingate, Russotti & Shapiro, LLP v Friedman, Khafif & Assoc., 41 AD3d 367, 370). "Where an attorney’s representation terminates upon mutual consent, and there has been no misconduct, no discharge for just cause, and no unjustified abandonment by the attorney, the attorney maintains his or her right to enforce the statutory lien" (Lansky v Easow, 304 AD2d 533, 534; see Klein v Eubank, 87 NY2d 459; cf. Matter of Winston, 214 AD2d 677). Where, however, an attorney withdraws without sufficient cause, his or her lien is automatically forfeited (see Hae Sook Moon v City of New York, 255 AD2d 292; Winters v Rise Steel Erection Corp., 231 AD2d 626). Here, Freedhand was not discharged by the plaintiff, but instead voluntarily withdrew. Since Freedhand failed to establish that there was just cause for his withdrawal, the Supreme Court should have vacated that portion of the judicial hearing officer’s determination that Freedhand was entitled to a fee (cf. Robinson v Friedman Mgt. Corp., 49 AD3d 436; Winters v Rise Steel Erection Corp., 231 AD2d 626). "

 

For a well written decision on one of the most complicated factual settings we can remember, read Oikonomos, Inc. v Bahrenberg   2013 NY Slip Op 50017(U)   Decided on January 5, 2013   Supreme Court, Suffolk County   Pines, J.   This legal malpractice-breach of fiduciary duty-breach of contract-fraud-promissory estoppel- equitable estoppel case has even more to it.  The facts of a vastly intertwined series of commercial / loan / guarantee / lease issues are so opaque that there is little sense to trying to describe it.  Justice Pines does a much better job in her decision,
 

"Applying these general principles to the case at bar, the Court finds that there are so many disputed issues of fact surrounding the legal malpractice claim of the Plaintiffs against Bahrenburg, that a trial is necessary. While Bahrenburg asserts he either did not represent or was released from any conflicts by certain Plaintiffs, the Plaintiffs state the opposite. While Bahrenburg offers different reasons for the Plaintiff’s economic losses, the Plaintiffs set forth that each and every breach, whether of a lease, promissory note or guarantee, was caused by Bahrenburg’s disloyalty, misrepresentations and improper acts. There are also issues of fact raised by the Third Party Defendants, the Braysons, with regard to the allegations that Bahrenburg’s actions of collusion and malicious behavior are sufficient to permit them to sue Bahrenburg both as former clients and as third parties to the various transactions, for legal malpractice under the authority set forth above.

In this action, based upon a careful reading of all the papers, the Court is convinced that the allegations in this case of breach of fiduciary duty against Defendant Bahrenburg, while extremely serious , are subsumed under the claims for legal malpractice as they all arise from the same sets of alleged facts and actions. For this reason, although the Court believes that the multitude of claims by the various Plaintiffs against Bahrenburg for breach of his fiduciary duties will be the subject of much of the trial of this action, they are not the basis for a separate cause of action. Accordingly, the motions for Summary Judgment dismissing the twenty seventh claim by the corporate Plaintiffs and the third , fourth, and ninth cross claims by the Braysons against Bahrenburg for legal malpractice are denied. The motion for Summary Judgment, dismissing the fourth and seventeenth claims as well as the first and eighth cross claims against Bahrenburg for breach of fiduciary duties is granted, with the understanding that all of the factual allegations made under such claims may be presented as the basis for legal malpractice.

As with the breach of fiduciary duty claims, the Plaintiffs and third party Cross Claimants have set forth allegations of facts, which if demonstrated at trial, constitute fraud. However, to the extent that such allegations are made against Bahrenburg, they are again, subsumed within the legal malpractice claims and indeed seek the same damages for the loss of the lease, note and guarantee payments on the various underlying agreements that give rise to this lawsuit. Therefore, while Plaintiffs will be free to demonstrate the acts complained of, they are again not separate causes of action. The same is not true with regard to Defendants Clark and Dryfoos, who are essentially accused, through the various affidavits and discovery presented to the Court, of aiding and abetting Bahrenburg in his various alleged concealments, disloyalties to his former clients, and wrongful acts in jeopardizing their contractual rights. Accordingly, the Summary Judgment motions to dismiss the fraud claims against Bahrenburg (fifth, eighteenth and thirtieth) are granted. On the other hand, the allegations set forth by Plaintiffs against Clark and Dryfoos are sufficient to allow the twenty first and thirtieth claims against them, in which they are accused essentially of aiding and abetting Bahrenburg in acts of misrepresentation and concealment, to proceed to trial and are not dismissed on the Summary Judgment motion.

 

There are numerous contracts at issue in this case, which the Defendants all claim to be barred and the Plaintiffs all assert are enforceable. In this Court’s view each presents ambiguities, when viewing the agreements as a whole, as well their purpose when entered (which is disputed in certain instances). Whether discussing the Oikonomos restructuring agreement, which the Defendants claim void based upon the advice of a non party and Plaintiff claims valid based upon the alleged advice of Windwood and Bahrenburg; the Stonegate lease amendment, which the Foundation asserts relieved it of its obligations and which Stonegate sets forth stands in view of obligations to the initial lending institution; the lease and services agreements between 3390, Educare and Windwood; or the guarantees of the Foundation and Windwood of Maple Valley’s obligations to WDR on its note (which the Defendants claim was expunged and the Plaintiff states is still in effect, either in law or equity under Massachusetts cases), questions of fact have been raised and require the issues to be tried. In this vein, Plaintiffs point to the case relied upon by movants, Awed v Marisco, 538 NE 2d 43 (Mass Ct. App. 1989), which held that even where a co-guarantor pays off a debt, thereby extinguishing the guarantee, such party still has a claim against the co-maker in equity and under the Uniform Commercial Code, for contribution. "