Gallet Dreyer & Berkey, LLP v Basile  2013 NY Slip Op 30101(U)  January 16, 2013  Supreme Court, New York County  Docket Number: 109687/11  Judge: Donna M. Mills is a recently decided case that touches on three themes.  The first is legal malpractice cases after settlement, the second is privity and the third is hindsight.  Plaintiffs move forward with many but not all of their claims still alive.

"H&P was retained in 2006 to represent Ms. Holm in an existing Surrogate’s Court  action seeking to revoke an irrevocable trust into which the bulk of Ms. Holm’s assets had been transferred. That action was commenced two months after Ms. Holm married the significantly younger Mr. Basile, and her sons, as trustees, fought the revocation. Gallet was initially retained by Mr. Basile to defend him at a deposition in the Surrogate’s Court Case.

The Surrogate’s Court matter was concluded with all parties entering into a Stipulation of Settlement while a motion for summary judgment by Holm’s sons was pending. The Stipulation provided for the payment of costs associated with Ms. Holm’s living expenses on a monthly basis as well as a cash allowance per month to be paid from the Trust. With respect to a farm property located in New Jersey (the “Farm”) that was transferred to her sons by Ms. Holm in 2002 and 2003, the Stipulation specifically acknowledged the validity of that transfer and specified that Trust funds were not to be used for the upkeep of the Farm, and discontinued an action commenced by summons with notice relating to the transfer of the Farm. A complaint was never filed in that matter
and Ms. Holm never retained H&P to perform any services with respect to that matter. The stipulation also addressed various loans made by Ms. Holm to her sons, setting forth the rates of interest, and that the loans were forgiven upon her death. The Stipulation further provided for the distribution of Ms. Holm’s estate upon her death, one-third to each son and one-third to Mr. Basile with applicable reductions for each. Also pursuant to the settlement, the Trust was to be funded by a refinance of Ms. Holm’s apartment. The crux 6f the allegations in the third-party complaint is that in hindsight, the settlement of the underlying Surrogate’s Court action, allegedly constituted malpractice.

As is set forth in the third-party complaint, Gallet was initially retained by Mr. Basile to defend him at a deposition in the Surrogate’s Court Case. Mr. Basile executed a retainer agreement for the legal service of his own separate and independent, in connection with the lawsuit commenced by his wife, Ms. Holm in the Surrogate’s Court. The third-party complaint admits that while Ms. Holm retained HBP, Basile retained Gallet as his attorneys. The complaint further admits that while Ms. Holm was invoiced for legal services by H&P, Mr. Basile was invoiced for legal services by Gallet.
In opposition to the motion to dismiss, Mr. Basile argues, inter alia, that H&P was his counsel by virtue of a “joint representation” of Ms. Holm and Mr. Basile by both H&P and Gallet. Mr. Basile argues that H&P communicated nearly exclusively with him regarding litigation of the Surrogate Court Case, the State Court Case and related matters. Mr. Basile annexes e mails purporting to show that H&P established a relationship in privity, or sufficiently near privity, to support his malpractice cause of action against it.

“[A] relationship of near privity may … be sufficient to sustain a legal malpractice claim” only in cases where there is negligent misrepresentation ( Federal Ins. Co. v North American Specialty Insurance Co., 47 A.D.3d at 60, 847 N.Y.S.2d 7) and, here, although the third-party complaint alleges that Gallet and H&P made negligent misrepresentations upon which the third-party plaintiffs relied, in light of the fact that the third-party plaintiffs were separately represented by counsel, any justifiable reliance on the purported negligent misrepresentation can only be directed at their own retained counsel. Moreover, contrary to the contention of third-party plaintiffs, their unilateral belief that they had an attorney client relationship with each others counsel, in addition to their own, does not by itself confer upon them the status of clients of their spouses’ counsel.
Since Ms. Holm and Mr. Basile clearly had separate representation in the underlying litigations, they cannot now argue that they were in privity or near-privity with each others lawyers, notwithstanding the fact that both law firms worked closely together and engaged in discussions and decisions jointly. As such, the documentary evidence submitted in support of the third-party defendants’ motion to dismiss, clearly proves that Gallet solely represented Mr. Basile in the underlying actions, and that H&P solely represented Ms. Holm.

According to the third-party complaint, H&P and Gallet’s purported malpractice arises from three instances of alleged negligence: (I) the purported failure to conduct due diligence relating to the ownership of the apartment; (2) the failure to prosecute the Supreme Court Action; and (3) that they were forced to enter into the Stipulation of Settlement which caused them to lose access to certain assets. “A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that the settlement of the action was effectively compelled by the mistakes of counsel” ( Bernstein v. Oppenheim & Co., P.C., 160A.D.2d 428,430,554 N.Y.S.2d 487 [I 9901 [citation omitted] ). The third-party complaint alleges that, but for third-party defendants’ negligence in failing to conduct due diligence and the consequential erroneous advice based on this failure, third-party plaintiffs would not have executed the stipulation in the Surrogates Court action, and would have received either a higher settlement or trial verdict. These allegations are sufficient to withstand a CPLR 321 I (a)(7) motion."

Wadsworth Condos LLC sought to develop a condominium building, and took on others as kind-of partners, but really as tenants in common.  What developed thereafter led to problems with municipal entities, a lot of money spent and  a legal malpractice case, Wadsworth Condos LLC v Dollinger Gonski & Grossman   2013 NY Slip Op 30149(U)   January 22, 2013   Sup Ct, New York County   Docket Number: 600899/2009  Judge: Louis B. York discusses both legal malpractice and associated professional negligence.

"Summary judgment is a drastic remedy which is granted only when the party seeking summary judgment has established that there are no triable issues of fact.  Andre v Pomeroy, 35 NY2d 361, 364 (1974). The burden then shifts to the motion’s opponent to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact." Mazurek v Metropolitan Museum of Art, 27 AD3d 227, 228 (1 st Dept 2006). "In considering a summary judgment motion, evidence should be analyzed in the light most favorable to the party opposing the motion." Martin v Briggs, 235 AD2d 192, 196 (1st Dept 1997). "On a motion for summary judgment the court is not to determine credibility, but whether there exists a factual issue, or if arguably there is a genuine issue of fact.” S .I. Capelin Assocs., Inc.. v Globe Mfg.. Corp., 34 NY2d 338, 341 (1974); see Psihogios v Stavropolis, 269 AD2d 295,296 (1st Dept 2000) (holding that issues of credibility should be left for resolution by the trier of fact). Here, there is a clear dispute raised by the testimony of Joe Bobker and Dollinger. While Dollinger slates that the litigation against Fischer was authorized, Joe Bobker disagrees, and states that this litigation was not authorized, and that Dollinger was specifically told not to commence the litigation against Fischer.

There also remains questions of fact as to whether Dollinger’s work for 43 Park
conflicted with the interests of the tenancy in common and the management agreement, and
whether Dollinger did or did not contribute to delays in the litigation which resulted in damages.
Therefore, because here are issues regrading the credibility of the witnesses, as well as issues of
fact regarding Dollinger’s work, Dollinger and the Dollinger law firm’s motion for summary
.judgment must be denied."

The Appellate Division avoided rubber stamping a summary judgment decision, and took a longer and closer look at the underlying case.  In this particular instance it affirmed, but did not simply say that settlement of the underlying case ended the discussion.  In Bellinson Law, LLC v Iannucci
2013 NY Slip Op 00395   Decided on January 24, 2013   Appellate Division, First Department it decided that : "In this action by plaintiff law firm seeking legal fees owed by defendant pursuant to a retainer agreement, plaintiff made a prima facie showing of entitlement to judgment as a matter of law. In opposition, defendant failed to raise triable issues of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). With respect to his counterclaim for legal malpractice, defendant failed to raise a triable issue as to whether plaintiff’s alleged negligence proximately caused his damages and whether the claimed damages were actual and ascertainable (see Wo Yee Hing Realty, Corp. v Stern, 99 AD3d 58, 62-63 [1st Dept 2012]; see also Reibman v Senie, 302 AD2d 290, 290 [1st Dept 2003]). The record does not support defendant’s contention that he was forced to settle the underlying action because plaintiff was incompetent and unprepared on the eve of trial. Indeed, even if plaintiff was negligent, there is evidence in the record indicating that defendant had other options besides settling the case (see Fusco v Fauci, 299 AD2d 263 [1st Dept 2002]). Further, defendant’s claimed damages could not be construed as actual and ascertainable, given that the bulk of the claimed damages in the underlying action were, at the time of settlement, subject to potential dismissal (see generally Markard v Bloom, 4 AD3d 128, 129 [1st Dept 2004], lv denied 2 NY3d 706 [2004]).

With respect to defendant’s fraud-based counterclaim, defendant failed to offer proof of [*2]injury arising from plaintiff’s allegedly misleading claims of federal court trial experience (see generally Small v Lorillard Tobacco Co., 94 NY2d 43, 57 [1999]). "

Accusing an attorney of legal malpractice may have dangerous consequences, but, as in all things, the details matter.  To whom you make the accusation is very important.  Make it to just anyone, and there might be a good defamation law suit; make it to another concerned attorney and it could be permissible.

In Sklover v Sack  2013 NY Slip Op 00323  Decided on January 23, 2013  Appellate Division, Second Department, plaintiff’s defamation claim fails because the words were communicated to another concerned party.   "Even if the offending statements are actionable assertions of fact rather than nonactionable expressions of opinion (see generally Mann v Abel, 10 NY3d 271, 276, cert denied 555 US 1170), the statements are protected by the absolute privilege for statements made in a judicial proceeding. A statement made by counsel in the course of a judicial proceeding, even if made with malice or bad faith, "is absolutely privileged if, by any view or under any circumstances, it may be considered pertinent to the litigation" (Martirano v Frost, 25 NY2d 505, 507; see Rabiea v Stein, 69 AD3d 700, 700; Sexter & Warmflash, P.C. v Margrabe, 38 AD3d 163, 171). The statements at issue were made among counsel in a pending judicial proceeding, and were pertinent to a dispute over the proceeds of the settlement in the federal action (see Rabiea v Stein, 69 AD3d at 701; Sexter & Warmflash, P.C. v Margrabe, 38 AD3d at 175-176; Impallomeni v Meiselman, Farber, Packman & Eberz, 272 AD2d 579, 580; cf. Ingber v Mallilo, 52 AD3d 569, 570). Furthermore, the statements were pertinent to the settlement of a prospective legal malpractice litigation (see Vodopia v Ziff-Davis Publ. Co., 243 AD2d 368; Lieberman v Hoffman, 239 AD2d 273). Accordingly, the statements are protected by an absolute privilege, and the Supreme Court should have denied the plaintiff’s motion and granted the defendants’ cross motion for summary judgment dismissing the complaint. "

Often enough, Courts have applied res judicata broadly to the question of attorney fee disputes and a later legal malpractice issue.  As a blackletter rule, if an attorney asks the court to set a fee, and it does, that act bars plaintiff from bringing the legal malpractice case on the theory that fees may not be awarded if there has been legal malpractice, and so the award of the fee disposes of the question of whether there was legal malpractice.

In Soni v Pryor   2013 NY Slip Op 00324   Decided on January 23, 2013  Appellate Division,   Second Department a more nuanced approach was taken.  "plaintiffs retained the defendants to represent them in an action commenced against the plaintiffs alleging that the plaintiffs had engaged in certain wrongful acts as directors and officers of several corporations. The parties subsequently had a fee dispute, which was resolved in an arbitration proceeding conducted pursuant to part 137 of the Rules of the Chief Administrator of the Courts (22 NYCRR 137.0-137.12; hereinafter part 137). The panel of arbitrators awarded the defendants the sum of $48,103.75, the full amount in dispute, and the arbitration award was confirmed by the Supreme Court in a proceeding commenced pursuant to CPLR article 75. The plaintiffs subsequently commenced this action alleging that the defendants had committed legal malpractice and breach of contract by failing to investigate whether there were insurance policies issued to the corporations that would have covered the attorney’s fees, defense costs, and loss incurred by the plaintiffs in the underlying action.

The Supreme Court should have denied that branch of the defendants’ motion which was to dismiss the complaint on the ground that the complaint is barred by the doctrines of collateral estoppel and res judicata. Part 137 expressly provides that it does not apply to "claims involving substantial legal questions, including professional malpractice or misconduct" (22 NYCRR 137.1[b][3]). As such, the defendants failed to sustain their burden of demonstrating that all of the issues raised in the instant action which are or may be determinative thereof were necessarily decided in the arbitration proceeding, or in the proceeding to confirm the arbitration award (see Mahler v Campagna, 60 AD3d 1009, 1011-1012). Moreover, in opposition to the motion, the plaintiffs [*2]submitted an affidavit of the plaintiff Om P. Soni, in which he stated that the arbitration panel refused to consider issues regarding the quality of the legal services performed by the defendants, and this evidence was sufficient to demonstrate that, in any event, the plaintiffs lacked a full and fair opportunity to litigate the issues raised in the instant complaint (see id. at 1012). "

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.