Datatreasury Corp. v Del Col; 2012 NY Slip Op 31913(U); July 5, 2012; Sup Ct, Suffolk County
Docket Number: 11-26774; Judge: John J.J. Jones Jr represents a very unusual use of Judiciary Law 487.  It comes mid-case in a commercial setting.

Judge Jones writes: "As is relevant to the instant action, Del Col, in an attorney affirmation dated January 20,2011, submitted in support of applications for an order to show cause and a temporary restraining order (TR 0) in the underlying case, affirmed that he was the attorney for Mitchael Trimarco and was seeking an ex parte order, without prior notice to defendant Data Treasury and nonparties Keith DeLuca, Shepard Lane, and Claudia Ballard, pursuant to 22 NYCRR 202.7 on the basis that such notice would significantly prejudice Trimarco. The bases for prejudice to Trimarco, according to Del Co ’s affirmation, were that Data Treasury was fleeing the jurisdiction; that Data Treasury was in violation of court orders and secreting its assets; that Data Treasury had tampered with witnesses; and that Data Treasury would further obstruct and impair Trimarco’s ability to recover if advance notice was given. A TRO was thereafter granted ex parte by order dated January 21,201 1 (Gazzillo, J.). The order enjoined Data Treasury and nonparties DeLuca, Lane, and Ballard, the alleged principals of IData Treasury, among other things, from selling, disposing, transferring, and diluting personal property and corporate assets of Data Treasury. It also prohibited Nix, Patterson & Roach, a law firm in Texas, from dispersing any monies or things of value to Data Treasury or its principals pending further order of the Court. Thereafter, the Appellate Division, Second Department, vacated the temporary restraining order.
    Subsequently, plaintiff Data Treasury commenced this action against Del Col seeking damages
pursuant to Judiciary Law 8 487 for attorney misconduct."

"Judiciary Law $ 487 applies only to wrongful conduct by an attorney in an action that is actually
pending (Mahler v Campagna, 60 AD3d 1009,876 NYS2d 143 [2d Dept 20091; see Tawil v Wasser, 21 AD2d 948, 801 NYS2d 619 [2d Dept 20061). Deception of a court is not confined to the actual
appearance in court, but may include any statement, oral or written, made with regard to a  proceeding brought or to be brought therein and communicated to the court with intent to deceive (Cinao v Rem, 27 Misc3d 195, 893 NYS2d 851 [Sup Ct Kings County 2010). A violation of Judiciary Law 487 permits the imposition of treble damages for certain attorney misconduct. Such violation may be established by either the defendant’s deceit or by a chronic, extreme pattern of legal delinquency by the defendant (Cinao v Reers, supra). When a party commences an action grounded in a material misrepresentation of fact, the opposing party is obligated to defend or default and necessarily incurs legal expenses. As such, the party’s legal expenses in defending the lawsuit may be treated as the proximate result of the misrepresentation (Amalfitano v Rosenberg, 12 NY3d 8, 874 NYS2d 868 [2009]). An attorney who is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive – the court or any party, is guilty of a misdemeanor and is liable for treble damages to the party injured (Amalfitano v Rosenberg, supra). The elements of a deceit claim are essentially the same elements that constitute a cause of action for fraud, namely representation, falsity, scienter, deception and injury (Morris v. Rochdale Village, Inc., 201 1 NY Slip Op 33315U [Sup Ct Queens County 2011).   CPLR 6301 provides that a temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had. Unlike a preliminary injunction,  where an undertaking is mandated by statute (CPLR 6212[b]), the posting of an undertaking prior to issuance of a TRO is discretionary with the court (CPLR 63 13 [c]) (see Napoleon Art & Production, Inc. and Code Films, Inc. v Laughlin, 14 Misc3d 1226A, 836 NYS2d 494 [Sup. Ct. New York County 20071). The granting of a TRO in an order to show cause without notice to the opposing party deprives the  party of the opportunity to argue that an undertaking is warranted, neutralizing the defendant at the discretionary phase (Napoleon Art & Production, Inc. and Code Films, Inc. v Laughlin, supra).

We’re still looking at Wortman v. Cheng today.

Although at oral argument, plaintiff’s principal stated he was not challenging the contingency fee agreement the law firm is, in fact, doing just that. Wortman states in his February 17, 2012 affidavit that "I am entitled to the quantum meruit  value of my services In the Cheng v. Cartelli case. Chang has unreasonably refused to settle the Cartelli case for the maximum limits of Cartelli’s policy of $500,000 despite her representations that she would accept such amount once offered, despite 4 offers to settle at $500,000 …”    

Elsewhere plaintiff states that Wortman relied on these misrepresentations in agreeing to represent her in three cases. Thus the law firm contends that it is entitled to its fees based upon quasi contractual principles because it was induced and defrauded into signing the flat free retainer with Chang, The law firm contends that had it known Chang had no intention of settling the Cartelli case immediately or ever, it would not have taken the other matters on would have made a different agreement with Chang her In connection with the Citidress and Golden City matters. Phrased differently, anticipating an effortless recovery of a 20% contingency fee in the malpractice action, Wortman agreed to take the foreclosure cases on for a modest fee. These arguments blur the distinctions between plaintiffs 2d COA for quantum meruit and its 3d COA for fraud.

Regardless of which factual claims are true, Wortman has no claim against Chang for legal fees in the Cartelli action, other than for the 20% contingency fee of the amount – if any- Chang eventually recovers on the judgment entered against the Cartelli estate. By its very nature a contingency fee is “contingent” on a successful result. Although Chang prevailed in the Cartelli action, and the $8,708,490 judgment was affirmed on appeal, it is unclear whether she will ever recover any part of that judgment. This uncertainty is the subject of Chang’s malpractice counterclaim against the law firm. Since Chang and the law firm entered Into a retainer agreement for a contingency fee, Wortman cannot assert a valid claim against his client for quantum meruit in the Cartelli action. Georgia Malone & Co., Inc. v. Ralph Rieder, 86 A .D.3d 406,410 [lst Dept 201 11).

The existence of a valid and enforceable written contract governing the disputed subject matter precludes the law firm from recovering in quantum meruit (Sheiffer v. Shenkman Capital Management, supra).

The law firm contends it was defrauded by Chang because Chang lied to Wotman about her eagerness and willhgness to settle the Cartelli case for $500,000. This claim presents complicated issues about an attorney’s fiduciary duties to his or her client and the nature of retainer agreements.

The unique relationship between an attorney and his or her client is based upon "the elements of trust and confidence on the part of the, client and of undivided loyalty  and devotion on the part of the attorney …" Demov, Morris. Levin & Shein v. Glantz. 53 N.Y.2d 553 [1981]). An attorney has a fiduciary duty to his or her client and this duty transcends those prevailing in the commercial market place (Ulico Cas. Go. v. Wilson, Elser. Moskowitz , Edelman & Dicker, 56 A.D.3d 1,8 [1st "Dept 2008]  internal citations  omitted). It is well established law that an agreement between an attorney and his or her is subject to close scrutiny and in the event of any ambiguity, it must be construed in a manner most favorable to the client [Shaw v., Manufacturers Hanover Trust Co,, 68 N.Y.2d 172 [1986]).
 

A "deliberate misrepresentation of present intent made for the purpose of inducing another to enter a contract will normally constitute actionable fraud if there is a reliance by the party to whom the misrepresentation was made" (Demov. Morris. Levine & Shein v, Glantz, 53 N.Y.2d at 557). Where, however, it is a client who made a misrepresentation to an attorney to induce him to take the case, that misrepresentation, even if deliberate, will not, as a matter of public policy, support a fraud cause of action against the client   [Demov, Morris. Levin & Shein v. Glantz  supra].

Applying the legal principles of Damov, plaintiffs claim fails because he has not established a material element of his fraud claim: reliance. Although in the client discharged the attorneys after she had promised them they would be substitute in as counsel on another, more financially lucrative matter, the underlying type of promise in this case is  indistinguishable. Wortman’s fraud claim is based on his expectation of fees which have not materialized. Therefore, plaintiff cannot, as a matter of public policy assert a fraud claim against Chang, its client. Even were the court to decide that the firm’s claim is valid, plaintiffs claims skirt dangerously close to the prohibitions set forth in DR 5-101 [1200.20] pertaining to conflicts of interest and a lawyer’s own interests. An attorney must deal fairly, honestly with his or her client and with undivided loyalty, avoiding conflicts of interest, operating competently, safeguarding his or her client’s property and honoring the client’s interests over the lawyer’s own interests ( Matter of Cooperman, 83 N.Y.2d 465 [1994]

In Wortman v. Cheng,  which we started to write about last week Justice Gische lays out a primer of the various attorney fee claims, and how they interrelate with legal malpractice.

"The elements of a claim for quantum r meruit am:( It)he performance of services in good faith; (2) the acceptance of services by the person to whom they are rendered; (3) an expectation of compensation; and (4) the reasonable value of the services (Georgia Malone & Go.. Inc, v, Ralph Rjeder (86 A.D.3d 406,410 [1st Dept,  2011])   The existence of a valid and enforceable written contract governing the disputed subject matter precludes plaintiffs from recovering in quantum meruit (Shelffer v. Shenkman Capital Management. Inc,, 291 A.D.2d 295 [1st Dept,  2002).

In connection with this particular cause of action, Wortman makes no claim that the March 22, 2001 flat fee retainer is invalid or should be invalidated. It is unrefuted that the contract obligates Chang "to pay for our services on the basis of a flat fee of $15,000" payable in 3 installments. It is unrefuted that she did, in fact, pay that fee, It is also unrefuted that Kenneth Cahill, the person who intended to open a restaurant at the building, paid a part of the fee, although not a signatory to that retainer. The flat fee retainer states that it is "in connection with your transactions for the establishment of a restaurant at [207 Second Avenue] …" referencing an agreement between Chang and Cahill. The retainer also states that the firm has "agreed to represent Janet Chang and
Kevin Cahill in connection with the following . . ." The $15,000 is not identified as a "retainer or
specify that Chang would thereafter be billed on an hourly basis. There is no provision
for the law firm to charge for its disbursements.

There are different types of billing arrangements that an attorney and client agree to, depending on the type of legal services being rendered and the nature of the case. Chang and Wortman had a contingency arrangement for the malpractice action, but agreed that a "flat fee" would be charged for the foreclosure actions and to bring the Chang/Cahill restaurant agreement to fruition. In a flat fee arrangement, as the words suggest, all work is done for a set, agreed to amount. In setting the flat fee, it is expected that an attorney has evaluated the complexity of the work required and set his or her fee accordingly. If it turns out the work needed is less than anticipated, than the attorney may benefit from the arrangement in the sense that he or she recoups more than his or her customary hourly rate. On the other hand, If the work turns out to be more complex than anticipated, the attorney has no basis to collect more than the agreed to amount, unless the retainer so provides (compare: Manufacturers & Traders Trust Co v. Dougherty, 11 A.D.3d 1019 [4th Dept 2004]  although retainer indicated work would be done for a flat fee of $1,250, the mortgage allowed plaintiff to recover “all reasonable legal fees from defaulting defendant; Webbe v. Webbe,267 AD2d 784 [3rd Dept 1099] in divorce action, defendant’s attorney had a flat fee retainer of $2,500,. but was able to seek legal fees from plaintiff).

The flat fee retainer at bar contains no Imitations, conditions, caveats or an expiration date. The $15,000 is not identified as a retainer to be replenished. The only additional monies that the law firm could recover under the flat free retainer were for “any appeals.” Therefore, any argument by Wortman that the retainer agreement regarding the foreclosure matters really means anything other than what it expressly provides is without any factual or legal basis. There is no indication within the four corners of this retainer agreement that it was intended to expire or the parties anticipated to receive or make additional payment. Since there is no ambiguity in the retainer agreement, Wortman’s effort to create an ambiguity where none exists is unavailing (In re Koppel, 95 AD3d 453 (1st Dept, 2012) The issue of whether Wortman complied with the requirements of Part 1215 of Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New Yo& (22 NYCRR 1215”) has been addressed by the parties in connection with the parties’ arguments about whether the retainer expired. Since the flat fee retainer was signed before this rule became effective (March 4, 2002), 22 NYCRR 1215.2 does not apply to the flat fee retainer. Even if it did, noncompliance with the requirements of 22 NYCRR 1215.1 would not bar the law firm from recovering in quantum meruit under certain circumstances (Nabi v. Sells, 70 A.D.3d 252 [1st Dept 2009]

Chang has proved the flat fee retainer is valid, enforceable and unambiguous,thereby meeting her burden and shifting it to the plaintiff law firm to demonstrate the existence of a triable issue of fact (Alvaraz w, Prospect Hosp., 68 N.Y.2d 320, 324 [ 1986];  Zuckerman v, City of New York ,49 N.Y.2d 557 [1980]). The law firm has not met its burden of showing, as it claims, that the flat fee retainer agreement expired or that it is ambiguous, Therefore, Chang is entitled to summary judgment dismissing the quantum meruit cause of action in the complaint to the extent that the law firm’s claims fall within the ambit of the work subject to the flat fee agreement and such work was performed before the firm was permitted to withdraw as counsel by Justice Heitler.

We’ll finish this case on Tuesday

Legal Malpractice and Attorney Fees are coupled throughout the case law involving attorneys.  They generally arrive on the scene together, and resolution of one generally disposes of the other.  In Daniel R. Wotman & Assoc., PLLC v Chang  2012 NY Slip Op 31845(U)  July 9, 2012
Supreme Court, New York County  Docket Number: 110893/2010  Judge Judith J. Gische writes about many of the typical tropes:  attorneys trying to change the terms of flat fees into hourly rates, attorneys deciding that the client just isn’t reasonable about settlement, clients not wanting to settle, clients getting bills and making a decision to pay a little, and cajole the attorney into doing something on appeal, attorneys leaving "biglaw" and trying to make it in the more modest legal world.

Plaintiff is a law firm named after its principal, Daniel R. Wotman, Esq. Chang  was a 50% shareholder in 207 Second Avenue Realty Corp. ("corporation"). The other shareholders (Ruby and Wilson Chang) held the remaining 50% interest. The corporation owned the building located at 207 Second Avenue, New York, New York. The law firm contends it is owed legal fees by Chang in the principal amount of $438,31 I .19 for legal services rendered in pursuit of three related cases involving Chang as follows: Citidress II Cora. v, 207 Second Avenue Realtv Carp, , Index
No.121848199 ("Citidress"), Gold Citv Commercial Bank v. 207 Second Avenue Corp, Index No. 104319 /93 ("Gold City") and Janet Chang, as assignee v. Botsacos, Index No. 2242/86.

Citidress and Gold City were each foreclosure actions. In Citidress, Chang brought a cross claim against her fellow shareholders (Wilson and Ruby Chang), alleging that they obtained a mortgage secured by the building without her knowledge. Chang subsequently bought the mortgage from Gold City, but was apparently never substituted as named plaintiff. In September 2007, Chang sold the building for $5,000,000 and Hon. Alice Schlessinger, the judge presiding over the Citidress case, dealt with various issues resolving that action. The Cartelli case is for legal malpractice.
Chang alleges that Thomas Cartelli, Esq. (now deceased), assisted the other shareholders in obtaining the mortgage through fraudulent means, including phony board minutes.

Chang, Individually and as Officer and Director of the corporation, entered into two (2) separate retainer agreements with the law firm.

Following B ten day trial on the Cartelli malpractice claim, at which Chang was represented by Wotman, on October IO, 2002, the jury returned a verdict in favor of Chang. The award consisted of $1,930,491 on the malpractice claim, $3,000,000 in punitive damages and $176,000 In legal fees. The jury found that Thomas Cartelli had been negligent and assisted the other shareholders (Wilson and Ruby Chang) in obtaining a mortgage without Janet Chang’s written consent, etc., and that Cartelli’s negligence had resulted in the diversion of the mortgage proceeds. Judgment was not immediately entered by Wotman In the Cartelli action.

A few months later, on June 13,2003, Cartelll’s malpractice insurance carder, The Home Insurance Company, was declared insolvent and The Superintendent of Insurance took possession of its property and assets (Supreme Court Index No. 402871-2003). Wortman did not enter judgment In the Cartelli malpractice action until several years later, on August 10, 2010. After serving the judgment on the Superintendent of Insurance, Wotman was notified (on August 19,2010) that the Liquidation Bureau had rejected the judgment on the basis that “it was not entered in accordance with applicable law.” The Cartelli judgment was appealed and affirmed on
appeal (Chang v. Botsacosa, 92 A.D.3d 610 [1st Dept 2012). No portion of the Cartelli judgment has been satisfied to date."

Meanwhile, in August 2004, Wotman moved to be relieved as counsel in the Citidress and Golden City motions, stating that Chang was "ignoring" his legal advice and pursuing that case and others "merely for the purpose of harassing and maliciously injuring other parties, including [the law firm]." Wotman also stated that mandatory withdrawal by his firm was necessary because "Chang and [the corporation] are out of control. Our law Firm cannot bring these clients under control … They are not following our advice and instructions.. ." The motion was argued before Justice Heitlar on the record (Steno Minutes 10/6/04)2 and Chang stated that relieving Wotman would prejudice her case because he had taken it on a contingency basis "with a flat charge for some other matters
because he knew that I was not able to pay [legal fees] after many, many lawyers sort of like given up because I was not paying." Chang also stated that Wotman, who had recently left a "big law firm" was "[putting] quite a bit of pressure for me to give up the malpractice case, which is something that he did not have experience [with] …" According to Chang, once Wotman was no longer with that "big firm," he started "[asking] me to give money to him, which I did not have. In fact, then he suggested that he should use the money in the receiver’s account and I agreed to allow him to apply to the Judge to have the use of that money, which would be deducted against the final payment of the contingency fee and fortunately, Judge Lebedeff declined to allow him
use [of] that money."  Justice Heitler, noting that the retainers were not a part of the record, asked
whether Wotman was owed any legal fees. He responded that he was and that his retainer agreement had "expired a while ago-back In April of 2001, it was a limited fee retainer …" The issue of whether there it was a conflict of interest for the corporation and Chang to have been jointly represented by Wotman was also raised during that oral argument. According to Wotman, that conflict had been "waived." Wotman’s motion to be relieved was granted by Justice Heitler.

We’ll continue with this attorney fee primer on Monday.

People start LLCs and other juridical entities in order to obtain a shield from personal liability.  Interests change over time which can cause difficulties later.  Brach v Levine    2012 NY Slip Op 51312(U)   Decided on July 16, 2012   Supreme Court, Kings County   Battaglia, J. is an example. 

Despite the shocking allegation that defendant " Levine allegedly altered the documents, and on November 15, 2006, the mortgage was recorded as against 420 Marcy Avenue, LLC, plaintiff 519 Marcy LLC, and Frankwink Properties, Inc., in addition to 222 Skillman, LLC, 189 Spencer LLC, and 401 Bedford LLC.  Levine allegedly altered the signature page by "adding wholly new parties to the agreement" we see that litigation against him is difficult.

"In their pre-answer motion to dismiss, defendants Michael J. Levine and D’Agostino, Levine, Landesman & Lederman, LLP contend that they are entitled to dismissal of the action as against them on the grounds that plaintiffs Mendel Brach, Moshe Roth, and 519 Marcy LLC either lack capacity to sue (see CPLR 3211[a][3]) or lack standing to bring the action. In addition, Defendants contend that the allegations in the Verified Complaint do not state a valid cause of action for fraud because, among other things, neither Mendel Brach nor Moshe Roth were party to any of the alleged transactions, and did not sustain any actual damages as a result of Defendants’ alleged fraudulent conduct. (See CPLR 3211[a][7]"

"In Community Board 7 of the Borough of Manhattan v Schaffer (84 NY2d 148 [1994]), the Court of Appeals discussed the distinction between dismissal for lack of capacity, lack of standing, and for failure to state a cause of action.

"[T]he concept of capacity is often confused with the concept of standing, but the two legal doctrines are not interchangeable. Standing is an element of the larger question of justiciability’. The various tests that have been devised to determine standing are designed to ensure that the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution. Often informed by considerations of public policy, the standing analysis is, at its foundation, aimed at advancing the judiciary’s self-imposed policy of restraint, which precludes the issuance of advisory opinions.
Capacity,’ in contrast, concerns a litigant’s power to appear and bring its grievance before the court. The concept of a lack of capacity, which has also occasionally been intermingled with the analytically distinct concept of a failure to state a cause of action, does not admit of precise or comprehensive definition. Capacity, or the lack thereof, sometimes depends purely upon a litigant’s status." (Id. at 154-55 [internal quotation marks, brackets, and citations omitted].)
In addressing these issues with respect to plaintiff 519 Marcy LLC, Defendants’ contention is most easily resolved based upon lack of capacity to sue pursuant to CPLR 3211(a)(3). (See e.g. Security Pacific National Bank v Evans, 31 AD3d 278, 279 [1st Dept 2006] [an objection to "plaintiff’s status [as a non-existent corporation] is properly understood as questioning legal capacity, not standing"].)

In this regard, Defendants contend that 519 Marcy LLC lacks legal capacity to sue because it was merged into 222 Skillman, LLC on February 11, 2003, and has been an inactive entity since 2003. It has been held that a business corporation that is merged with, and completely absorbed by, another corporation ceases to exist as an independent jural entity, and, therefore, lacks legal capacity to sue. (See Westside Federal Savings & Loan Association of New York City v Fitzgerald, 136 AD2d 699, 699 [2d Dept 1988]; see also e.g. Lance International, Inc. v First National City Bank, 86 AD3d 479, 480 [1st Dept 2011] [dissolved corporation lacks capacity to sue unless in the course of winding up its affairs]; cf. Security Pacific National Bank v Evans, 31 AD3d at 279.) "

""Generally corporations have an existence separate and distinct from that of their shareholders and an individual shareholder cannot secure a personal recovery for an alleged wrong done to a corporation. The fact that an individual closely affiliated with a corporation (for example a principal shareholder, or even a sole shareholder), is incidentally injured by an injury to the corporation does not confer on the injured individual standing to sue on the basis of either that indirect injury or the direct injury to the corporation". (New Castle Siding Co., Inc. v Wolfson, 97 AD2d 501, 502 [2d Dept 1983], aff’d 63 NY2d 782 [1984]; see also Baccash v Sayegh, 53 AD3d 636, 639 [2d Dept 2008] ["Although it is undisputed that the plaintiff is Bridal Coutrue’s sole officer and shareholder, a corporation has a separate legal existence from its shareholders even where the corporation is wholly owned by a single individual"].) "[C]ourts are loathe to disregard the corporate form for the benefit of those who have chosen that form to conduct business". (Baccash v Sayegh, 53 AD3d at 639 [quoting Harris v Stony Clove Lake Acres, 202 AD2d 745, 747 (3d Dept 1994)].) [*5]

The caselaw cited above appears to consider the issue in terms of both "standing to sue" (New Castle Siding Co., Inc. v Wolfson, 97 AD2d at 502) and "having a cause of action" (id.) . However, in Matlinpatterson ATA Holdings LLC v Federal Express Corp. (87 AD3d 836 [1st Dept 2011], the court analyzed the "standing" issue as a "threshold matter" in the context of a motion for failure to state a cause of action pursuant to CPLR 3211(a)(7), and continued to consider whether any recognizable cause of action could be discerned from the complaint despite noting that the plaintiff may not have had "standing". (See id.) Similarly, in Baccash v Sayegh (53 AD3d 636), the court addressed the issue in terms of the plaintiff’s failure to prove at trial the elements of a cognizable cause of action. (See id. at 639.) In this regard, the court found that the plaintiff, the sole shareholder and owner of a corporation, did not prove that she suffered any direct damages as result of the defendant’s legal malpractice. (See id. at 640.)

In Sealy v Clifton, LLC (68 AD3d 846 [2d Dept 2009]), the Second Department held that an individual plaintiff, who owned a 50% interest in an limited liability company, did not have "legal capacity to sue" for partition of a property owned by a limited liability company of which he was member. (See id., at 847.) The court also noted that a member of a limited liability company "has no interest in specific property of the limited liability company". (See id.; see also Limited Liability Company Law § 601; see also e.g. Yonaty v Glauber, 40 AD3d 1193, 1195 [3d Dept 2007].) "

After all this, the individual plaintiff’s complaint is dismissed.

In New York City condominiums are a rich source of litigation.  At the ownership level, one sees litigation over the buying and selling; at a personal injury level, one sees slips and falls.  In the construction of the buildings, negligence and indemnification between general contractors and subs is an ongoing field of law.  Here, in Flintlock Constr. Servs., LLC v Rubin, Fiorella &
Friedman LLP;   2012 NY Slip Op 31835(U)  July 9, 2012  Supreme Court, New York County
Docket Number: 109657/2011  judge: Saliann Scarpulla we see how the insurance carriers move their attorneys around in a never ending circle of litigation.

"As alleged in the complaint, FCS is a general contractor, and RFF is a law firm  which was designated by FCS’s insurer to represent FCS in a construction dispute.  CS states in the complaint that on or about March 30, 2004, FCS entered into a standard AIA form contract with owner Well-Come Holdings, LLC (“Well-Come”) (the contract”) for the construction of an 8-story condominium apartment project located at 06 Mott Street, in New York City (the “Mott Street project”). FCS alleges that pursuant o the contract, “FCS’s responsibilities were limited and its indemnification obligations ere limited to damages caused by its own conduct; it had not indemnity or other obligations with respect to the scope of work reserved for Well-Come, and . . . it had no obligations to indemnify Well-Come for Well-Come’s own negligence or that of Well- Come’s subcontractors or ~consultants.~F’C S also pleads that it was required to provide insurance to protect FCS and Well-Come from claims of property damage stemming from performance of the contract.

FCS alleges that during the early stages of construction at the Mott Street project in the summer of 2004, one or more ‘Occurrences”to took place which allegedly caused property damage to three adjacent property owners. These owners filed three separate lawsuits in Supreme Court, New York County, against Well-Come, FCS and some of Well-Come’s subcontractors and consultants (the “underlying litigation”). Well-Come was originally defended in the underlying litigation by Marine pursuant to its liability policy. FCS was defended by American Safety, which assigned the defense to RFF. FCS alleges that at various times from 2004 through 2009, RFF defended
multiple claims asserted by numerous parties against FCS at the request and direction of American Safety or American Safety Indemnity Company,’ and that RFF regularly reported to American Safety’s claims personnel about developments and strategies in the defense of the claims against FCS.

At some point, FCS and American Safety came to an agreement whereby FCS  would pay the cost of its defense in any given claim up to and including the amount of the self-insured retention under its American Safety policy. Upon exhaustion of the self insured retention for each claim, as alleged in the complaint, American Safety would pay for FCS’s defense.  FCS alleges in the complaint that although both American Safety and FCS are named as defendants in the declaratory judgment action, RFF entered an appearance and filed pleadings only on behalf of FCS. Further, FCS alleges that American Safety admitted in the declaratory judgment action that it issued both primary and excess coverage to FCS as required by the contract, but denied that Well-Come was an
“additional insured” under its policy or that it had any duty to defend or indemnify Well- Come as an additional insured under any insurance policy issued by American Safety to FCS.
 

Here, the underlying litigation is still pending, therefore Well-Come’s negligence remains an open question. And as RFF acknowledges in reply, before it can be determined whether FCS suffered damages caused by the execution of the stipulation of dismissal, it must first be determined whether Well-Come was negligent.Moreover, FCS has sufficiently pled the existence of actual damages. FCS states in the complaint that because of the stipulation of dismissal, it now faces a claim by Well- Come and its insurer for in excess of $100,000 in attorneys’ fees and expenses incurred in the defense of Well-Come in the underlying litigation. While FCS also alleges future,
speculative damages, the claims it already faces from Well-Come for attorneys’ fees are real and ascertainable, and sufficient to plead a cause of action for legal malpractice, established by FCS’s submission of correspondence from Well-Come’s counsel requesting payment in the amount of $100,395.98. Accordingly, the first and second causes of action of the complaint can not be dismissed."

It’s pretty well accepted that a legal malpractice claim accrues on the date the mistake is made, but in . DURAN, -v-  MOODY, REDNISS MOODY LLP, EDWARD J. GREENFIELD, LAW OFFICE OF EDWARD J. GREENFIELD,  Defendants.  o. 11 Civ. 6155 (LTS)(JLC)  UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK   2012 U.S. Dist. LEXIS 97977 we see the elusive alternative theory of accrual.  That (once in a great while) alternative theory is that a cause of action acrues only when plaintiff suffers an injury which entitles her to relief. 
 

"Greenfield argues that Duran’s claims are barred by New York’s three-year statute of limitations for legal malpractice claims. See N.Y. C.P.L.R. § 214. According to Greenfield, the statute of limitations commenced with his termination in February 2007 — four years prior to the filing of the complaint. However, the statute of limitations for a malpractice claim accrues when the plaintiff suffers an injury that entitles her to relief. Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541 (1994); see also Kronos. Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993). While the Complaint alleges that Greenfield had acted negligently as of February 2007, there is no indication that [*7] Greenfield’s alleged negligence resulted in any legally cognizable injury prior to May 13, 2009, when the New York Supreme Court granted summary judgment as to most of Plaintiff’s claims. Plaintiff’s suit against Greenfield was therefore timely filed."

The Fourth Department, in what we see as strong terms, reiterated that it is always the attorney’s job to prepare the case, and that responsibility may not be shifted to the client. Even when the client participates in the preparation it remains a responsibility of the attorney.

In Rupert v Gates & Adams, P.C. ;2011 NY Slip Op 02554 ; Decided on April 1, 2011 ; Appellate Division, Fourth Department the AD not only says that it was the obligation of the attorneys to trace and investigate matrimonial assets, but that they themselves had to do the work.
 

"We further conclude, however, that the foregoing waiver analysis does not apply with respect to plaintiff’s aforementioned claims that defendants were negligent with respect to the investigation and valuation of plaintiff’s separate property, their investigation of the payment of the sum of $315,000 relative to a note held by plaintiff, and their investigation of the deposit by plaintiff of approximately $60,000 in pension monies into a joint account. Defendants failed to meet their initial burden on those parts of the motion concerning those claims (see Pignataro, 38 AD3d 1320; see generally Zuckerman, 49 NY2d at 562). The waiver analysis based on plaintiff’s global settlement does not apply to those purported deficiencies in defendants’ representation of plaintiff in the matrimonial action because the appeal from the final judgment in the matrimonial action would not have permitted defendants or substitute counsel for plaintiff to address questions regarding the failure to trace plaintiff’s separate property into the marriage and to locate evidence both proving plaintiff’s payment of $315,000 on an outstanding note and demonstrating that $60,000 of plaintiff’s pension monies had been transferred to a joint account to be shared with plaintiff’s former wife. Finally, defendants will not be heard to contend that plaintiff’s involvement with the preparation of the matrimonial action for trial bars him from raising those deficiencies. An attorney generally is not permitted to shift to the client the legal responsibility that the attorney was hired to undertake because of his or her superior knowledge (see Northrop v Thorsen, 46 AD3d 780, 783). Indeed, it is well settled that "[a]n attorney has the responsibility to investigate and prepare every phase of his [or her] client’s case" (Rosenstrauss v Jacobs & Jacobs, 56 AD3d 453, 453 [internal quotation marks omitted]). "