Client settles case and then turn around and sues attorney who settled the case for client, or worse (for the attorney) client settles case on his own, and then sues attorney who was already off the case.  Can a client sue for legal malpractice after settling the case?  The answer is yes, if the settlement was effectively compelled by the attorney’s malpractice.

Put in a more elegant way, the Appellate Term decided Garg v Wigler   2012 NY Slip Op 50494(U)
Decided on March 20, 2012   Appellate Term, First Department:

"Accepting plaintiff’s allegations as true, and according them the benefit of every favorable inference, as we must in the context of a motion to dismiss on the pleadings (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]), we find the complaint, as amplified by plaintiff’s verified answers to defendant’s interrogatories, sufficient to state a cause of action for legal malpractice. The record so far developed raises triable issues as to whether defendant-attorney’s prior representation of plaintiff — including defendant’s acknowledged failure to timely file an administrative appeal following the denial of plaintiff’s claim for disability benefits — was so deficient as to compel plaintiff to settle the underlying federal lawsuit (see Jones Lang Wootten USA v LeBoeuf, Lamb, Green & MacRae, 243 AD2d 168, 175 [1998], lv dismissed 92 NY2d 962 [1998]; Whitman & Ransom v Revson, 220 AD2d 321 [1995]). "Settlement, when compelled by an attorney’s breach of the standard of care, does not present an intervening cause so as to bar a malpractice action" (Jones Lang Wooton USA, at 175). We find unavailing defendant’s contention that there are no issues of fact as to whether its malpractice, if any, caused plaintiff damages. "

When we see a business start up and close rapidly, we often wonder how could this happen.  When we see a shuttered restaurant we wonder how one entrepreneur’s dream could go so wrong.  Here, in Wo Yee Hing Realty Corp. v. Stern, Supreme Court, New York County, Justice Debra James we guess at three things:

a.  This real estate transaction was for millions of dollars;

b.  The sellers had absolutely no idea how to go about selling and buying a like-kind building, and lost $ 4 million dollars in unnecessary tax;

c.  Hired a solo practitioner, who (we guess) had no legal malpractice insurance, did so without a retainer agreement, and did so without any written communications between them.

Result? 

"This is an action seeking damages for alleged legal malpractice with respect to the sale of property, in which plaintiffs claim that they were unable to take advantage of the Internal Revenue Code (IRC) § 1031 like-kind exchange tax deferral because of defendant’s actions. The corporate plaintiff is the owner of the subject property, and the individual plaintiffs are principals of the corporate plaintiff . Defendant is an attorney who alleges that, in 2006, plaintiff Chun Wo Yung (Chun Wo) approached him regarding the Check One: sale of a building that Chun Wo and his  family had owned since  1979. In November, 2006, Chun Wo called defendant to let him
know that he was ready to have a contract drafted regarding the sale of the building, and Chun Wo faxed defendant a letter that Chun Wo had received from a real estate broker who was representing the purchaser. "

"Defendant maintains that throughout the entire process, he constantly informed plaintiffs that he had no experience with 1031 like-kind exchanges, and that they always told him that they would take care of it.

In his EBT, Chun Wo stated, in contrast to defendant’s testimony, that he was unfamiliar with how a 1031 like-kind exchange worked, and that he had never heard of a qualified intermediary. In his affidavit, Chun Wo avers that the corporate plaintiff paid approximately $3,400,000 in federal taxes and approximately $1,700,000 in local taxes.

It’s rarely the mistake (the departure) upon which plaintiff and defense battle in legal malpractice.  It is almost always the "but for" part of the equation, in which plaintiff must show a departure, but for which there would have been a better and different outcome, in which the mistake and the outcome are proximately related, with ascertainable damages.  As an example, in this case could plaintiff have won his case, but for the mistake of his attorneys?

Catuzza v Rodriguez   2012 NY Slip Op 01949   Decided on March 16, 2012   Appellate Division, Fourth Department  questions whether the underlying case could ever have been won. 
"Memorandum: Plaintiff commenced this legal malpractice action seeking damages allegedly resulting from defendants’ negligence in their representation of him in an action against, inter alia, his former employer, the Erie County Water Authority (hereafter, ECWA action). The ECWA action was dismissed based upon plaintiff’s failure to comply with discovery demands. Supreme Court properly denied the motion of defendant David Rodriguez, Esq. and the motion of defendants Noemi Fernandez-Hiltz, Esq. and The Law Offices of Noemi Fernandez, PLLC seeking summary judgment dismissing the complaint. Defendants moved for such relief on the ground that plaintiff could not have prevailed in the ECWA action, inasmuch as he failed to exhaust his administrative remedies by appealing the determination of the Hearing Officer in the prior proceeding pursuant to Civil Service Law § 72. Defendants, however, failed to establish as a matter of law that the complaint in the ECWA action would have been dismissed on that ground (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Failure to exhaust administrative remedies is a defense that may be waived if not timely raised (see Matter of Punis v Perales, 112 AD2d 236, 238), and the defendants in the ECWA action did not raise that defense in their answer. Further, inasmuch as " the grounds urged for relief’ and the remedies sought in [the ECWA action and the prior Civil Service Law § 72 proceeding] are separate and distinct," plaintiff did not fail to exhaust his administrative remedies with respect to [*2]the conduct of the defendants in the ECWA action (Matter of Sokol v Granville Cent. School Dist. Bd. of Educ., 260 AD2d 692, 694). "
 

In Barocca v Garten, 2012 NY Slip Op 30609(U) March 1, 2012 Supreme Court, Nassau County
Docket Number: 5249/11 Judge: Antonio I. Brandveen faced a situation in which plaintiff had a long series of communications with the defendant’s attorney, and then served a summons with notice on the defendant’s attorney.  Does this constitute good service?  What standard is employed to determine whether the service is good or not?

The court wrote: " The Court of Appeals holds: On a motion to dismiss pursuant to CPLR 3211 , the pleading is to be afforded a liberal construction (see CPLR 3026). We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit * 8 8 within any cognizable legal theory (Morone v Morone 50 NY2d 481 , 484; Rovello v Orofino Realty Co. 40 NY2d 633 634) Leon v Martinez, 84 N. 2d 83 87- 614 N. S.2d 972 (1994). Here, the parties, owners and an architect, executed an agreement for a residential design at 71 Percheron Lane, Roslyn Heights, New York. There were some issues with the Town of North Hempstead. Attorneys represented the parties in their efforts to resolve the issues regarding certain work performed involving the residence. The parties communicated with the assistance of their legal counsels. On April 7, 2011 the plaintiff commenced the instant action. CPLR 306-b provides:

Service of the summons and complaint, summons with notice, third-party summons and complaint, or petition with a notice of petition or order to show  cause shall be made within one hundred twenty days after the commencement of the action or proceeding, provided that in an action or proceeding, except a proceeding commenced under the election law, where the applicable statute of limitations is four months or less, service shall be made not later than fifteen days after the date on which the applicable statute of limitations expires. If service is not made upon a defendant within the time provided in this section, the court upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.

CPLR 305 (b) provides:
If the complaint is not served with the summons, the summons shall contain or  have attached thereto a notice  stating the nature of the action and the relief sought and, except in an action for medical malpractice, the sum of money for which judgment may be taken in case of default. The Second Department holds:
The 120-day service provision of CPLR 306-b can be extended by a court, upon motion  " upon good cause shown or in the interest of justice (CPLR 306-b). Good cause" and "interest of justice" are two separate and independent statutory . standards (see Leader v. Maroney, Ponzini Spencer 97 N. 2d at 104, 736
S.2d 291 , 761 N.E.2d 1018). To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service (see Leader v. Maroney, Ponzini Spencer 97 N. 2d at 105- , 736 N.Y.S.2d 291 , 761 N.
1018).. .If good cause for an extension is not established, courts must consider the interest of justice" standard of CPLR 306-b (see e.g. Busler v. Corbett, 259 AD.2d at 17, 696 N. 2d 615). The interest of justice standard does not require . reasonably diligent efforts at service, but courts, in making their determinations may consider the presence or absence of diligence, along with other factors (see Leader v. Maroney, Ponzini Spencer 97 N.Y.2d at 105; 736 N.Y.S.2d 291 761 N. 2d 1018). The interest of justice standard is broader than the good cause
standard (see Mead v. Singleman 24 A.D.3d 1142, 1144 806 N.Y.S.2d 783), as its factors also include the expiration of the statute of limitations, the meritorious nature of the action, the length of delay in service, the promptness of a request by the plaintiff for an extension, and prejudice to the defendant (see Leader v.
Maroney, Ponzini Spencer 97 N. 2d at 105-106, 736 N.Y.S.2d 291 , 761 E.2d 1018; Matter of Jordan v. City of New York 38 AD.3d 336 339 833 Y.S.2d 8; Estey-Dorsa v. Chavez, 27 A.D.3d 277, 813 N. S.2d 54; Mead v.
Singleman 24 AD.3d at 1144, 806 N. 2d 783; de Vries v. Metropolitan Tr. Auth. 11 AD.3d 312, 313, 783 N. S.2d 540; Bafkin v. North Shore Univ. "

The interplay of bankruptcy and personal injury or legal malpractice cases is complicated.  Basically, once one files a Chapter 7 petition, all assets, including the penny in petitioner’s pocket becomes part of the Bankruptcy estate. That estate includes any personal injury claims, and even any future legal malpractice claims.  If they are listed in the schedules, then the trustee has the right to litigate and collect for the creditors.  If they are not, then, for the most part, they will be lost to the plaintiff.  Here, in Santonocito v Moskowitz, Passman & Edelman; 2012 NY Slip Op 30580(U)
March 7, 2012 ;Supreme Court, New York County ;Docket Number: 114418-2010; Judge: Judith J. Gische we see a plaintiff who has a good legal malpractice case lose it all.

"On June 1,2004, prior to filing the personal injury action, plaintiff  and his wife flied a voluntary petition for bankruptcy under Chapter 7 of the bankruptcy ("bankruptcy petition"). The Santonocitos brought the petition pro-se, but a legal services company (We the People) prepared and filed the petition on their behalf, charging them a $229 fee.

Schedule B of the bankruptcy petition requires that the debtor "list all personal property of the debtor of whatever kind." Item 20 requires that the debtor lid "Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims. Give estimated values." Item 17 of Schedule B requires the debtor to also list "Other liquidated debts owing to debtor, including tax refunds." The Santoncitos response was that they had "Proceeds from Auto Accident"

"When a debtor files for bankruptcy protection, this creates an "estate’ comprised of ‘ail legal and equitable interests of the debtor as of the commencement of the case (1 1 USC  541 [a][1]. A pre-petition injury qualifies as a legal interest, within the meaning of the statute (In re Corbi, 149 B.R. 325,329 [Bankr.E.D.N.Y.l993]) and a debtor is required to disclose in its bankruptcy petition any causes of action that would be brought by the debtor (Kunica v. St. Jean Financial Inc., 233 8.R. 46 [SDNY l999Q]). This is for the benefit of the creditors (Kunica v. St. Jean, supra). If the debtor fails to list a claim, "an unscheduled claim remains the property of the bankruptcy estate… Crawford v. Franklin Credit Management Corp., ., -B .R.–, 201 1 WL 1118584 [S.D.N.Y. 2011; also Bromley v. Fleet, 240 AD2d 611 (2d Dept 1997),   Consequently, the debtor lacks standing to bring a lawsuit in connection with such claims after emerging from bankruptcy, and if  s/he does, the lawsuit must be dismissed."

Kenneth M. Block, Esq. and John-Patrick Curran Esq. write that the line between tort and contract claims in architectural negligence cases has become blurred over the years.  Both legal and architectural negligence claims were at one time strictly divided into tort and contract sides of the equation.  Each had its own statute of limitations, and each was doctrinally different.  In their outside counsel column in the New York Law Journal they describe how the lines have blurred.

"In 1996, the state Legislature, through an amendment to CPLR Section 214(6), overruled Sears, Roebuck’s holding that differing statutes of limitations governed the damages available in architectural malpractice suits grounded in tort instead of contract.7

This legislative action swept away the notion that tort damages were available only during a three-year limitations period but that contractual damages were available for six years. However, the amendment left open the question of whether, once that distinguishing feature (for statute of limitations purposes) between malpractice claims sounding in tort and those sounding in contract was removed, plaintiffs needed to continue to separate contract and tort theories in their malpractice claim or risk losing the ability to recover under both theories."
 

"One way to understand Brushton-Moira is as an evolution in architectural malpractice theory: In 1993, the Third Department sharply delineated between contract and malpractice claims, but by 1998, the Court of Appeals treated the action as a hybrid and merged contract and tort theories.

This view of malpractice claims was embraced by the First Department in a 1999 case, 17 Vista Fee Associates v. Teachers Insurance & Annuity Association of America.17 In 17 Vista, the trial court found that the plaintiff had no malpractice claim because it only alleged economic loss and no legal duty outside the contract was alleged to have been breached. The First Department rejected that finding, noting that "in claims against professionals, a legal duty independent of contractual obligations may be imposed by law as incident to the parties’ relationship…for failure to exercise reasonable care[.]"18 It was irrelevant that the plaintiff may not have suffered tort damages because the fact that it "suffered pecuniary losses only is of no significance in this malpractice claim against a professional" because "[m]any types of malpractice actions…will frequently result in economic loss only."19 Thus, regardless of the underlying theory, both contract and tort damages were recoverable.

Conclusion

In the past, plaintiffs asserting architectural malpractice claims had to exercise care in pleading their claims, making sure to assert both contract and tort theories to ensure that both contract and tort damages would be available to them. Cases such as Brushton-Moira and17 Vista indicate that plaintiffs no longer need to expressly define the theory under which their malpractice claims are brought, and if the claim is properly pled and proven, they will be able to recover both contract and tort damages for architectural malpractice."

We are often struck by the human element and how it interacts with the institutional element of litigation. Schedules are packed, attorneys have many cases, court dates go unrecorded, attorneys just don’t show up for conferences, and yet the cases go on. We believe that even in a successful case for one side or the other, a detailed inspection of the file or the record will demonstrate multiple mistakes by the winner. In other words, there are often departures without proximity.

Even in legal malpractice litigation, where the stakes are at least conceptually raised, mistakes happen. Here, in Hudson v Gouldbourne ; 2011 NY Slip Op 03548 ; Decided on April 26, 2011
Appellate Division, Second Department we see a default, a motion for a default judgment, a judgment and now, a sanction.

"An order relieving a party from a default may be conditioned on payment of a monetary sanction pursuant to CPLR 5015(a) (see Gissaro v Lessne, 300 AD2d 281, 282; Du Jour v DeJean, 247 AD2d 370, 371; Workman v Amato, 231 AD2d 627, 628; Coven v Trust Co. of N.J., 225 AD2d 576; Sasson v Sasson, 134 AD2d 491). Under the circumstances of this case, the Supreme Court providently exercised its discretion in imposing a monetary sanction in the sum of $3,000 as a condition to granting the defendant’s motion to vacate the default judgment against her on the issue of liability. "
 

Irony has little place in litigation, yet it abounds. In Perez-Faringer v Heilman ; 2010 NY Slip Op 09238 ; Decided on December 14, 2010 ; Appellate Division, Second Department plaintiff, pro-se in the action below, and in the appeal, has had the action dismissed, for the mere and easily avoidable failure to serve a complaint after demand.
 

The unfortunate juxtaposition of a case within a case within a case is unique to legal malpractice litigation. In a meta- sort of way it is symmetric. "The plaintiffs purchased a parcel of real property located in Scarsdale (hereinafter the subject property), from the defendant Lila Lambert Carloni. In this real estate transaction, the plaintiffs were represented by the defendant Julia Heilman and Carloni was represented by the defendant Sue Freedman. Subsequent to the closing of title, the plaintiffs discovered that the property upon which an easement which they needed to park their cars would not be maintained or repaired by the Village of Scarsdale, as represented by Carloni in the contract. In addition, they found out that the third floor of the home on the property, which had been converted into living space, and the front deck, did not have certificates of occupancy.

On September 29, 2008, the plaintiffs pro se filed a summons with notice at the Westchester County Clerk commencing an action against, among others, Heilman, Carloni, and Freedman, inter alia, to recover damages for legal malpractice, fraud, and breach of fiduciary duty. "

"On February 9, 2009, Freedman served a demand for a complaint on the plaintiffs. Since Freedman mailed this demand to the plaintiffs, the plaintiffs had until March 6, 2009, to serve their complaint. The plaintiffs failed to serve a complaint upon Freedman by that date. [*2]

In an order entered July 14, 2009, the Supreme Court granted Freedman’s motion to dismiss the action pursuant to CPLR 3012(b) insofar as asserted against her. In a second order also issued the same day, the Supreme Court denied the plaintiffs’ motion, inter alia, to extend their time to serve their complaint. We affirm. "