Decedent hires attorney to prepare a will, and to make changes to beneficiaries for her assets.  As one might predict, something goes wrong.  in Gurvitz v Wank; 2011 NY Slip Op 32511(U); September 19, 2011; Supreme Court, Nassau County; Docket Number: 10468/06; Judge: Ute W. Lally we see the results.  The litigation goes on for years, and only now, some 20 years later, are the actual claims honed to an amended complaint.

"In December 1989 , defendant Jerald Wank, an attorney and a certified public accountant, prepared the Last Will and Testament for non-party Marta Wisterich (the Will"). The Will was executed on January 3 , 1990 and named , both , the plaintiff Barbara Gurvitz, and the defendant, Jerald Wank, as co-executors of her Estate. The Will also named the plaintiff as the sole beneficiary. Apparently, at the time of the preparation and execution of the Will , Marta Wisterich asked Wank to change the beneficiary of her Teacher s Insurance and Annuity Association (TIM) Equity Fund to Barbara Gurvitz. Plaintiff claims that the defendant failed to file the requisite paperwork with the TIM reflecting the requested change. As a result, plaintiff filed the appropriate papers with TIM herself on April 22 1991.  Marta Wisterich died on May 28 , 1991.

Plaintiff claims that the defendant then negotiated an agreement to split the Estate of Marta Wisterich in half as between the decedent’s aunt and the plaintiff. She claims that during the negotiations therein , defendant apparently represented the interests of the plaintiff as well as the interests of the Estate. Furthermore , plaintiff claims that the defendant failed to pay her the half of the estate to which she was entitled , instead retaining said share and telling her that he would first pay the outstanding taxes on her behalf. Plaintiff claims that the defendant deposited said monies into a new (escrow) account created under her name, from which defendant withdrew the money to give to the decedent’s aunt. Plaintiff claims that the escrow account created an appearance of income that the plaintiff did not in fact receive. She also claims that not only did the defendant fail to
file or pay plaintiff’ s taxes , but he also refused to pay back the money he held in escrow and refused to represent her before the IRS and the New York State Department of Finance when plaintiff received a tax bill. Plaintiff claims that as the result of defendant’s mistakes, her liability to the IRS totaled more than $160 977. 84 and the amount paid to the Department of Finance totaled more than $23 361. 11. In addition plaintiff claims that as the executor, defendant failed to sell Wisterich’ s cooperative apartment in New York for two years after her death , resulting in  fines and penalties to the Estate and further diminishing the value of the residual Estate.

The statute of limitations begins to run when the cause of action accrues (CPLR 9203(aD, Le.
 "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"(Aetna Life Cas. Co. v Nelson 67 NY2d 169 , 175).  Plaintiff claims in her first cause of action (breach of fiduciary duty as attorney) that plaintiff was represented by the defendant from "March 1992 to now acting as her  attorney with respect to the estate of Marta Wisterich". As alleged in her proposed amended complaint, the claimed breach , as attorney, occurred when the defendant misappropriated funds with respect to plaintiff’ s taxes. According to the plaintiff’ s own allegations said breach occurred some time after May 1992 and before 2000 when defendant forwarded the funds held for the plaintiff in his escrow account to the plaintiff’  then attorney, Mr. Caro. Clearly, under these facts , and even assuming that the breach of fiduciary duty occurred at the very latest in 2000, the cause of action to recover damages for breach of fiduciary duty is time-barred insofar as asserted against Wank as attorney (CPLR 3211 (a)5.). Accordingly, plaintiffs proposed first cause of action for breach of fiduciary duty as attorney is dismissed. Plaintiff has failed to make the requisite evidentiary showing establishing merit to her proposed amended claim (Joyce v McKenna Assoc. , supra; Morgan v Prospect Park Assocs. Holdings, supra). ‘

Might we trust our attorneys?  Can a plaintiff be assured that the attorneys are not conspiring with defendants to "carve" up the settlement between them.  Our system is based upon trust and loyalty, and a belief in the incentive of success.  However…

It need not always be true.  as an example, the Second Circuit reversed the dismissal of a major case against Leeds Morelli & Brown, finding  "overriding and abiding conflicts of interest for LMB and thoroughly undermined its ability to "deal fairly, honestly, and with undivided loyalty to [appellants]"  "The overriding nature of the conflict is underscored by the fact that, when fourteen of the 587 clients failed to agree,Nextel’s final, but pre-consultancy, payment to LMB was reduced from $2 million to $1,720,000, or $20,000 per non-agreeing client. "  In Johnson v. Nextel Communications 1892-cv -09 we see:

"Once all the claims were processed, LMB would formally go to work for Nextel as a consultant for two years at $1 million per year. LMB also promised in the DRSA not to accept new clients with claims against Nextel, not to refer any such client to another lawyer or firm, and not to accept compensation for any prior referral.

It cannot be gainsaid that, viewed on its face alone, the DRSA created an enormous conflict of interest between LMB and its clients. Such a conflict is permissible only if waivable by a client through informed consent. See Int’l Bus. Machs, Corp. v. Levin, 579 F.2d 271, 282 (3d Cir. 1978); Filippi v. Elmont Union Free Sch. Dist. Bd. of Educ., 722 F. Supp. 2d 295, 310-11 (E.D.N.Y. 2010). However, there may be circumstances in which a conflict is not consentable. See GSI Commerce Solutions, Inc. v. BabyCenter, L.L.C., 618 F.3d 204, 212 n.2 (2d Cir. 2010); CenTra, Inc. v. Estrin, 538 F.3d 402, 412 (6th Cir. 2008); Cohen v. Strouch, No. 10 Civ. 7828, 2011 WL 1143067, at *2-3 (S.D.N.Y. Mar. 24, 2011). For two reasons, this is such a case."

"Therefore, LMB’s clear duty as counsel to the parties seeking relief from Nextel was to advise each client individually as to what was in his or her best interests taking into account all of the differing circumstances of each particular claim. See Ziegelheim v. Apollo, 128 N.J. 250, 260-61 (1992); Jones Lang Wootton USA v. LeBoeuf, Lamb, Greene & MacRae, 674 N.Y.S.2d 280, 284-85 (N.Y. App. Div., 1st Dep’t. 1998). The DRSA was flatly antagonistic to that duty.

On the face of the DRSA, its inevitable purpose was to create an irresistible incentive—millions of dollars in payments having no relation to services performed for, or recovery by, the claimants—for LMB to engage in an en masse solicitation of agreement to, and performance of, the DRSA’s terms from approximately 587 claimant clients. The effectiveness of the DRSA, and therefore the payments to LMB, depended on Nextel’s conclusion that a sufficient number of clients had agreed to it.3 Any number short of all 587, and Nextel would have no obligation to pay anything, as Amendment 2 demonstrated by reducing the final, pre-consultancy $2 million payment to LMB to $1,720,000, a reduction of $280,000, or $20,000 apiece for the fourteen clients LMB failed to deliver. By entering the DRSA, agreeing to be bound by its terms and accepting the financial incentives available therein, LMB violated its duty to advise and represent each client individually, giving due consideration to differing claims, differing strengths of those claims, and differing interests in one or more proper tribunals in which to assert those claims.4 See Elacqua, 860 N.Y.S.2d at 232-33; accord Matter of Educ. Law Ctr., Inc., 86 N.J. 124, 133 (1981).

Legal malpractice is ubiquitous and might be expected at any attorney-client interface.  What is not expected, nor routine is the big loss of escrow funds.  News cycles have more and more reported on "rogue" traders/professionals.  Here is a big one in the law world from the NY Law Journal:

Client Sues Crowell Over Missing Escrow
 

"Crowell & Moring was sued Friday for $5.5 million in missing real estate escrow money that a client says was improperly diverted by former firm associate Douglas R. Arntsen (See Complaint).

Attorney Bruce H. Lederman, representing Regal Real Estate and related entities, sued Crowell & Moring ten days after reporting Mr. Arntsen to the Manhattan District Attorney’s Office. According to published accounts, Mr. Arnsten was in custody in Hong Kong after fleeing to avoid arrest. The reports could not be confirmed.

"My client has a big problem—this is unbelievable," Mr. Lederman, of D’Agostino, Levine, Landesman & Lederman said in an interview. "I feel like I’ve been living a bad episode of Law & Order since last Tuesday."

Mr. Arntsen’s picture has been taken down from Crowell & Moring’s website. The lawsuit accuses the firm of negligence and breach of contract for failing to prevent the improper diversion of funds by Mr. Arntsen. The funds came from deposits for sales of real estate in lower Manhattan and a condemnation award for a property on Eighth Avenue in Manhattan.

The lawsuit states that Crowell & Moring partner William O’Connor came to the firm in 2007, bringing Mr. Arntsen and Regal’s business with him, from Buchanan Ingersoll & Rooney. It states that Mr. O’Connor was responsible for supervising the work of Mr. Arntsen, who was with the firm until Sept. 9. The suit said the firm failed "to maintain adequate checks and controls over escrow accounts" to prevent the diversion of money.

Mr. Lederman said that the suit, Regal Real Estate, LLC. v. Crowell & Morning, was filed by Mr. Lederman after the law firm failed to meet a 3 p.m. Friday deadline for returning the money. With interest and the costs of the investigation, Regal is seeking $6 million, plus an award of attorney’s fees.

Crowell & Moring declined to comment"
 

A recent case, reported on Lexis but not yet entered in the NYS Court Appellate Division web site discusses the interrelation of defamation and legal malpractice.  In DANY DAVID, Plaintiff, – against – MICHAIL Z. HACK, WILLIAM J. O’MAHONEY and QUADRINO & SCHWARTZ, Defendants. INDEX NO. 103705/11; 103705/11; SUPREME COURT OF NEW YORK, NEW YORK COUNTY; 2011 NY Slip Op 32443U; 2011 N.Y. Misc. LEXIS 4461, Justice Mills, we see a case in which plaintiff and law firm argued over fees, and came to a resolution.  In that resolution the law firm refunded $250 and required a release.  Plaintiff signed the release, but now claims that it covered only a fee dispute and not any underlying legal malpractice.  In addition, client has a defamation claim.
 

The release definitely covered "legal malpractice" but the court found underlying indicia that the refund and the agreement did not contemplate anything but a fee dispute.  "It is undisputed that the law firm ceased its representation of plaintiff by December 23, 2009. Thereafter, plaintiff contested the amount due and owing for the services [*3] provided by the law firm during its prior representation of plaintiff, and such dispute was resolved with a refund to plaintiff by the law firm in the amount of $250.00. In consideration of such refund, plaintiff executed a mutual release on March 31, 2010, in favor of the law firm. The subject release specifically "RELEASES, ACQUITS AND FOREVER DISCHARGES" the law firm and its attorneys:
from any and all claims, rights, demands, liabilities, controversies, or causes of action, known or unknown, asserted or unasserted, liquidated or unliquidated, fixed or contingent, or of any nature whatsoever including without limitation, claims in contract, tort, or legal malpractice, under statutory or common law, or in equity…from the beginning of the world to the date of execution of this Agreement.
Moreover, such release also states as follow:

5. Careful Review and Understanding of Agreement

The parties to this Agreement acknowledge, [**3] represent and warrant that:
a. They have fully read this Agreement, understand its contents, and agree to its terms and conditions; and

b. They have consulted with legal counsel prior to executing this Agreement and the consequences of this Agreement have been completely explained to them by their attorneys and those terms are fully understood and voluntarily accepted by them.

Accordingly, the law firm contends that the plaintiff’s action against it are barred by the subject release.

As a general rule, a valid release that is clear and unambiguous on its face constitutes a complete bar to an action on a claim which is the subject of the release absent fraudulent inducement, fraudulent concealment, misrepresentation, mutual mistake [*4] or duress (see Littman v Magee, 54 AD3d 14, 17, 860 N.Y.S.2d 24 [2008]).

While plaintiff acknowledges signing the subject release, he contends that he was unrepresented at the time he signed it, and was under the impression that the release was limited to his fee dispute, and not a malpractice action. Plaintiff cites Rule 1.8(h)(2) in support of his position, which provides as follows:
(h) A lawyer shall not:
(2) settle a claim or potential claim for such liability with an unrepresented [**4] client or former client unless that person is advised in writing of the desirability of seeking, and is given a reasonable opportunity to seek, the advice of independent legal counsel in connection therewith.

There is no evidence presented by the law firm that the plaintiff was given a reasonable opportunity to seek, the advice of independent legal counsel in connection with the signing of the release. Additionally, plaintiff in his opposition annexes correspondence sent from the law firm to him, suggesting that he come into their office to sign the release and pick up the check in the amount of $250.00 to complete the pending fee dispute."

A potential client comes to the legal malpractice practitioner and says that a good medical malpractice case was lost at trial because of errors by their attorney.  They tell you that their expert was precluded, and that the case was lost against all defendants.  What’s more, the defendants were permitted to ask hypothetical questions that were not proper.  What can you do for me?

In many situations, the facts recited are true, and yet may not be actionable.  As an example,in Banister v Marquis ; 2011 NY Slip Op 06544 ; Decided on September 20, 2011 ; Appellate Division, Second Department  we see the following:
 

"Contrary to the plaintiffs’ contention, the trial court providently exercised its discretion in precluding them from calling an expert radiologist to testify. The proffered explanation for failing to identify this witness until after the trial began was not based on good cause (see CPLR 3101[d][1][i]; Lucian v Schwartz, 55 AD3d 687, 688; Caccioppoli v City of New York, 50 AD3d 1079, 1080). [*2]"

"The trial court should have prohibited counsel for the defendant Belinda Marquis from questioning an expert witness for the plaintiffs about a hypothetical pertaining to the probability of the infant plaintiff having both a pectus carinatum and fibromastosis, as the hypothetical was not based on facts supported by the evidence, nor from facts fairly inferable from the evidence (see Gilleo v Horton Mem. Hosp., 196 AD2d 569, 570). However, the error was harmless (see CPLR 2002; Kropf v New York Hosp., 212 AD2d 761). The trial court’s comments about the hypothetical did not deprive the plaintiffs of a fair trial (see Figueroa v Maternity Infant Care Family Planning Project, Med. & Health Research Assn. of N.Y. City, 243 AD2d 424).

Will preclusion of the expert survive a "judgment call" defense?  Can plaintiff prove to a judge’s satisfaction that testimony from that expert would have made a difference?  Is it all speculative? 

Are the harmless errors a mistake of the attorney, or did he/she make a valiant effort to object, only to be overruled?  Obviously the AD felt that there was no "but for" aspect…they found it harmless.

Legal malpractice litigation seems different from all other professional malpractice areas.  There seem to be more defenses and hurdles in this lawyer written-lawyer judged-lawyer prosecution area.

InByron Chem. Co., Inc. v. Groman; 2009 NY Slip Op 03465 ; Decided on April 28, 2009 ; Appellate Division, Second Department plaintiff employer sued its attorneys for an employee benefit provision which was drafted by attorney firm 1, which was then taken over by attorney firm 2. At issue was whether the doctrine of continuous representation tolled the statute of limitations, and if it did, were the two law firms to be held in the case. The Second Department held that while the law firms continued to intermittently represent the employer, such was not sufficient to toll the statute of limitations.
 

"Contrary to the plaintiff’s contention, the statute of limitations was not tolled by the continuous representation doctrine (see Dignelli v Berman, 293 AD2d 565; cf. Shumsky v Eisenstein, 96 NY2d at 168; see also Maurice W. Pomfrey & Assoc., Ltd. v Hancock & Estabrook, LLP, 50 AD3d 1531; Zaref v Berk & Michaels, P.C., 192 AD2d 346). The defendants’ subsequent representation in matters unrelated to the specific matter that gave rise to the alleged malpractice was insufficient to toll the statute of limitations (see Dignelli v Berman, 293 AD2d at 565). Accepting the facts alleged in the plaintiff’s complaint as true, there was a nine-year lapse between the defendants’ representation as to the employment agreements. The continuous representation doctrine does not contemplate such intermittent representation (see Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1, 9; Shumsky v Eisenstein, 96 NY2d at 167-168; Loft Corp. v Porco, 283 AD2d 556). Accordingly, the Supreme Court correctly granted the defendants’ motions to dismiss the complaint insofar as asserted against them as time-barred. "
 

In a  Court of Appeals  case which limits potential liability, or more correctly put, continues a limit of potential liability of a corporation’s outside professional advisors, including attorneys. In Kirschner v Kpmg Llp ; 2010 NY Slip Op 07415 ; Court of Appeals ; Read, J. we see a discussion of this accountant’s malpractice question:

""Would the doctrine of in pari delicto bar a derivative claim under New York law where a corporation sues its outside auditor for professional malpractice or negligence based on the auditor’s failure to detect fraud committed by the corporation; and, the outside auditor did not knowingly participate in the corporation’s fraud, but instead, failed to satisfy professional standards in its audits of the corporation’s financial statements?" (In re Am. Intl. Group, Inc., 998 A2d 280 [Del 2010]).

"The doctrine of in pari delicto [FN4] mandates that the courts will not intercede to resolve a dispute between two wrongdoers. This principle has been wrought in the inmost texture of our common law for at least two centuries (see e.g. Woodworth v Janes, 2 Johns Cas 417, 423 [NY 1801] [parties in equal fault have no rights in equity]; Sebring v Rathbun, 1 Johns Cas 331, 332 [NY 1800] [where both parties are equally culpable, courts will not "interpose in favor of either"]). The doctrine survives because it serves important public policy purposes. First, denying judicial relief to an admitted wrongdoer deters illegality. Second, in pari delicto avoids entangling courts in disputes between wrongdoers. As Judge Desmond so eloquently put it more than 60 years ago, "[N]o court should be required to serve as paymaster of the wages of crime, or referee between thieves. Therefore, the law will not extend its aid to either of the parties or listen to their complaints against each other, but will leave them where their own acts have placed them" (Stone v Freeman, 298 NY 268, 271 [1948] [internal quotation marks omitted]). "

"Traditional agency principles play an important role in an in pari delicto analysis. Of particular importance is a fundamental principle that has informed the law of agency and corporations for centuries; namely, the acts of agents, and the knowledge they acquire while acting within the scope of their authority are presumptively imputed to their principals (see Henry v Allen, 151 NY 1, 9 [1896] [imputation is "general rule"]; see also Craigie v Hadley, 99 NY 131 [1885]; accord Center, 66 NY2d at 784). Corporations are not natural persons. "[O]f [*10]necessity, [they] must act solely through the instrumentality of their officers or other duly authorized agents" (Lee v Pittsburgh Coal & Min. Co., 56 How Prac 373 [Super Ct 1877], affd 75 NY 601 [1878]). A corporation must, therefore, be responsible for the acts of its authorized agents even if particular acts were unauthorized (see Ruggles v American Cent. Ins. Co. of St. Louis, 114 NY 415, 421 [1889]). "The risk of loss from the unauthorized acts of a dishonest agent falls on the principal that selected the agent" (see Andre Romanelli, Inc. v Citibank, N.A., 60 AD3d 428, 429 [1st Dept 2009]). After all, the principal is generally better suited than a third party to control the agent’s conduct, which at least in part explains why the common law has traditionally placed the risk on the principal. "

"We are also not convinced that altering our precedent to expand remedies for these or similarly situated plaintiffs would produce a meaningful additional deterrent to professional misconduct or malpractice. The derivative plaintiffs caution against dealing accounting firms a "get-out-of-jail-free" card. But as any former partner at Arthur Andersen LLP — once one of the "Big Five" accounting firms — could attest, an outside professional (and especially an auditor) whose corporate client experiences a rapid or disastrous decline in fortune precipitated by insider fraud does not skate away unscathed. In short, outside professionals — underwriters, law firms and especially accounting firms — already are at risk for large settlements and judgments in the litigation that inevitably follows the collapse of an Enron, or a Worldcom or a Refco or an AIG-type scandal. Indeed, in the Refco securities fraud litigation, the IPO’s underwriters, including the three underwriter-defendants in this action, have agreed to settlements totaling $53 million (www.refcosecuritieslitigation.com). In the AIG securities fraud litigation, PwC settled with shareholder-plaintiffs last year for $97.5 million (www.refcosecuritieslitigationpwc.com). It is not evident that expanding the adverse interest exception or loosening imputation principles under New York law would result in any greater disincentive for professional malfeasance or negligence than already exists [FN6]. Yet the approach advocated by the Litigation Trustee and the derivative plaintiffs would allow the creditors and shareholders of the company that employs miscreant agents to enjoy the benefit of their misconduct without suffering the harm. [*20]"

One has to shake the head and ask why all the effort goes into a law suit that will [or is so likely to] fail? The question is multiplied when plaintiff is an attorney seeking fees.

Rule 137 seems pretty comprehensive and exacting. Attorney who seeks a fee needs to serve th client with an opportunity to arbitate. Here in Messenger v Deem; 2009 NY Slip Op 29501 ;Decided on December 7, 2009 ;Supreme Court, Westchester County ;Giacomo, J. we see what turns out to be a total waste of time for everyone, including the jurors.
 

"In his complaint, plaintiff alleged that "Pursuant to Second Department case law, notice of right to arbitrate legal fees need not be provided to a client who never disputes the reasonableness of an attorney’s legal fees…Defendant never disputed the reasonableness of Plaintiff’s fees." (Complaint at ¶¶6-7.)

In her answer [FN1], defendant denied the allegations of the complaint and plead thirteen affirmative defenses including that plaintiff was not entitled to an attorney’s fee because of his: failure to provide defendant with notice of arbitration before commencement of the suit ."
 

"Part 137 of the Rules of the Chief Administrator of the Courts provides for a Fee Dispute Resolution Program. A mandatory Arbitration Procedure is set forth therein for all representations that commenced on or after January 1, 2002, and is applicable "to all attorneys admitted to the bar of the State of New York who undertake to represent a client in any civil matter." 22 NYCRR 137.1.

Plaintiff argues that the mandatory arbitration provisions of Part 137 are inapplicable to the instant matter because, like in the Scordio matter, there was no disagreement as to the amount of attorney’s fee due to plaintiff, and that defendant [*3]simply did not pay what was due. In Scordio, the Appellate Division, Second Department held that the mandatory arbitration notice provided for by then Court Rule 136.5 did not apply where the client did not dispute the reasonableness of the fees charged, and specifically declined "to follow the rule adopted by the Appellate Division, First Department, which obligates an attorney to send such a notice even in the absence of any fee disagreement with a client." Scordio v. Scordio, 270 AD2d at 329, 705 NYS2d at 59.

Court Rule 136.5, upon which Scordio was premised, was repealed in January 2002 and replaced with Court Rule 137.6. Former Rule 136, which was applicable only to domestic matters has been subsumed by the newer Part 137 which, with limited exceptions that are not alleged here, is applicable to all civil matters. Court Rule 137.6 is applied in the same manner as former Rule 136.5. See, Abinanti v. Pascale, 41 AD3d 395, 837 NYS2d 740 (2nd Dept., 2007); Borah, Goldstein, Altschuler, Schwartz & Nahins, PC v. Lubnitzki, 13 Misc 3d 823, 822 NYS2d 425 (N.Y.Civ.Ct., 2006). "

"A "fee dispute" (22 NYCRR §137.2) or a disagreement as "to the attorney’s fee" [22 NYCRR §137.6(a)] is not only found when the former client complains as to time billings on a line by line basis. Under Part 137, arbitrators are entrusted to "determine the reasonableness of fees for professional services". 22 NYCRR §137.0. Here the defendant "disputed the reasonableness of the fees" plaintiff was charging. See, Scordio v. Scordio, supra , 270 AD2d at 329, 705 NYS2d at 59. The "reasonableness" of the fee cannot be limited to disputes as to whether an attorney should have charge "1.0 hours of billing time" instead of "1.2 hours of billing time". If such were the case a simple audit of the bill would be all that was necessary. Instead, arbitrators are given authority to evaluate and make a subjective finding of reasonableness. For something to be reasonable it must be fair and proper under the circumstances. To hold otherwise would render the Rule impotent and unenforceable. "