Reported on the front page of the NY Law Journal today is a $ 5 million dollar legal malpractice verdict and judgment that could swell to $ 10 million after interest.  in Friedman v. Boros, Justice Jaffe determined that the jury verdict will stand, and that pre-judgment interest in this commercial legal malpractice case commenced in 2000.  The case turned on collateral estoppel and arbitration.

"The court rejected defendants’ argument based on State Farm Ins. Co. v Smith, 277 AD2d 390 (2d Dept, 2000) and Kerins v. Prudental Prop. & Cas., 185 AD2d 403 (3d Dept 1992), and concluded that if plaintiff and Katz had entered into a limiting agreement, Mahoney Cohen would likely have not prevailed in asserting collateral estoppel as a defense in plaintiff‘f s action against it.
By decision and order dated April 26, 2005, the Appellate Division, First Department,
affirmed the September 2004 decision, finding that defendants had not “established as a matter of‘
law, that even if plaintiff and Katz had entered into an agreement limiting the collateral estoppel
effect of the arbitration award, the Mahoney Cohen lawsuit would nonetheless have been
dismissed on collateral estoppel grounds.” (17 AD3d 275, 276). ‘I’he If the Court, citing Smith, also
observed. that “in circumstances involving arbitration, the parties themselves can formulate their
own contractual restrictions on the carry-over estopple effect.” (Id.).

Defendant was found liable for both legal malpractice and accouting malpractice in a mid 7 figure judgment.

Judgment is the shorthand for the principal in legal malpractice that an attorney may not be held liable for legal malpractice solely upon an act or decision which is said to be the product of a question of judgment.  Selection of experts, selection of witnesses, which questions are put to a witness, and many other issues can be questions of judgment.  Here, in U.S. Bank National Association, as Trustee for asset Backed Pass through certificates, series 2006-HE1, Plaintiffs v. Alan C. Stein, Esq., Gastwirth, Mirsky & Stein, L.L.P., Law office of Alan C. Stein, P.C., Robert M. Steinert and Chicago Title Insurance Company, Defendants, 016919/08 we see the application of this principal.

"In an action to recover damages for legal malpractice, "a plaintiff must demonstrate that the attorney ‘failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’ and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages". Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 442 (2007), quoting McCoy v. Feinman, 99 N.Y.2d 295, 301 302 (2002). To establish causation, "a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer’s negligence". Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d at 442. Expert testimony is normally needed to establish that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, "unless the ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service, or the attorney’s conduct falls below any standard of due care". Greene v. Payne, Wood & Littlejohn, 197 A.D.2d 664, 666 (2d Dept. 1993).

An honest error of judgment or the "selection of one among several reasonable courses of action does not constitute malpractice". Rosner v. Paley, 65 N.Y.2d 736, 738 (1985), nor is the attorney "held to the rule of infallibility" or "liable for an honest mistake of judgment where the proper course is open to reasonable doubt". Grago v. Robertson, 49 A.D.2d 645, 646 (3d Dept 1975). Absent "reasonable" courses of conduct found as a matter of law, a determination that a course of conduct constitutes malpractice requires findings of fact. Grago v. Robertson, 49 A.D.2d 645, 646 (3d Dept. 1975).

As succinctly stated by the Court of Appeals, the relevant question on the viability of the contribution claim asserted herein is not whether the Baum Firm owed a duty to Stein, "but whether each owed a duty to plaintiff and whether, by breaching their respective duties, they contributed to her ultimate injuries…" Schauer v. Joyce, 54 N.Y.2d 1, 6 (1981). There are potentially two tortfeasors here. Stein may be found negligent in failing to have properly recorded the US Bank Mortgage and the Baum Firm may likewise be found negligent in failing to have secured an equitable lien which would have minimized US Bank’s damages. Accordingly, there are issues of fact with respect to whether Stein and the Baum Firm will be liable for legal malpractice. Under the circumstances of this case, neither party is entitled to summary judgment."

Legal malpractice litigation is unique.  While the simple fact is that this branch of the law is written by attorneys, is utilized to litigate against attorneys, is judged upon by attorneys, the more complex story is that there are a number of unique rules.  One is that a criminal defendant may not sue his attorney absent "actual innocence."  There are no lawsuits for bad advice which leads to a conviction.

  Sgambelluri v Ironman ; 2010 NY Slip Op 08555 ;Decided on November 16, 2010 ;Appellate Division, Second Department sums this rule up nicely: "To succeed on a "cause of action for legal malpractice arising from negligent representation in a criminal proceeding, [the] plaintiff must allege his innocence or a colorable claim of innocence of the underlying offense" (Carmel v Lunney, 70 NY2d 169, 173; see Britt v Legal Aid Socy., 95 NY2d 443, 448; Daly v Peace, 54 AD3d 801, 802). "A plea of guilty bars recovery for legal malpractice, [r]egardless of the plaintiff’s subjective reasons for pleading guilty’" (Casement v O’Neill, 28 AD3d 508, [*2]509, quoting Kaplan v Sachs, 224 AD2d 666, 667). "

We looked at the underlying decisions in this case, and are still scratching our figurative head here.  in Lusk v Weinstein , 2011 NY Slip Op 04742 , Decided on June 7, 2011 , Appellate Division, First Department we see the AD citing an obviously correct principal of law: "a charging lien entered in the underlying action against plaintiff barred her from thereafter asserting a claim for legal malpractice (see Judiciary Law § 475; Wallach v Unger & Stutman, LLP, 48 AD3d 360 [2008])."
 

But, in the underlying case, after a charging lien was entered, the parties agreed and "entered into a stipulation with Parker to resolve the parties’ fee dispute without prejudice to any other claims either party might assert against the other in other actions, e.g., Parker’s res judicata defense here."
 

Why, then, was defendant permitted to utilize a res judicata defense?  Maybe our readers could explain it to us?

Empire Purveyors, Inc. v Brief Justice Carmen & Kleiman, LLP; 2011 NY Slip Op 31420(U)
May 31, 2011; Sup Ct, NY County; Docket Number: 110909/08; Judge: Jane S. Solomon presents a horrifying view of how clients sometimes fare at the hands of attorneys, especially attorneys who move from firm to firm.  From the decision:

"Cook admitted the following at his deposition. On or about October 3, 2003, Empire retained the Firm to assist it in recovering the balance allegedly due on two promissory notes signed by Eileen Weinberg, the defendant in the underlying case. The notes guaranteed repayment of two loans, one in the amount of $40,000, and the other in the amount of $80,000, t h a t the late Mr. P i n t o had extended to Ms. Weinberg. The matter was assigned to Cook, who at that time was an associate at the Firm. In approximately November 2005, Cook left the Firm and joined Windels Marx. From some time in October 2003 through October 2005, Cook falsely, and repeatedly, represented to plaintiffs that he had commenced an action and had obtained a judgment
against Ms. Weinberg, and that he was engaged in discovery and enforcement proceedings to collect on that judgment. So as to provide "corroborative detail intended to give artistic
verisimilitude" to his fabrication (Gilbert and Sullivan, The Mikado, Act 2), Cook presented the Pintos with a purported subpoena duces tecum to take the deposition of Ms. Weinberg, as a
judgment debtor, as well as a notice of motion seeking sanctions for contempt, and other fake documents. In fact, Cook had lost the promissory notes signed by Ms. Weinberg, which plaintiffs had given to the Firm, and he had not commenced any action on behalf of Empi-re. Indeed, he did not even purchase an index number. He now seeks to escape liability f o r his negligence, and for his lies, by arguing that: (i) the plaintiffs other than Empire have no claim; (11) plaintiffs suffered no damages; (iii) plaintiffs’ successor counsel had sufficient opportunity to protect their rights; and (iv) plaintiffs’ claims are barred by collateral estoppel and by judicial estoppel."

Defendant loses summary judgment motion and the case continues with some of the plaintiffs.

We commonly get two types of fraud letters, and the come all the time.  One recent type is the "collaborative divorce" letter in which an offshore spouse needs held collecting a large equitable distribution check from the US spouse.  Another type is the offshore large corporation that needs help collecting a debt from a US debtor. 

When this law firm fell victim to the second of these frauds its legal malpractice carrier was asked to defend and indemnify against the bank.  Supreme Court found no coverage, but the AD reversed.

Lombardi, Walsh, Wakeman, Harrison, Amodeo & Davenport, P.C. v American Guar. & Liab. Ins. Co. ,  2011 NY Slip Op 04589 ,  Decided on June 2, 2011 ; Appellate Division, Third Department .  "Plaintiff, a law firm, was contacted via e-mail by an individual purporting to be the chief executive officer of a Taiwanese corporation seeking legal assistance in collecting debts in North America. After the individual sent plaintiff a signed retainer agreement, plaintiff received a $384,700 check from a purported debtor of the corporation. Plaintiff opened an account at Berkshire Bank and deposited the check. At the request of the purported chief executive officer, plaintiff instructed Berkshire Bank to wire the value of the check, minus a legal fee for plaintiff, in two transfers to a third party in South Korea, who was allegedly a supplier of the Taiwanese corporation. After the funds were transferred, Berkshire Bank notified plaintiff that the check was counterfeit and plaintiff’s account [*2]was overdrawn."
 

"Plaintiff commenced this action seeking, among other things, declarations that defendant was required to defend and indemnify it. Defendant moved for summary judgment. Plaintiff cross-moved for summary judgment or, in the alternative, an order compelling defendant to comply with its disclosure demands. Supreme Court denied plaintiff’s cross motion, granted defendant’s motion and entered a judgment declaring that defendant was not required to defend or indemnify plaintiff in the Berkshire Bank action. Plaintiff appeals.

An insurer has the duty to defend an insured "whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim, or where the insurer ‘has actual knowledge of facts establishing a reasonable possibility of coverage’" (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175 [1997], quoting Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 67 [1991]). The insurer’s duty to defend, which is broader than the duty to indemnify, exists regardless of the merit of the underlying claim (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006]). To avoid defending an action, the insurer bears the burden of showing that the claim is not even potentially covered (see United States Fid. & Guar. Co. v U.S. Underwriters Ins. Co., 194 AD2d 1028, 1028-1029 [1993]).

Berkshire Bank’s complaint alleged that plaintiff, as a law firm, opened a bank account, deposited a check in that account, ordered wire transfers from the account and caused an overdraft when the check was determined to be counterfeit. The complaint included causes of action for breach of the account agreement and violations of the Uniform Commercial Code. The insurance policy issued by defendant provided coverage for any claim "based on an act or omission in [plaintiff’s] rendering or failing to render Legal Services for others." "Legal Services" is defined by the policy as "those services performed by an Insured as a licensed lawyer in good standing . . . or in any other fiduciary capacity but only where the act or omission was in the rendition of services ordinarily performed as a lawyer." The terms of this policy encompass more than what would traditionally be considered "legal [*3]malpractice" (see United States Fid. & Guar. Co. v U.S. Underwriters Ins. Co., 194 AD2d at 1029). "

"Because defendant did not meet its burden on the motion, plaintiff was entitled to a declaration that defendant had a duty to defend plaintiff in the Berkshire Bank action. Due to the confidential settlement of that action, we are unable to determine whether defendant was obligated to indemnify plaintiff. Accordingly, we remit for further proceedings (see Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 425 [1985]). "

Truebright Co., Ltd. v Lester ; 2011 NY Slip Op 04235 ; Decided on May 17, 2011  ;Appellate Division, Second Department is yet another example of a lost legal malpractice case, but not based upon the innocence or non-departure of the attorney.  In fact, just as in a recent case dismissed because the statute of limitations had passed on a case the attorney failed to file, here, there was a lack of capacity to sue.  Was it a bankruptcy filing that killed the capacity?  Was it a sale of the business to another that killed the capacity?  We do not know.
 

What we do know is:

"Under the circumstances, the Supreme Court did not improvidently exercise its discretion when it, in effect, granted the defendant’s motion for leave to amend his answer, as the proposed amendment was neither palpably insufficient nor patently devoid of merit, and there was no evidence that it would prejudice or surprise the plaintiffs (see CPLR 3025 [b]; Matter of Roberts v Borg, 35 AD3d 617, 618; Public Adm’r of Kings County v Hossain Constr. Corp., 27 AD3d 714, 716). To the extent that the plaintiffs "wish[ ] to test the merits of the proposed added . . . defense, [they] may . . . move for summary judgment upon a proper showing" (Lucido v Mancuso, 49 AD3d 220, 229). "

We often ask whether the law of legal malpractice is different from the rest of the negligence world?  Why do attorneys get a second chance, in which judges ponder whether they could have won the case had they not made mistakes?

In Dempster v Liotti ; 2011 NY Slip Op 04408 ; Decided on May 24, 2011 ; Appellate Division, Second Department ; Belen, J. we see a prime example.  Judge Belen himself framed the issue:

"We are asked to consider whether an attorney who failed to oppose a motion to dismiss the complaint in an action underlying a legal malpractice action, and thereafter failed to file a timely notice of appeal from the order that granted the motion to dismiss, is entitled, under the facts of this case, to summary judgment dismissing the legal malpractice cause of action on the ground that such negligence did not proximately cause the dismissal of the underlying action. Here, we conclude that, since the underlying action was time-barred as a matter of law, the attorney’s negligence, although clearly inexcusable, was not a proximate cause of the plaintiff’s alleged injuries, and accordingly this malpractice action must be dismissed.

To state a cause of action to recover damages for legal malpractice, a plaintiff must allege: (1) that the attorney "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession," and (2) that the attorney’s breach of the duty proximately caused the plaintiff actual and ascertainable damages (Leder v Spiegel, 9 NY3d 836, 837, cert denied sub nom. Spiegel v Rowland, 552 US 1257; see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442). As to the first prong, "[a]n attorney may be liable for ignorance of the rules of practice, for failure to comply with conditions precedent to suit, for neglect to prosecute or defend an action, or for failure to conduct adequate legal research" (Conklin v Owen, 72 AD3d 1006, 1007). However, even if a plaintiff establishes the first prong, the plaintiff must still demonstrate that he or she would have succeeded on the merits of the action but for the attorney’s negligence (see Hamoudeh v Mandel, 62 AD3d 948, 949; McCluskey v Gabor & Gabor, 61 AD3d 646, 648; Peak v Bartlett, Pontiff, Stewart & Rhodes, P.C., 28 AD3d 1028, 1030-31; see also Brodeur v Hayes, 18 AD3d 979; Raphael v Clune, White & Nelson, 201 AD2d 549, 550). Further, as to the second prong, the plaintiff must plead and prove actual, ascertainable damages as a result of an attorney’s negligence (see Barnett v Schwartz, 47 AD3d 197, 211). "[M]ere speculation about a loss resulting from an attorney’s alleged omission is insufficient to sustain a prima facie case of legal malpractice" (Siciliano v Forchelli & Forchelli, 17 AD3d 343, 345; see Dupree v Voorhees, 68 AD3d 810, 812-813; Plymouth Org., Inc. v Silverman, Collura & Chernis, P.C., 21 AD3d 464; Giambrone v Bank of N.Y., 253 AD2d 786).

In the instant action, the plaintiff alleges that Liotti failed to exercise the ordinary skill and knowledge commonly possessed by a member of the legal profession when he failed to file timely opposition papers in response to the RICO defendants’ motion to dismiss her amended complaint in the RICO action, and when he failed to timely appeal from the District Court’s subsequent order granting such motion. Liotti does not contest these allegations, and we conclude they are factually substantiated by the record.
 

Here, Liotti’s inexcusable failure to file timely opposition papers to the RICO defendants’ motion to dismiss the amended complaint and to file a timely notice of appeal from the District Court’s order granting such motion, clearly falls below the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession (see Conklin v Owen, 72 AD3d at 1007; McCoy v Tepper, 261 AD2d 592, 593). However, as previously discussed, despite such negligence, Liotti is entitled to summary judgment inasmuch as the plaintiff’s civil RICO claim was time-barred as a matter of law. Consequently, Liotti has established that the plaintiff is unable to prove that she would have prevailed in the RICO action but for his negligence. In opposition, the plaintiff failed to raise a triable issue of fact (see Hamoudeh v Mandel, 62 AD3d at 949).