We’ve discussed the oft-found fact situation of how a fee determination by a bankruptcy court may block a later legal malpractice action. In Breslin Realty Dev. Corp. v Shaw ; 2010 NY Slip Op 00087 Decided on January 5, 2010; Appellate Division, Second Department; Chambers, J., J. the court writes persuasively about the concept:
 

"In bankruptcy proceedings, the general rule arising under 11 USC § 330(a)(4) is that "a finding of malpractice would mean that the attorneys were not entitled to compensation for those services found to be substandard" and, accordingly, failure to raise the malpractice claims when the final fee applications were considered and approved by the Bankruptcy Court barred later litigation of such claims under principles of res judicata (In re Iannochino, 242 F3d 36, 42; see Grausz v Englander, 321 F3d 467; Osherow v Ernst & Young [In re Intelogic Trace], 200 F3d 382; cf. Clement v Brumfield, 2004 Cal. App. Unpub. LEXIS 1031, citing Matter of Boddy, 950 F2d 334). Res judicata bars future litigation between the same parties or those in privity arising out of transactions giving rise to a cause of action which could have been raised in a prior bankruptcy proceeding (see Truesdell v Donaldson, Lufkin & Jenrette Sec. Corp., 281 AD2d 334; Evergreen Bank v Dashnaw, 246 AD2d 814). An exception lies if the plaintiff was deceived in the prior action or proceeding (see Izko Sportwear Co. Inc., v Flaum, 25 AD3d 534; Penthouse Media Group v Pachulski Stang Ziehl & Jones [US Dist Ct, SD NY, 9 Civ 85, Scheindlin, J., 2009]).

Applying these principles, we conclude that the final award of fees in the bankruptcy proceeding bars the plaintiffs’ malpractice claim based upon the same services in the present litigation. The final fee award in the bankruptcy proceeding was a determination on the merits, barring the legal action sounding in legal malpractice pursuant to the doctrine of res judicata (see Izko Sportwear Co. Inc. v Flaum, 25 AD3d 534).

Further, we are unpersuaded that there is evidence in this case that the defendants deceived the debtors or the Bankruptcy Court. The June 2003 agreement demonstrates that the plaintiffs were aware of the factual basis of their malpractice claim at the time of the defendants’ fee application. Moreover, the June 2003 agreement was drafted at least in part by separate and independent counsel—the Dollinger law firm. Thus, on the date that the Bankcuptcy Court entered the defendants’ final award, December 15, 2003, the debtors had ample opportunity to raise their malpractice claims as objections to the fee award. Accordingly, we conclude that the plaintiffs failed to meet their burden of demonstrating under the doctrine of collateral estoppel that they lacked a full and fair opportunity to litigate the legal malpractice claim in the Bankruptcy Court (see Izko Sportswear Co. Inc. v Flaum, 25 AD3d 534; cf. Penthouse Media Group v Pachulski Stang Ziehl & Jones [US Dist Ct, SD NY, 9 Civ 85, Scheindlin, J., 2009]). "

It’s a trick question.  The answer is always those that are relevant, material and cannot be obtained elsewhere.  In the Fourth Department, this case states the rule:Riordan v Cellino & Barnes, P.C.
2011 NY Slip Op 03769 ;Decided on May 6, 2011 ; Appellate Division, Fourth Department
 

"Memorandum: Plaintiffs commenced this legal malpractice action seeking damages allegedly resulting from the negligence of defendants in their representation of Clarence F. Riordan (plaintiff) in the underlying Labor Law and common-law negligence action. Plaintiff commenced the underlying action seeking damages for injuries that he sustained when he was working on the reconstruction of a school building in East Rochester. Defendants, however, failed to serve a timely notice of claim against East Rochester Schools (see Matter of Riordan v East Rochester Schools, 291 AD2d 922, lv denied 98 NY2d 603), and a jury returned a verdict of no cause of action with respect to plaintiff’s claims against the remaining defendant in the underlying action. Defendants admit that they were negligent in failing to serve the notice of claim in a timely manner, but they contend that they are not liable for legal malpractice on the ground that the underlying action against East Rochester Schools has no merit. "

Legal malpractice is ubiquitous.    All social classes are potential litigants, and almost every human endeavor (which interact with the law) will have incidences of legal malpractice.  We are reminded of the New Yorker cartoon in which a small boy cries over a dropped ice cream cone, and a suited man asks "Do you need an attorney, little boy?"

This nobel laureat did need an attorney, and it turned out badly.  Now it heads to legal malpractice litigation. Today’s NYLJ, in an article by Zoe Tilman, writes:

"Rita Bank, a well-known Washington, D.C., divorce attorney, has been litigating unhappy break-ups for more than a quarter-century. But next month, the family law heavyweight will find herself in court over an unamicable split with a renowned former client.

Ms. Bank is facing a $5 million legal malpractice lawsuit from Joseph Stiglitz, a New York-based Nobel laureate in economics, who is claiming that Ms. Bank gave him counsel that left him financially vulnerable in the divorce proceedings and failed to promptly tell him about merger discussions she was having at the time with his ex-wife’s attorney.

Ms. Bank, a co-partner at Ain & Bank, has denied any wrongdoing. She referred questions to her attorney, Richard Simpson of Wiley Rein in Washington, D.C., who called the lawsuit "meritless." "Everything was handled exactly as the ethics rules say they should be handled," he said.

The case was scheduled to go to trial before U.S. District Judge Richard Leon in 2008, but was rescheduled a half-dozen times during the past three years because of scheduling conflicts and motions detours. For instance, Mr. Stiglitz, a Columbia University economics professor, argued unsuccessfully that he should be allowed to testify as a damages expert, given his background.

The trial is scheduled to begin June 21 in U.S. District Court for the District of Columbia.

Mr. Stiglitz hired Ms. Bank in 2000, shortly after he had separated from his second wife, Jane Hannaway. At the time, Ms. Bank was with Feldesman Tucker Leifer Fidell in Washington, D.C.

From the beginning, Mr. Stiglitz claims that Ms. Bank failed to follow his wishes to file suit as soon as possible. Mr. Stiglitz notes in his complaint that when divorce negotiations began, he knew that he was under consideration for the Nobel Prize in economics and wanted to prevent Ms. Hannaway from laying claim to any subsequent award or income.

Mr. Stiglitz has accused Ms. Bank of giving him misinformation throughout the divorce negotiations. At the onset, Mr. Stiglitz claims that Ms. Bank failed to tell him that in the District of Columbia assets can be considered part of the marital estate until the divorce trial. Instead, he alleges, she told him that if he deposited new income in a separate bank account, it would be off limits when it came time to divide the estate.

When Mr. Stiglitz relocated from Washington to New York in 2001, he claims Ms. Bank then failed to advise him on the differences in matrimonial law between the two jurisdictions that might have led him to reconsider the move. After Mr. Stiglitz received the Nobel Prize in 2001, he says Ms. Bank failed to tell him that his "celebrity status" could open the door to larger earnings claims from Ms. Hannaway if the case proceeded in New York."
 

In re: Teligent, Incorporated, Debtor v. K&L Gates LLP, 10-2257-bk (L);U.S. Court of Appeals, Second Circuit Bankruptcy is an odd case. It combines elements of bad faith litigation, Mary Carter agreements, bankruptcy dealing and huge sums.  A"’Mary Carter" agreement can give the "settling" defendant a financial interest in the remainder of the plaintiff’s case and more importantly in the amount recovered against any non-settling defendant(s)." 

Here, "When Teligent, Inc. ("Teligent") hired Alex Mandl as its CEO in 1996, the company extended Mandl a $15 million loan. The loan was to be due and payable immediately if Mandl resigned his employment without "good reason," but would be automatically forgiven if Teligent terminated Mandl’s employment other than for "cause."

Mandl retained the law firm K&L Gates LLP around April 2001 in connection with his potential departure from Teligent. At that time, $12 million was outstanding on the loan. K&L Gates drafted a severance agreement for Mandl that, according to the law firm, "reflect[ed] that Teligent had terminated Mandl other than for Cause effective as of April 27, 2001, thus triggering automatic loan forgiveness."

Less than a month after the parties ratified the severance agreement, Teligent filed for bankruptcy under Chapter 11. Cross-Appellee Savage & Associates, P.C. ("Savage & Associates") was appointed by the bankruptcy court to be the Unsecured Claims Estate Representative. In discharging its duties pursuant to this role, Savage & Associates filed approximately 1,000 adversary proceedings. These adversary proceedings included an action against Mandl, brought under Sections 548 and 550 of Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§548, 550, to recover the balance of the loan. Mandl again retained K&L Gates to represent him in connection with this matter.

The bankruptcy court held a one-day trial after which it concluded that Mandl had resigned before Teligent terminated his employment, and therefore, Mandl was liable for the balance of the loan. See In re Teligent, Inc., 380 B.R. 324, 333-36 (Bankr. S.D.N.Y. 2008). That finding was not appealed.

Shortly after the bankruptcy court issued its decision relating to the loan, Mandl retained Greenberg Traurig, LLP ("Greenberg Traurig") as new counsel. Greenberg Traurig then filed a number of motions, including a motion for relief from the judgment based in part on a claim of newly discovered evidence. Around the same time, Savage and Associates commenced a new lawsuit in the Eastern District of Virginia against Mandl, naming as defendants Mandl’s wife, Susan Mandl, and ASM Investments LLC ("ASM"), an entity associated with Mandl, and alleging that Mandl had fraudulently transferred certain property through ASM to his wife in order to shelter his assets from creditors.

All parties to the action in Virginia participated in a voluntary mediation in attempt to resolve both the motions before the bankruptcy court as well as the Virginia Action. Greenberg Traurig invited K&L Gates to participate in the mediation, to address Mandl’s claim that K&L Gates committed malpractice in the course of representing him during his termination from Teligent and in the resulting adversary proceeding. K&L Gates declined to participate.

In setting up a framework for the mediation, the parties agreed to be bound by the terms of the protective orders routinely employed by the Bankruptcy Court in the Southern District of New York in the context of court-ordered mediation (the "Protective Orders"). The Protective Orders imposed limitations, inter alia, on the disclosure of information relating to the mediation. However, the Protective Orders provided no guidance on when, or if, a party might be entitled to release confidential information connected to the mediation.

Although formal mediation did not result in a settlement, the parties thereafter reached an agreement. In exchange for dismissal of the action in Virginia, Mandl agreed to pay the estate $6.005 million and to commence a malpractice suit against K&L Gates. The terms of the agreement also required Mandl to remit to the estate 50 percent of the net value of any malpractice recovery. The bankruptcy court approved the settlement pursuant to a motion under Federal

ule of Bankruptcy Procedure 9019 

Legal malpractice litigagnts, as well as most other plaintiffs, would like to bring a case where they live.  It’s convenient, it’s more likely favorable, and it’s easier.  However, a case which took place in a neighboring state may not be proper to bring in NY.  Here is an example.  In Paolucci v Kamas
2011 NY Slip Op 03823 ; Decided on May 3, 2011; Appellate Division, Second Department, plaintiff finds that the case may not be brought in NY.  The AD doesn’t say, but the events leading to legal malpractice litigation took place in Kansas.
 

"Personal jurisdiction can be conferred under CPLR 302(a)(1) "even though the defendant never enters New York, so long as the defendant’s activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 NY3d 65, 71, cert denied 549 US 1095; see Fischbarg v Doucet, 9 NY3d 375, 380). Here, however, the Supreme Court properly determined that the number, nature, and quality of the defendants’ contacts with New York do not evince purposeful activities by which the defendants availed themselves of the benefits and protections of New York law (see Weiss v Greenberg, Traurig, Askew, Hoffman, Lipoff, Quentel & Wolff, 85 AD2d 861; see also Kimco Exch. Place Corp. v Thomas Benz, Inc., 34 AD3d 433; O’Brien v Hackensack Univ. Med. Ctr., 305 AD2d 199; cf. Fischbarg v Doucet, 9 NY3d 375; Grimaldi v Guinn, 72 AD3d 37).

The Supreme Court also properly determined that personal jurisdiction over the defendants was not conferred pursuant to CPLR 302(a)(3) based upon tortious activity occurring outside New York, causing injury within New York. The plaintiff failed to demonstrate prima facie that the defendants "[1] regularly do[ ] or solicit[ ] business, or engage[ ] in any other persistent course of conduct, or derive[ ] substantial revenue from goods used or consumed or services rendered, in the state," or "[2] expect[ ] or should reasonably expect the act to have consequences in the state and derive[ ] substantial revenue from interstate or international commerce" (CPLR 302[a][3][i], [ii]; see Ingraham v Carroll, 90 NY2d 592; cf. LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210). [*2]"

In Law Offs. of D’amico & Assoc., PLLC v D’Elia ; 2011 NY Slip Op 21160 ; Decided on April 26, 2011 ; Appellate Term, Second Department  attorney (plaintiff) has sued client (defendant) for fees, while at the same time attorney (defendant) is being sued for legal malpractice in Supreme Court by Client (plaintiff.)  What happens to the Civil Court fee suit when the Supreme Court malpractice is dismissed.
The general rules of civil procedure apply.  While there may be application of res judicata and collateral estoppel there is also application of the rule that you may not bring up new arguments in reply.

"While plaintiff, in its initial moving papers, sought to dismiss defendant’s counterclaims pursuant to CPLR 3211 (a) (1) and CPLR 3211 (a) (7), it did not, in those papers, seek dismissal based upon res judicata pursuant to CPLR 3211 (a) (5), and it implicitly sought dismissal on res judicata grounds, if at all, only by letter to the District Court. New theories and arguments in support of a motion which do not appear in the initial moving papers should not be considered by the motion court (see e.g. Ritt v Lenox Hill Hosp., 182 AD2d 560 [1992] [reply papers should not be used to raise new arguments]). By granting plaintiff relief on the alternative ground implicitly raised by its letter, the District Court relieved plaintiff of its burden of demonstrating in its initial moving papers that the claims asserted against the D’Amico firm in the Supreme Court action were the same as those asserted against it in defendant’s counterclaims in the instant action, and deprived defendant of a meaningful opportunity to contest that issue (see Fergusson v Dumbacher, 21 Misc 3d 145[A], 2008 NY Slip Op 52547[U] [App Term, 1st Dept 2008]; Zarintash v Kopple, 5 Misc 3d 130[A], 2004 NY Slip Op 51309[U] [App Term, 1st Dept 2004]). Accordingly, it was error for the District Court to dismiss defendant’s counterclaims on the alternative ground of res judicata implicitly raised by plaintiff.

In view of the foregoing, the order is reversed, and the matter is remitted to the District Court for a new determination of the branch of plaintiff’s motion seeking to dismiss defendant’s counterclaims pursuant to CPLR 3211 (a) (1) and CPLR 3211 (a) (7). This disposition is without prejudice to plaintiff’s seeking dismissal of defendant’s counterclaims on the ground of res judicata upon proper notice. "

Plaintiff lives to fight another day, but is unlikely to win the war.

Legal malpractice litigation is a complicated matter, with the need to prove hypothetical outcomes, requirements for experts, and proofs that things would have come out differently.  It is not for the faint of heart.  Pro-se litigants do poorly here.

In Kovitz v Wenig, Ginsberg, Saltiel & Greene, LLP ;  2011 NY Slip Op 50768(U) ;  Decided on April 26, 2011 ;  Appellate Term, Second Department we see one such unfortunate outcome. "Plaintiff commenced this small claims action seeking to recover $2,000 as a result of defendant’s alleged legal malpractice. At the nonjury trial, plaintiff testified that he had retained defendant to commence an action for illegal eviction "done by lock-out without a warrant." Plaintiff stated that defendant had repeatedly failed to properly serve a necessary party to the action, which had resulted in the dismissal of that action. Plaintiff further asserted that defendant had failed to verify the necessary party’s residence or effectuate service through alternative methods. A partner in defendant’s firm testified that her firm could not properly serve the necessary party because plaintiff had provided the firm with the party’s incorrect addresses, and plaintiff had refused to pay the cost of an investigator to ascertain the party’s actual residence. The partner further contended that, in any event, defendant had failed to prove his damages. The Civil Court found that plaintiff had failed to establish a prima facie case of legal malpractice and dismissed the action. "

"The decision of a fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence (see Claridge Gardens v Menotti, 160 AD2d 544 [1990]). This standard applies with greater force to judgments rendered in the Small Claims Part of the court (see Williams v Roper, 269 AD2d 125, 126 [2000])." "Since the court’s findings and conclusions are supported by the record, we find that the judgment provided the parties with substantial justice according to the rules and principles of substantive law (CCA 1804, 1807; Ross v Friedman, 269 AD2d 584 [2000]; Williams, 269 AD2d at 126). Accordingly, the judgment is affirmed"

LOK PRAKASHAN, LTD. -v.- RALPH A. BERMAN, DAVIDOFF MALITO & HUTCHER, LLP,
No. 09-0136-cv; UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT;2009 U.S. App. LEXIS 22988 is an example of the Court’s continued romance with the concept that litigation is an art and not a science.

What is a question of judgment? " "A complaint that essentially alleges either an ‘error of judgment’ or a ‘selection of one among several reasonable courses of action’ fails to state a claim for malpractice." Id.

The District Court concluded that "[b]ecause there is ample evidence in the record that Defendants’ omission of the specified document was a conscious and reasonable decision regarding trial strategy, not negligence, and the omission of the document was not the proximate cause of any loss, Plaintiff has failed to show the elements required to support a claim of legal malpractice." [*4] Order of November 1, 2005. We agree and, substantially for the reasons stated by the District Court in its well-reasoned orders of November 1, 2005 and December 12, 2008, find plaintiff’s arguments to be without merit."