In Warshaw Burstein, LLP v Colambda Tech., Inc. 2023 NY Slip Op 34435(U) December 14, 2023 Supreme Court, New York County Docket Number: Index No. 150283/2023
Judge: Louis L. Nock the legal malpractice and breach of fiduciary duty counterclaims were upheld on a CPLR 3211 motion. Claims of Judiciary Law 487 were not.

“Plaitiff law firm commenced this action seeking unpaid legal fees from its former client, defendant. Defendant brings six counterclaims, for breach of contract, legal malpractice, breach of fiduciary duty, violation of Judiciary Law § 487, fraud, and breach of the covenant of good faith and fair dealing. In summary, defendant alleges that it retained plaintiff to obtain approval for a reverse merger and ticker symbol change from the Financial Industry Regulatory Authority (“FINRA”). Plaintiff ultimately failed to garner FINRA approval. Defendant alleges that plaintiff advised it to undertake costly and unnecessary state level merger filings, failed to detect flaws in the underlying merger documents and disclosures that precluded FINRA approval, communicated with and employed a disbarred attorney in its representation of defendant, and disclosed privileged information regarding defendant to defendant’s business rivals. Plaintiff
now moves to dismiss all six counterclaims.”

“The counterclaim for violation of Judiciary Law § 487 must be dismissed. Violations of
the statute are only actionable if they take place during a pending judicial proceeding (US Suite LLC v Baratta, Baratta & Aidala LLP, 171 AD3d 551, 551 [1st Dept 2019]). Defendant does not allege any such proceeding. Moreover, none of the conduct defendants complain of took place within the State of New York, and the statute has no extraterritorial reach (Doscher v Manatt, 148 AD3d 523, 524 [1st Dept 2017] [“courts have held that the statute does not apply to conduct outside New York’s territorial borders or to administrative proceedings, observing that its purpose is to regulate the manner in which litigation is conducted before the courts of this State”]).

The fraud and breach of the duty of good faith and fair dealing counterclaims arise out of the same facts and seek the same damages as the legal malpractice and breach of fiduciary duty counterclaims, and must therefore be dismissed as duplicative (e.g. Ullmann-Schneider v Lacher & Lovell-Taylor, P.C., 121 AD3d 415, 416 [1st Dept 2014]; Soni v Pryor, 102 AD3d 856, 858 [2d Dept 2013]). In addition, the court notes that to the extent the fraud counterclaim alleges that plaintiff misrepresented its own qualifications, defendant fails to sufficiently allege misrepresentations of present fact (see Fairway Prime Estate Mgt., LLC v First Am. Intern. Bank, 99 AD3d 554, 557 [1st Dept 2012] [“if the promise concerned the performance of the contract itself, the fraud claim is subject to dismissal as duplicative of the claim for breach of contract”]; HSH Nordbank AG v UBS AG, 95 AD3d 185, 206 [1st Dept 2012] [dismissing fraud
claim based in part on alleged insincere promise regarding the manner of performance). Finally, defendant fails to plead with particularity any misrepresentation made by plaintiff, as defendant does not allege what was said, when it was said, and who it was said to (E1 Entertainment U.S. LP v. Real Talk Entertainment, Inc., 85 AD3d 561, 562 [1st Dept 2011]).”

Warshaw Burstein, LLP v Colambda Tech., Inc. 2023 NY Slip Op 34435(U) December 14, 2023 Supreme Court, New York County Docket Number: Index No. 150283/2023
Judge: Louis L. Nock illustrates the oft repeated warning that attorney fee claims will always trigger a legal malpractice claim. Sometimes, as in this case, the legal malpractice claims pass a CPLR 3211 test and go on towards trial.

“Plaintiff law firm commenced this action seeking unpaid legal fees from its former client, defendant. Defendant brings six counterclaims, for breach of contract, legal malpractice, breach of fiduciary duty, violation of Judiciary Law § 487, fraud, and breach of the covenant of good faith and fair dealing. In summary, defendant alleges that it retained plaintiff to obtain approval for a reverse merger and ticker symbol change from the Financial Industry Regulatory Authority (“FINRA”). Plaintiff ultimately failed to garner FINRA approval. Defendant alleges that plaintiff advised it to undertake costly and unnecessary state level merger filings, failed to detect flaws in the underlying merger documents and disclosures that precluded FINRA approval, communicated with and employed a disbarred attorney in its representation of defendant, and disclosed privileged information regarding defendant to defendant’s business rivals. Plaintiff
now moves to dismiss all six counterclaims.”

“Turning to the malpractice claim, “[a]n action for legal malpractice requires proof of
three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff’s losses; and (3) proof of actual damages” (Global Bus. Inst. v Rivkin Radler LLP, 101 AD3d 651 [1st Dept 2012]). Defendant adequately alleges several discrete acts of malpractice, specifically, that plaintiff failed to adequately examine the underlying merger documents and disclosures, failed to correct errors in those documents, and advised defendant to undertake costly and unnecessary work to effectuate the merger at the state level that plaintiff should have known was unnecessary in light of the unamended disclosures. Further, defendant
states that because of plaintiff’s conduct, FINRA never approved the merger and defendant incurred additional unnecessary costs. At the motion to dismiss stage, these allegations are sufficient to sustain the counterclaim.

The counterclaim for breach of fiduciary duty is also adequately pled. “To establish a
prima facie case for breach of fiduciary duty, a plaintiff must allege (1) the existence of a
fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct” (Village of Kiryas Joel v County of Orange, 144 AD3d 895, 898 [2d Dept 2016] [internal quotation marks and citations omitted]). While plaintiff correctly points out that there is a certain amount of overlap between this counterclaim and the legal malpractice counterclaim, the breach of fiduciary duty allegations primarily concern other conduct by plaintiff allegedly violative of the Rules of Professional Conduct; specifically, that plaintiff utilized a disbarred attorney as part of its work on defendant’s matter without telling defendant, and requiring defendant to pay fees for said disbarred attorney. In addition, plaintiff allegedly disclosed its invoices detailing work done for defendant to a third party. Plaintiff argues that the counterclaim should be dismissed in its entirety as duplicative, but misstates the specific allegations underlying each counterclaim. Thus, to the extent that the breach of fiduciary duty counterclaim is supported by independent allegations of misconduct, the court declines to dismiss it as duplicative.”

In this 10-year old case, Mawere v Landau 2023 NY Slip Op 34446(U), December 8, 2023 Supreme Court, Kings County Docket Number: Index No. 501184/12 Judge: Lawrence S. Knipel all claims are dismissed on summary judgment.

“Plaintiff commenced this action seeking, among other relief, damages for breach
of contract and breach of fiduciary duty stemming from the purchase and. acquisition by the Alliance Defendants of Ruby Weston Manor (RWM), a financially troubled .-nonprofit nursing home facility in Brooklyn. Plaintiff is a physician and licensed nursing, home administrator who serves as the Chief Operating Officer of Queens Boulevard Extended Care facility. According to plaintiffs extant pleading (Third Amended Verified Complaint), in 20i0 he learned of the opportunity to purchase the asset of RWM along with another financially trouble4 nursing home facility Mateus Garvey Residential Rehab Pavilion, Inc; (MG).”

” The existence of an attorney-client relationship is an essential element of a cause
of action to recover damages for legal malpractice (see Lindsay v Pasternack Tilker
Ziegler Walsh Stanton & Romano LLP; 129 AD3d 790, 792 [2d Dept 2015]). ”Pursuant
to the doctrine of [the] law of the case:, judicial determinations made during the course of … litigation before final judgment is entered may have preclusive effect provided that
the parties had a full and fair opportunity to litigate the initial detetmination” (Sterngass v Town Bd. of Town of Clarkstown, 43 ADJd 1037, I 037 [2d Dept 2007]; see Ruffino v Green; 72 AD3d 785, 786 [2d Dept 2010]). The law of the case doctrine ”is a rule of practice, an articulation of sound policy that, when an issue is once judicially determined, that should be the end of the matter as far as Judges and courts of co-ordinate jurisdiction are concerned” (Martin v City of Cohoes, 37·NY2d 162, 165 [1975]). “The doctrine applies only to legal determinations that were necessarily resolved on the merits in the prior decision and to the same questions presented in the same case” (RPG Consulting, Inc. v Zormati, 82 AD3d 739, 740 [2d Dept 2011] [citations and internal quotation marks omitted]); As it was already determined in this litigation, by the report. of the Special Referee and the order of this court confirming the report, that the Law Firm Defendants had no attorney-client relationship with plaintiff, the cause of action for legal malpractice is precluded under the law of the case doctrine.”

“As a result, the Law Firn Defendants’ motion for summary judgment dismissing·
the Third Amended Verified Complaint as against them is granted.”

We are pleased to present the link to a NYLJ article discussing Judiciary Law 487 in its present and historical context.

Here is the Link

Happy Holidays!

Carasco v Schlesinger 2023 NY Slip Op 06437 Decided on December 14, 2023
Appellate Division, First Department provides a window into the rise and fall of the large personal injury law firms, including attorneys who leave and take cases with them.

Here, defendant attorney was unable to obtain summary judgment and was unable to show that plaintiff could not prove at least one element of his lost personal injury claim due to failure to provide discovery to the landowner.

“In October 2014, plaintiff fell while crossing Second Avenue near 58th Street in Manhattan. In December 2014, plaintiff retained the law firm of Julian & Schlesinger, P.C. (J&S) to bring a personal injury action on her behalf. At that time, Schlesinger was an associate at J&S who had met with plaintiff and represented her at the 50-h hearing. J&S dissolved in 2015 and Schlesinger moved to the Morelli Law Firm, PLLC., who was never retained by plaintiff. On January 28, 2016, Schlesinger commenced a personal injury action in Supreme Court, New York County on plaintiff’s behalf. The summons and complaint in the underlying action listed counsel for plaintiff as “Michael S. Schlesinger of the Schlesinger Law Firm, P.C.” Between February 2017 and July 2018, Supreme Court, New York County issued orders dismissing the underlying action based, inter alia, on plaintiff’s failure to provide discovery. Plaintiff then commenced this legal malpractice action against J&S, Morelli Law Firm ^[FN1], and Schlesinger.

In order to establish a legal malpractice claim, a plaintiff must establish “three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff’s losses; and (3) proof of actual damages” (Brooks v Lewin, 21 AD3d 731, 734 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). When the claim is based on the alleged mishandling of a litigation, then plaintiff must satisfy the “case within a case requirement, demonstrating that but for the attorney’s conduct the plaintiff client would have prevailed in the underlying matter or would not have sustained any ascertainable damages” (Lieblich v Pruzan, 104 AD3d 462, 462-463 [1st Dept 2013] [internal quotation marks omitted]).

The court correctly determined that Schlesinger failed to establish prima facie that plaintiff could not prevail on her “case within a case” showing that she would have won the underlying personal injury action. Plaintiff provided sufficient detail and testimony to provide a jury with a nonspeculative basis for finding that the accident was caused by the condition of the raised roadway (see Taveras v 1149 Webster Realty Corp., 134 AD3d 495, 496-497 [1st Dept 2015], affd, 28 NY3d 958 [2016]). That plaintiff gave some inconsistent testimony was a credibility issue, not subject to determination on summary judgment (see Latif v Eugene Smilovic Hous. Dev. Fund Co., Inc., 147 AD3d 507, 508 [1st Dept 2017]).

Whether the condition was open and obvious is generally an issue of fact (see Tagle v Jakob, 97 NY2d 165, 169 [2001]). Even were the condition to be found open and obvious, defendants in the underlying action would still have an obligation to maintain the [*2]property in a reasonably safe condition (see Westbrook v WR Activities-Cabrera Mkts., 5 AD3d 69, 70 [1st Dept 2004]).”

These are the two lessons found in Marcum LLP v L’Abbate, Balkan, Colavita & Contini, L.L.P. 2023 NY Slip Op 06443 Decided on December 14, 2023 Appellate Division, First Department an ironic case in which a major legal malpractice defense firm was sued for legal malpractice and they were defended by a friendly competitor major legal malpractice defense firm.

“Supreme Court correctly concluded that defendants, L’Abbate, Balkan, Colavita & Contini, L.L.P. (LBCC) and Marianne S. Conklin, who represented plaintiff in an underlying action alleging accounting malpractice, among other things, were entitled to dismissal of the complaint given that plaintiff failed to allege that defendants were negligent or that they proximately caused any damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Fielding v Kupferman, 65 AD3d 437, 442 [1st Dept 2009]). Plaintiff alleged that in the underlying action, defendants’ supplemental discovery production, which included responsive documents that had been inadvertently withheld, such as declarations submitted in connection with a federal investigation into one of plaintiff’s clients, precipitated a coverage dispute with its insurers. That dispute led to plaintiff having to retain other coverage counsel and to ultimately contribute to the settlement in the underlying action.

Although plaintiff contends that the declarations were subject to grand jury secrecy rules, plaintiff did not allege that either of the employees who composed the declarations testified before a federal grand jury, or that the declarations were entered into evidence. Thus, the declarations were not subject to the general rule of grand jury secrecy because they were not “evidence actually presented to [the grand jury]” nor “anything that may tend to reveal what transpired before it” (see United States v Eastern Air Lines, Inc., 923 F2d 241, 244 [2d Cir 1991], citing Fed Rules Crim Pro rule 6[e][2]). Accordingly, plaintiff failed to allege that defendants’ conduct breached its duty of care.

Even if defendants negligently produced the documents, plaintiff did not adequately allege that defendants’ actions were the proximate cause of the claimed damages, including plaintiff’s contribution to the settlement and retention of coverage counsel (see Fielding v Kupferman, 65 AD3d at 442). Plaintiff does not dispute that, even if the declarations were subject to privilege or grand jury secrecy rules, defendants would have had to provide notice those documents were being withheld from production because they were responsive (see CPLR 3122[b]). Moreover, plaintiff acknowledged that the insurers were previously aware of the federal investigations into its client and several of plaintiff’s employees. Plaintiff’s claim rests on the assumption that if defendants had not produced the documents, its adversaries and insurers would not have requested or compelled them, so the insurers would not have initiated [*2]the coverage dispute and would have instead fully funded the settlement. This speculation is insufficient to establish that defendant’s malpractice, if any, was a proximate cause of plaintiff’s losses (see Brooks v Lewin, 21 AD3d 731, 734-735 [1st Dept 2005], lv denied 6 NY3d 713 [2006]).

Supreme Court also correctly dismissed that part of the legal malpractice claim seeking disgorgement of attorneys’ fees paid to LBCC, which is, essentially, a claim for monetary damages in connection with its legal malpractice claim (see Access Point Med., LLC v Mandell, 106 AD3d 40, 44 [1st Dept 2013]). Defendant was not discharged for cause, nor did it charge legal fees for any work associated with the motion practice ensuing from the supplemental disclosures (see Decolator, Cohen & DiPrisco v Lysaght, Lysaght & Kramer, 304 AD2d 86, 91 [1st Dept 2003]). Since the underlying legal malpractice claim is dismissed, the claim for disgorgement must be dismissed as well (see Cambridge Capital Real Estate Invs., LLC v Archstone Enter. LP, 137 AD3d 593, 596 [1st Dept 2016]).”

Holland & Knight LLC v Walsam 316, LLC 2023 NY Slip Op 33748(U)
October 17, 2023 Supreme Court, New York County Docket Number: Index No. 654470/2022 Judge: Dakota D. Ramseur has a third lesson in attorney billing litigation. How does a Judiciary Law 487 defense to the bills fare?

“In November 2022, plaintiff Holland & Knight LLC commenced the instant action
against defendant Walsam 316, LLC to recover outstanding legal fees Walsam accrued as part of plaintiffs legal representation in an underlying case entitled Walsam 316 LLC et al v 316 Bowery Realty Corp. et al. (NYSCEF index no. 153318/2017). In this motion sequence (001), plaintiff moves pursuant to CPLR 3211 (a) (1) and (a) (7) to dismiss Walsam’s counterclaims, wherein Walsam alleges, individually and on behalf of a putative class, that plaintiff invoiced for legal research that the parties’ retainer agreement did not permit. The motion is opposed. As part of this same motion sequence, Walsam cross-moves pursuant to CPLR 602 to consolidate this action with its malpractice action against plaintiff Walsam 316, LLC, et al. v Thompson & Knight, e. al. 1 (NYSCEF index. No. 156653/2022). For the following reasons, plaintiffs motion
to dismiss is granted in its entirety, and the cross-motion is deemed moot.”

“Under Judiciary Law§ 487, an attorney who “(1) is guilty of any deceit or collusion … or
(2) willfully delays his client’s suit with a view to his own gain; or willfully receives any money or allowance for or on account of any money which he has not laid out” is guilty of a misdemeanor, and liable to the injured client for treble damages. (Judiciary Law § 487.) For a law firm to be liable to their client under § 487, the client must allege a chronic and extreme pattern oflegally delinquent, wrongful, or deceitful behavior. (Freeman v Brecher, 155AD3d 453,454 [1st Dept 2017], citing Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008]; see also Kaufman v Maritt Hock Hamroff, LLP, 192 AD3d 1092, 1093 [2d Dept 2021] [“Relief pursuant to Judiciary Law S 487 ‘is not given lightly’ and requires a showing of ‘egregious conduct or chronic and extreme pattern of behavior on the part of defendant attorneys’.]) Allegations of excessive billing for services rendered and overinflated fees do not rise to the level of wrongful conduct required for liability to attach on a §487 claim. (See Chowaiki & Co. Fine Art Ltd. v Lacher, 115 AD3d 600, 601 [1st Dept 2014] [allegations that client was excessively billed and then threatened and coerced into paying the excessive and overinflated fees did not establish the “existence of a chronic and/or extreme pattern of legal delinquency”]; Rodriguez v Jacoby & Meyers, LLP, 2014 WL 3421053 at *5 [Sup. Ct. NY County 2014] [ allegations of defendants’ delaying plaintiffs lawsuit for their own gain and false
billing statements did not establish a chronic and extreme pattern of legal delinquency or intentionally egregious misconduct under§ 487], ajf’d 126, AD3d 606, 608 [1st Dept 2015] [“There is no evidence that defendants engaged in misconduct constituting a violation of Judiciary Law§ 487.]) Walsam’s Judiciary Law§ 487 claim is based solely on the nine invoices containing the allegedly false billings for Westlaw and Lexis access. Even if proven, Walsam’s misconduct allegations do not rise to the level required by Judiciary Law § 487.5 Accordingly, this counterclaim is dismissed pursuant to CPLR 3211 (a) (7).”

Holland & Knight v. Walsam,316 LLC, , which we discussed on Monday December 11, 2023 has three lessons about attorney billings. The first is how electronic research monthly fees to the law firm can be attributed to the client. The second, which we highlight today is how the account stated principle works in favor of the law firm.

“In January 2019, Walsam retained Holland & Knight and its partners Michael
Blumenthal and Stuart Glick to represent it in an indemnification action it commenced against non-party 316 Bowery Realty Corp. The parties executed an Engagement Letter that, among other things, defined the scope of plaintiffs representation (i.e., to “represent Walsam in connection with analysis of documents and pleadings to advise Walsam on prospective strategy in the lawsuit … against 316 Bowery Realty Corp.”) and listed the hourly rates of its partners. (NYSCEF doc. no. 2 at 1-2, Engagement Letter.) In pertinent part, the Letter also provides, “In addition to legal fees, the Firm charges for out-of-pocket costs and expenses incurred in representing Walsam. These costs and expenses include, but are not limited to, filing fees, travel expenses … and charges for the Firm’s access to and use of any electronic research services on Walsam ‘s behalf(emphasis added).” (Id. at 3.) The Engagement Letter continues, “By entering
into this representation agreement, Walsam agrees to timely pay the Firm’s invoices for fees and expenses related to the representation.” (Id.)

In March 2019, Walsam executed an addendum to the Letter that expanded plaintiffs
representation to include acting as special counsel defending a tenant rent overcharge proceeding against it in Supreme Court, New York County. (That action, Peter Arnold et al. v 4-6 Bleecker Street LLC et al., has the NYSCEF Index no. 158541/2013.) By Decision and Order dated October 18, 2019, this Court [Chan, J.] granted the tenants in that action summary judgment and entered a $2,081,539.02judgment against the named defendants, including Walsam. In August 2022, Walsam commenced a malpractice action-Walsam 316, LLC, et al. v Thompson & Knight, et al., the same action with which Walsam seeks to consolidate-against plaintiff, Blumenthal, and Glick. By Decision and Order dated August 2, 2023, the Court [Ramseur, J.] granted plaintiffs motion to dismiss the complaint in its entirety. (NYSCEF index no. 156653/2022, doc. no. 42.)”

“But even were plaintiff not entitled to summary judgment pursuant to CPLR 3211 (a) (1),it is entitled to dismissal of plaintiffs breach of contract counterclaim under the account stated doctrine. “Where an account is rendered showing a balance, the party receiving it must, within a reasonable time, examine it and object, if he disputes its correctness. If he omits to do so, he will be deemed by his silence to have acquiesced, and will be bound by it as an account stated, unless fraud, mistake or other equitable considerations are shown.” (Shaw v Silver, 95 AD3d 416, 416 [1st Dept 2012].) Where a client receives invoices from its law firm seeking payment for professional services rendered, and the client fails to object within a reasonable time, the law firm has an actionable account stated cause of action. (Levisohn, Lerner, Berger & Langsam v
Gottlieb, 309 AD2d 668, 668 [1st Dept 2003].) The same principle applies where the doctrine is invoked by the law firm in defense of a breach of contract claim brought by the client. (Atsco Footwear Holdings, LLC v KBG, LLC, 193 AD3d 493, 494-495 [1st Dept 2021]; An-Jung v Rower, LLC 173 AD3d 488,488 [1st Dept 2019] [holding breach of contract claims should be dismissed in light of defendants’ account stated defense where retainer required objections to be raised within 30 days of receipt of the invoice, plaintiff timely paid the invoices, and did not object to any of them until two months after she received the last one].)

Here, plaintiff sent nine invoices containing charges for electronic research conducted on Walsam’s behalf. (See NYSCEF doc. no. 16, invoices.) Of these nine, four accrued from March through October 2019; one from January 2020; and the final four from April through September 2021 (NYSCEF doc. no. 13 at ,i 4-5, Blumenthal affidavit.) Walsam promptly paid the first five invoices; only the final four remain unpaid. (Id. at ,J5.) The parties do not dispute that the Engagement Letter provides, “If Walsam has questions or concerns about the fees and expenses, please contact us promptly.” Nor does Walsam dispute that it did not object to any of the invoices until March 2023, when it answered and interposed counterclaims, approximately seventeen months after it received the final invoice.4 (See NYSCEF doc. no. 23 at 14; NYSCEF doc. no. 13 at ,J7-8, Blumenthal affidavit.) By submitting copies of its invoices outlining services rendered and billable hours and attesting to Walsam’s failure to object within a reasonable time,
plaintiff has made a prima facie showing of an account stated. (Law Offs of Clifford G.
Kleinbaum v Shurkin, 88 AD3d 659, 660 [2d Dept 2011]”