The economy stalls, the stock market falls, big investment schemes become exposed, and huge real estate projects run into problems.  This weekend’sNY Times discussed how big name real estate players can run into problems, but it is the investors who lose the money.  Here, in GSO RE Onshore LLC v Sapir ;2010 NY Slip Op 52138(U) ;Decided on November 24, 2010 ;Supreme Court, New York County ; Fried, J.  we see how one of the big players got into some problems.
 

"On October 24, 2006, GSO, as lender, and SDS William Street Mezz LLC (SDS), as borrower, entered into an agreement under which GSO would loan SDS a principal amount of up to $65.5 million, at an interest rate of 18% per year. SDS sought the loan to fund the development and construction of a building of condominium apartments, with ancillary parking [*2]and retail, at 15 William Street, New York, New York (the Project). The loan was evidenced by an October 24, 2006 note made by SDS to the order of GSO, obligating SDS to pay GSO the principal sum of $58 million, plus interest. "

"As a condition for making the loan, GSO required that it be personally guaranteed by someone with the ability to repay it in the event of SDS’s default. SDS offered Sapir, an investor in the Project, as the guarantor. On October 24, 2006, Sapir and GSO entered into a guaranty (the Guaranty) in which Sapir personally and unconditionally guaranteed payment and performance of all of SDS’s obligations under the Loan Documents. In paragraphs 3 and 10 of the Guaranty, Sapir agreed to waive any defenses that he might have to an action against him under the Guaranty, except for the defense of actual timely performance of his obligations under the Guaranty. Sapir further agreed to waive any right to notice of default or demand for payment. "

"In opposition to the motion and in support of the cross motion, Sapir’s son, Alex Sapir (A. Sapir) submits an affidavit in which he explains that he is the president of the Sapir Organization and a member of The Sapir Group LLC (the Sapir Group), a privately held, New York-based real estate holding and development firm. Sapir is the chairman of the Sapir [*3]Organization. A. Sapir states that he ran the Sapir Group’s day-to-day negotiations of the loan transactions underlying this action.A. Sapir explains that, in 2005, the Sapir Group started to develop the Project. In connection therewith, the Sapir Group partnered with an entity controlled by S. Lawrence Davis and an entity controlled by the Sapir Group’s attorney in connection with the Project, Robert J. Ivanhoe (Ivanhoe) of the law firm Greenberg Traurig LLP. Ivanhoe formed Strategic William Street LLC, the entity through which he was a partner in the Project, with a 5% interest therein. A. Sapir states that Ivanhoe continued to represent SDS, including the Sapir Group (which holds a 90% interest in the Project) in the negotiation of the terms of the loan, including the Guaranty.

A. Sapir contends that GSO knew from the beginning that Ivanhoe was representing the Sapir Group in connection with the loan as well as Sapir in connection with the Guaranty. According to A. Sapir, GSO realized that Ivanhoe, as a partner in the Project, had a conflict of interest. A. Sapir explains that, in the stronger economic times of 2006, the parties predicted profits in the Project that would have netted Ivanhoe’s company $15 million, such that GSO knew that Ivanhoe had a strong incentive to complete the deal. According to A. Sapir, because of this knowledge, GSO presented the one-sided Guaranty to Ivanhoe, who then presented it to Sapir. A. Sapir asserts that GSO was aware that a disinterested lawyer without a conflict of interest would not advise Sapir to sign the Guaranty. In his affirmation, Sapir’s attorney, Stephen B. Meister, states that it is unheard of for investors such as GSO to earn such high rates of return when there is no risk involved because the returns are guaranteed by a net worth guarantor."

"GSO has established its prima facie entitlement to judgment as a matter of law because the undisputed facts establish GSO’s underlying loan to SDS, Sapir’s personal guaranty thereof and the failure to make payment in accordance with their terms. E.D.S. Sec. Sys. v Allyn, 262 AD2d 351, 351 (2d Dept 1999); see also Hotel 71 Mezz Lender LLC v Mitchell, 63 AD3d 447, 448 (1st Dept 2009).

Sapir has not established the existence of any defense to GSO’s prima facie case, because the Guaranty contains a waiver-of-defenses provision. Such a provision in a guaranty is valid and enforceable, and bars, as a matter of law, any defenses a guarantor might otherwise assert in an action to recover under its guaranty. Citibank v Plapinger, 66 NY2d 90 (1985); Red Tulip LLC v Neiva, 44 AD3d 204, 209-10 (1st Dept 2007).

"I stated at oral argument, without opining on the merits, that Sapir may have a claim against Ivanhoe. GSO also notes in its papers that Sapir, if he can prove his claims, may seek to bring a separate damages action against Ivanhoe for alleged breach of fiduciary duty and/or legal malpractice, and against GSO for allegedly aiding and abetting Ivanhoe’s alleged breach. Any such possible claims, however, can not be asserted as defenses to an unconditional guarantee. "

Criminal defense legal malpractice cases are so rare that the 4th Department found but a single case to discuss in the decision in Dombrowski v Bulson  ;2010 NY Slip Op 09625 ; Decided on December 30, 2010 ;Appellate Division, Fourth Department .  Plaintiff was convicted, lost on appeal, argued ineffective assistance of counsel, lost, tried to take an appeal to the AD, lost, finally got to US District Court and gained habeas relief.  He was not retried, and the case was dismissed.
 Dombrowski discusses two aspects of damages in legal malpractice cases.  One is whether one might receive compensation for the incarceration and whether one may receive compensation for lost wages.  Plaintiff won on the first prong, which is the exception to the rule that one may not obtain non-pecuniary damages in legal malpractice.

"It is well settled that non pecuniary damages are not recoverable in a legal malpractice action involving the negligence of an attorney in a civil matter (see e.g. Wolkstein v Morgenstern, 275 AD2d 635, 637; Dirito v Stanley, 203 AD2d 903). Here, however, the issue before us is whether that rule should also apply to legal malpractice actions where the underlying matter is criminal rather than civil in nature. The only New York appellate court decision on point is that of the First Department in Wilson v City of New York (294 AD2d 290), which held that recovery of nonpecuniary damages is not permitted. In our view, the reasoning of the First Department in Wilson is not persuasive, and we therefore decline to follow the holding in Wilson.

"It is fundamental to our common-law system that one may seek redress for every substantial wrong. The best statement of the rule is that a wrong-doer is responsible for the natural and proximate consequences of his [or her] misconduct’ " (Battalla v State of New York, 10 NY2d 237, 240; see Derby v Prewitt, 12 NY2d 100, 105-106). Where emotional or other nonpecuniary loss is a direct result of a defendant’s breach of duty, a plaintiff may recover damages for such loss (see generally Martinez v Long Is. Jewish Hillside Med. Ctr., 70 NY2d 697, 699; Kennedy v McKesson Co., 58 NY2d 500, 504-506). The risk of imprisonment is a direct result of attorney malpractice in a criminal case and, indeed, it is the primary risk involved in most criminal cases. In our view, a cause of action for criminal legal malpractice is analogous to causes of action for false arrest and malicious prosecution, both of which allow recovery for the plaintiff’s loss of liberty resulting from the plaintiff’s wrongful incarceration (see Strader v Ashley, 61 AD3d 1244, lv dismissed 13 NY3d 756; Lynch v County of Nassau, 278 AD2d 205; see generally Britt v Legal Aid Socy., 95 NY2d 443, 448). We thus conclude that a plaintiff who establishes that he or she was wrongfully convicted due to the malpractice of his or her attorney in a criminal case may recover compensatory damages for the actual injury sustained, i.e., loss of liberty, and any consequent emotional injuries or other losses directly attributable to his or her imprisonment. "

In an otherwise garden or varietal attorney fee dispute with a legal malpractice defense, we ran across the "French Person" defense to attorney fees for the first time.  Justice Gische, in Singer v Adler ;2010 NY Slip Op 33439(U); December 13, 2010; Sup Ct, NY County gave it short shrift. 

"This action is based upon claims for legal services rendered by plaintiff, Stephen Sayre Singer, to defendant, Joel A. Adler. Adler brings a pre-answer motion to dismiss the verified complaint against him on the basis that it is barred by the statute of limitations and alternatively, he is a “French person” and a New York Court does not have personal jurisdiction over him, pursuant to Article 14 of the Civil Code of the Republic of France. Both parties are attorneys at law and each is self represented in this action."

"Defendant generally claims there is no personal jurisdiction over him because he  is a “French person.” Whether this argument pertains to long arm jurisdiction or service of process, it fails.
CPLR 5 302 provides that a court may assert jurisdiction over a non-domiciliary when the non-domiciliary “transacts any business within the state” and the cause of action arises out of that business. See CPLR 302 (a)(l). In order to have personal jurisdiction over a defendant, it is essential that the suit against the non-domiciliary have some “articulable nexus” to the business transacted. See McGowan v, Smith, 52 NY2d 268, 272 (1981). The basis of plaintiffs complaint, premised on plaintiffs performance of legal services for defendant, and the non-payment of legal fees, while defendant was domiciled in New York, amounts to “transaction of business within the state” and has an “articulable nexus” to the business transacted, specifically the provision of legal
services. Therefore, personal jurisdiction over defendant is proper. "

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. "

While the guiding principals are clear and unambiguous, the facts and calculations underlying this matrimonial legal malpractice case are daunting.  Holding companies, general partners, intra-company transfers, straw-men and the like make the financial analysis difficult.

Justice Ramos, in TPR Inv. Assoc., Inc. v Fischer;  2010 NY Slip Op 33370(U);  December 9, 2010;  Supreme Court, New York County;  Docket Number: 603509/07 teases out whether the wife may sue the attorneys over their handling of a international net of financial transactions, including the "missing million."  Rather than re-cap the financial shenanigans, we look at the guiding principals:
 

"This action for fraud and malpractice arises out of the bitter divorce between plaintiff Dalia Genger (Mrs. Genger) and her former husband, defendant Arie Genger (Mr. Genger). Plaintiff TPR Investment Associates, Inc. (TPR) is a holding company, comprised of plaintiff D&K Limited Partnership (D&K).
Mr. Genger was formerly the president, chairman, and controlling shareholder of TPR. D&K, in turn, was ninety-six percent owned by the Gengers’ children, Sagi and Orly, while Mrs. Genger owned
the remaining four percent and was its general partner. The facts set forth herein are taken from the pleadings  and the Sonnenschein Defendants’ Rule-19A Statement. It is noted that plaintiffs failed to comply with Part 53 Practice Rules which expressly require the submission of a Rule 19-A Statement of Undisputed Facts on summary judgment motions.

TPR’s main asset was a controlling stake in non-party Trans- Resources, Inc. ( T R I ) a holding company of domestic and foreign subsidiaries that manufacture fertilizer and chemicals. From
1995 to 2005, TPR held fifty-three percent of TRI‘s shares. Former defendant William Dowd was the president of TRI and an officer of TPR, while Mr. Genger also purportedly controlled T R I .
Defendant Klimerman, a partner at Sonnenschein Nath &Rosenthal LLP (Sonnenschein) together, the Sonnenschein Defendants) represented Mr. Genger during the divorce proceedings.

To establish a claim for common law fraud, a plaintiff must demonstrate that defendants knowingly misrepresented a material fact upon which the plaintiff justifiably relied and caused 
damage (Ross v L o u i s e Wise Services, Inc., 8 NY3d 478, ).
The Sonnenschein Defendants correctly assert that the terms of the Settlement belie any  contention that Mrs. Genger justifiably relied upon M r . Genger’s N e t Worth Statement, or was
damaged from any omissions. First, the Settlement states that the equitable distribution contemplated thereby is intended to "effect approximately a 50-50 distribution of their marital assets and represent and set forth a fair, reasonable and suitable distribution" of property"

"The claims against the Sonnenschein Defendants for violation of Judiciary Law 487 also must be dismissed. Plaintiffs f a i l to submit any evidence that the Sonnenschein Defendants intentionally sought to deceive the court in the divorce proceeding to the extent of the omissions. As to the Shikmim Note, Mrs. Genger only alleges ”on information and belief” that
the Sonnenschein Defendants were aware of the Shikmim Note to begin with."

This holiday week, swept with snow and high winds, brings a case which re-emphasizes our meme that legal malpractice may show up anywhere attorneys are at work.  Here in Country Club Partners, LLC v Goldman ;  2010 NY Slip Op 09309 ;  Decided on December 16, 2010 ;  Appellate Division, Third Department   we see an allegation of legal malpractice (not addressed here) and of breach of fiduciary duty in the real estate transactions surrounding a country club transaction.
 

"Plaintiff’s breach of fiduciary duty claim relates, in part, to Goldman’s allegedly improper actions occurring after SGMS’s representation of plaintiff ceased, and plaintiff’s malpractice claim relates, in p art, to defendants’ allegedly improper actions occurring during SGMS’s representation of plaintiff,  he two claims are not duplicative (see Kurman v Schnapp, 73 AD3d 435, 435-436 [2010]; Ulico  Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 9 [2008]; Weil, Gotshal &  Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 AD3d 267, 271 [2004]). "

"The attorney-client relationship "imposes on the attorney the duty to deal fairly, honestly and with undivided loyalty . . . including maintaining confidentiality, avoiding conflicts of interest,  operating competently, safeguarding client property and honoring the clients’ interests over the  lawyer’s" (Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d at 9 [internal  quotation marks and citations omitted]; see Krouner v Koplovitz, 175 AD2d 531, 532 [1991]). To  recover on its claim, plaintiff is required to "prove both the breach of a duty owed to it and damages  sustained as a result" (Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d at 10  internal citation omitted]). That is, a client must establish "actual and ascertainable  damaes" (Boone v Bender, 74 AD3d 1111, 1112 [2010] [internal quotation marks and citations ommitted]; see Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d 925, 926 [2003]) that would not have occurred "but for" the attorney’s conduct (Boone v Bender, 74 AD3d at 1113; see Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d at 10; Weil, Gotshal & Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 AD3d at 271-272). "For defendants to succeed on their motion for summary judgment here, they were required to present evidence in admissible form establishing that plaintiff is unable to prove at least one of these elements" (Ehlinger v Ruberti, Girvin & Ferlazzo, 304 AD2d at 926 [citations omitted]; see Boone v Bender, 74 AD3d at 1112-1113).

Here, summary judgment dismissing plaintiff’s cause of action alleging a breach of fiduciary duty was properly granted since defendants met their burden on their motion and, in opposition, plaintiff failed to raise a question of fact that defendants’ breach proximately caused it any ascertainable damages (see Boone v Bender, 74 AD3d at 1113; Brodeur v Hayes, 18 AD3d 979, 980-981 [2005], lv dismissed and denied 5 NY3d 871 [2005]). In support of their motion, defendants presented Kime’s affidavit, in which she stated that Michael Gordon, a member of [*3]plaintiff, contacted her about acquiring an option to purchase a portion of her property. Kime stated that she advised Gordon that she was not interested in selling an option to only a portion of her property, but instead desired to sell outright the entire parcel, including its residence. According to Kime, neither Gordon nor any other member of plaintiff made subsequent offers to purchase the entire parcel and negotiations with plaintiff ceased. Kime was thereafter approached by several people interested in purchasing the property and, in August 2006, she received two offers to purchase the entire parcel, one from Goldman and another from Todd Britton and Mary Britton, both for $435,000. Kime stated that she decided to accept Goldman’s offer over the Brittons’ offer because it included a higher down payment ($100,000 compared to $5,000) and was, in the opinion of her attorney, the stronger offer. In opposition to defendants’ motion, Gordon submitted an affidavit in which he stated that negotiations with Kime progressed to the point where an offer in the amount of $400,000 was made and an option agreement was drafted. "

Legal malpractice litigation is often viewed with a gimlet eye. This is a 50’s expression meaning a sharp or knowing look.  Courts often believe that legal malpractice counterclaims are merely a method of trying not to pay legal fees.  As has been observed elsewhere, attorney fees are dear to the heart of attorneys.

Butterman & Kahn, LLP v Yildiz;  2010 NY Slip Op 33440(U);  December 13, 2010;  Sup Ct, NY County;  Judge: Judith J. Gische seems to be an example of this phenomenon.  "An account stated represents an agreement between the parties reflecting mounts due on prior transactions. Jim-Mar Cwp. v. Aquatic Constr., 195 A.D.2d 868 (3d dept. 1993), Iv. denied 82 N.Y.2d 660 (1993). The receipt and retention of an account, without objection, within a reasonable period of time, gives rise to an account stated entitling the moving party to summary judgment in its favor. Morrison Cohen Siflger & Weinstein. LLP v. Ackerman, 280 A.D.2d 355 (Iat Dept. 2001). Where either no account
has been presented or there is any dispute regarding the correctness of the account, the cause of action fails. M & A Const, CQrD. v. McTaque, 21 A.D.3d 610 (3rd Dept. 2005). plaintiff, but has provided no proof other than her own affidavit.

Here, plaintiff has established a prima facie cause of action for account stated against the defendant. Plaintiff has established that it sent detailed billing statements to the defendant reflecting the legal serviced provided and the fees and disbursements incurred on the defendant‘s behalf. Plaintiff has also established that the defendant made partial payments on many of these billing statements, and otherwise retained same without objection. Here, the defendant’s retention of the bills and her forty-six partial payments give rise to an account stated (see Morrison Cohen v, Wate rs, 13 AD3d 51 [Ist Dept 20041; Morrison Cohen Sinqer 8 Weinge in, LI P v. Ackerman, 280 AD2d 355 [lst Dept 2001J;s ee also Moses & Sinqer LLP v. S&S Machinew Corp., 251 AD2d 271 [ lst Dept 1998]),

The defendant has failed to raise a triable issue of fact on the issue of timely objection. Her argument that Attorney Butterman’s statement on the record at a court Page6of 12
[* 7] proceeding that the defendant owed $40,000 is rejected because is not relevant to issue
of whether the defendant timely objected to the bills she indisputably received. It is undisputed that the defendant received each and every one of the bills that the plaintiff sent. Moreover, Attorney Butterman’s misrepresentation of the amount that the defendant owed to plaintiff has been explained by plaintiff as a reasonable error. Attorney Butterman supposedly confused the amount the defendant owed to his firm with the total child support arrears owed by Mr. Yildiz at that point. *
Indeed, the defendant made another partial payment to the plaintiff after the September 2009 court appearance where Attorney Butterman misspoke. Even this partial payment was a recognition of the defendant’s indebtedness to the plaintiff (Boulanqer, Hicks. $ tein & Churchill, P,C, v. Jac obs, 235 AD2d 353 [lst Dept 19971). The defendant’s claims that Attorney Butterman “lied” to the court or downplayed the amount the defendant owed to his firm is a red herring.  Any claims that the defendant made timely objections in writing are unsubstantiated."

Equitable Estoppel is a principal which comes into play most often when a case is not commenced within the statute of limitations. The theory is that plaintiff was lulled into not starting the case by a wrongful act of defendant. Considering that blown statutes of limitations are one well recognized basis for legal malpractice cases, the two concepts are suitably intertwined.

In a recent legal malpractice (arising from a medical malpractice case) we see Justice Shulman of Supreme Court, New York County writing:

"The doctrine of equitable estoppel may bar a defendant from asserting the statute of limitations when the plaintiff "was induced by fraud, misrepresentations or deception to refrain from filing a timely action" (Ross v Louise Wise Sews., Inc., 8 NY3d 478, 491 [2007], quoting Simcuski v Saeli, 44 NY2d 442, 448-449 [1978]; General Stencils, lnc. v Chiappa, 18 NY2d 125, 128 [ 19661). Equitable estoppel will "bar the assertion of the affirmative defense of the Statute of Limitations where it is the defendant’s affirmative wrongdoing . . . which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding" (Zumpano v. Quinn, 6 NY3d 666, 673 [2006], quoting General Stencils, lnc. v Chiappa, 18 NY2d at 128). A defendant may be precluded from.invoking a statute of limitations defense under such circumstances (Putter v North Shore Univ. Hosp., 7 NY3d 548, 552 [ZOOS], quoting Zumpano v Quinn, 6 NY3d at 673).
Where a medical malpractice claim is asserted, the patient’s medical records are material to reaching a responsible decision on whether there are grounds for a lawsuit and equitable estoppel may arise where there is an unreasonable delay in delivering records to an attorney consulted in a suspected case of malpractice (Karnruddin v Desrnond, 293 AD2d 714 [2d Dept 20021). Concealment by a physician or failure to disclose his own malpractice may, in a proper case in conjunction with other factors, provide a foundation for seeking to invoke the doctrine of equitable estoppel to extend the applicable period of limitations (Simcuski v Saeli, 44 NY2d at 452).

Of critical importance, due diligence on the plaintiffs part in ascertaining the facts and commencing the action is an essential element when plaintiff seeks to invoke this doctrine. Although there are exceptions, "the question of whether a defendant should be equitably estopped is generally a question of fact” (Putter v North Shore Univ. Hosp., 7 NY3d at 553). On the other hand, where plaintiff is timely aware of the facts requiring him to make further inquiry before the statute of limitations expires, an equitable estoppel defense to the statute of limitations is inappropriate as a matter of law (Pahlad w Brustman, 8 NY3d 901 [2007])."In Lopresti v Bamundo, Zwal & Schermerhorn, LLP;  2010 NY Slip Op 33436(U);  December 14, 2010;  Sup Ct, NY County ;  Docket Number: 100206/09;  Judge: Martin Shulman determines that equitable estoppel does not apply."This record contains no evidence of any affirmative wrongdoing or purposeful concealment on Dr. Marino’s part caused Lopresti’s delay in commencing the underlying action (see Zumpano v Quinn, 6 NY3d at 673; Kamruddin v Desmond, 293 AD2d at 71 5). Lopresti’s allegedly incorrect statements to Bamundo ZwaI as to the last date Dr. Marino treated Vito Lopresti and the delay in having a personal representative appointed cannot be held against Dr. Marino. Rather, Lopresti’s and/or Bamundo Zwal’s own inaction caused the untimely commencement of the underlying case. See, e.g., Public Adm’r of State of New York v Beth Israel Med. Ctr., 2007 WL 176380 (Sup Ct, NY County, Carey, J)(granting summary judgment dismissing action as time barred and finding that hospital should not be equitably estopped from asserting statute of limitations as a defense where plaintiffs inaction and failure to avail itself of various procedural safeguards’ prevented timely commencement of action)."