The litigation funding industry either preys on, or aids clients who have significant damage cases that they cannot bring to trial, or when the clients need money during long litigation.  This story, while nominally that of a disbarred attorney, focuses a light on the lending practices of attorneys and clients.

There is a top tier of medical malpractice law firms, and they have vast brain-damaged medical malpractice experience.  A multi-million dollar damage case likely falls within those that would have been taken up by any of the top-tier firms. But this case was not handled by one of the big firms.   What happened here?  In Matter of Cousins
2010 NY Slip Op 07413 ;Decided on October 19, 2010 ; Appellate Division, First Department 
we see that a set of plaintiffs "retained respondent pursuant to a written retainer agreement which set forth the sliding fee scale mandated by Judiciary Law § 474-a. They also signed a litigation financing agreement under which they would borrow money from respondent for expenses and disbursements at an interest rate of 15% per year. To fund the Veneski action and other cases, respondent apparently borrowed several hundred thousand dollars from various litigation funding companies, including Core Funding Group, LLC (Core Funding) and Legal Asset Funding, LLC (LAF), pledging some of the same collateral to both entities. "

"After a jury awarded the Veneskis $4,215,300 in damages, Mr. Veneski signed an affidavit on February 26, 2000 in support of a potential application by respondent for increased compensation pursuant to Judiciary Law § 474-a, stating: "I intend to give [respondent] one third (1/3) of the net recovery he has obtained for me in this action whether it be denominated a fee, gift or gratuity (a tip)". Respondent did not file the affidavit or seek court approval for an increased fee until 2006.

After this Court ordered a new trial (285 AD2d 369), the malpractice action was settled in November 2002 for $3 million plus an annuity that would yield $750,000 over 20 years. On December 12, 2002, respondent wrote to Mr. Veneski that he was about to receive the first payment of $1 million, and that "[s]ubject to court approval (if required), the attorney fee is one-third of the net recovery." Respondent calculated that he was owed $154,011.26 in disbursements and $281,996.25 in attorney’s fees from that payment. At some point the Veneskis paid respondent an additional $63,000 as interest on disbursements.

Thereafter, the malpractice defendants’ main insurance carrier became insolvent and the remaining $2 million of the settlement was to be paid by the Liquidation Bureau. Respondent represented to the liquidation court that his attorney’s fee on that payment was $212,500. In contrast, he wrote to Mr. Veneski in October 2003 that he was "owe[d]" $454,450.55, representing $666,524.73 in "attorney’s fees" plus $425.82 in disbursements, less the $212,500 set aside for him by the Liquidation Bureau. After receiving the payment, Mr. Veneski gave respondent a check for $454,450.55 and, upon respondent’s request, crossed out the words "attorneys fees" he had written on the memo line, and substituted "gift." At the same meeting, Mr. Veneski signed a gift tax return in blank, which respondent sent to respondent’s accountant to fill in. When respondent received the first annuity payment of $20,000 in October 2005, he wrote to Mr. Veneski that he was applying it to disbursements and interest. "

"We agree with the Referee and Hearing Panel that disbarment is the appropriate sanction (see Matter of Harley, 298 AD2d 49 [2002]). Respondent charged a brain-damaged client over $500,000 more than the statutory maximum in attorney’s fees. He tried to disguise those fees as a gift, and deceived his client to secure his assistance in the charade. Respondent has yet to satisfy the judgment directing him to return those fees and the over-billed disbursements, and he has a pending petition for Chapter 7 Bankruptcy relief. His other attempted and accomplished plans to obtain financing from clients demonstrate a pattern of conduct which, at best, reflects an indifference to his clients. "

PROTOSTORM, LLC ,  -against- ANTONELLI, TERRY, STOUT & KRAUS, LLP, ., Defendants. 08-CV-931 (NGG) (JO) UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK  2010 U.S. Dist. LEXIS 109466 [October 12, 2010, Decided]  is the Court’s lament over a motion for summary judgment gone bad.  Federal Courts have a Rule 56.1 which is supposed to, in essence, organize motions for summary judgment in a manner that allows all to understand the competing arguments.  Here, motions, cross-motions, letters, amended complaints, faulty local Rule 56.1 statements have all conspired to render the entire effort meaningless.
 

"As the court has already noted, the parties have made piecemeal letter submissions relating to the ATS&K Defendants’ summary judgment motions. If the court were to decide those motions on the merits, it could either (1) attempt to parse the letters for relevant information and argument [*19] and consider it, despite the parties’ failure to comply with the requirements of Federal Rule of Civil Procedure 56, or (2) ignore the letters and solely consider the parties’ formal submissions.

Each option is problematic. If the court were to attempt to parse the parties’ many letters, it might well miss important information. Moreover, the court would not have the benefit of any Rule 56.1 statements covering the information submitted by letter. Finally, it is not clear whether the parties have put forth all of the evidence and arguments that they would like the court to consider, or if they exercised some degree of restraint. On the other hand, if the court were to ignore the letters altogether in deciding the instant motions, it would almost certainly be faced with either a motion for reconsideration or a new motion for summary judgment because both parties have indicated that they would like the court to consider additional information. This course is not an efficient use of the court’s limited resources. The lack of Rule 56.1 statements covering the newly submitted evidence — and the infirmities in the parties’ current Rule 56.1 statements — also militate against deciding the [*20] motions’ on the current record.

Consequently, the court denies the ATS&K Defendants’ motions under Federal Rules of Procedure 12(b)(6) and 56 without prejudice. It appears that merits discovery is now complete. To the extent that this is true — or when it is — the ATS&K Defendants are granted leave to file another motion for summary judgment on substantially the same grounds as their present motions. To the extent that they wish to do so, the parties should confer regarding a possible briefing schedule. The parties are further instructed to reacquaint themselves with Local Rule 56.1 and are counseled that the court will not consider any letters that are submitted after briefing is complete.

Finally, while the court does not address the substance of the ATS&K Defendants’ motions at this time, it offers one observation. Before evaluating whether Plaintiffs’ claims are time-barred, the court will need to engage in a choice-of-law analysis. "In diversity cases, ‘state statutes of limitations govern the timeliness of state law claims’, and state law ‘determines the related questions of what events serve to commence an action and to toll the statute of limitations.’" Diffley v. Allied-Signal. Inc., 921 F.2d 421, 423 (2d Cir. 1990) [*21] (quoting Personis v. Oiler, 889 F.2d 424, 426 (2d Cir. 1989)).

The parties appear to assume that the court’s determination of which statute of limitation applies will be made by weighing the interests of various states. (See, e.g., Def. Mem. 25-26.) This may not be the appropriate inquiry. New York’s statute of limitations applies unless a nonresident plaintiff sues upon a cause of action that arose outside of New York. See Stafford v. International Harvester Co., 668 F.2d 142, 147 (2d Cir. 1981); N.Y. C.P.L.R. § 202; see also Bianco v. Erkins, 243 F.3d 599, 608 (2d Cir. 2001) ("Modern choice-of-law decisions are simply inapplicable to the question of statutory construction presented by C.P.L.R. 202. C.P.L.R. 202 is to be applied as written, without recourse to a conflict of law analysis.") (quoting Ledwith v. Sears Roebuck & Co., 231 A.D.2d 17, 660 N.Y.S.2d 402, 406 (1st Dep’t 1997)). To the extent that the parties agree that New York law governs issues related to the statute of limitations, they should tailor any future arguments appropriately."
 

in Gelobter v Fox 10/01/2010 , Supreme Court, Nassau County,  Judge Marber, we see a legal malpractice action sounding in "Seller Rescue Fraud."  Plaintiff says that she did not know the price at which she sold her house, and that the actually selling price was several hundred thousand dollars less than she believed.

Her complaint was dismissed, sanctions were granted against plaintiff  and plaintiff moved to renew and reargue  On this motion and decision, Justice Marber recites the Bishop v. Maurer. 9 NY3d 910 (2007)

Clients (and everyone else) are bound by the contents of documents they sign and agree to.  A defense that the signer did not read the contents has extremely limited currency.  An exception in legal malpractice actions might arise when the documents are very difficult legal writings, that a lay person might not understand, even when read.

In Bishop the Court of Appeals wrote: " [it] is true that plaintiffs here, as is normally the case, are bound by the estate planning documents decedent signed. Nevertheless, the conclusiveness of the underlying agreement does not absolutely preclude an action for professional malpractice against an attorney for negligently giving to a client an incorrect explanation of the contents of a legal document (see Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & Steiner, 96 NY2d 300, 305 [2001]). "

In Byron 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 Felt v. Van Alstyne we see an interesting real estate-legal malpractice case, one which is, unfortunately, no so uncommon. Plaintiff owns 51 acres of property in Greene County and wants to sell a portion, 6.1 acres. The balance of 45 acres or so, which is unimproved, is to be sub-divided and kept. Defendant attorney is hired to do the closing.

What is a closing? It is the sale transaction, and the attorney for a party is supposed to make sure that the transaction actually follows the intent of the parties. Here everything went wrong. Now, plaintiff, who has sued the buyers in a separate action, must sue the attorney and the title closing company over this mistake: the deed did not have a description of the premises to be sold attached to it. Imagine that, the deed simply recited all 51 acres, when in fact only 6 acres were to be sold.

The defense? That’s how it’s done here! The lesson to be taken from this case, is that when plaintiff moves for summary judgment, and includes the affidavit of an expert, defendant better have one too. The affidavit of co-defendant was simply not enough. Result? Plaintiff is granted partial summary judgment with the damages to await the outcome of another trial, presumably against the buyer.

Keeping in mind the biblical aphorism that certain things come in threes, we report on a second lake front legal malpractice case.  This one is ZAVALIDROGA,  -v.-  COTE,  JOHN DOE, DORIS M. KELLEY, JAMES E. KELLEY, DAVID LAPLANTE, individually and officially as an Oneida County Sheriff’s deputy, GREGORY J. AMOROSO, individually and officially, TOWN OF ANNSVILLE, a municipal entity.

Well, perhaps it is not a lake but rather a pond.  "After the Zavalindrogas’ neighbors successfully sued in state court for rights to a pond and adjacent property, the Zavalindrogas brought the current federal action against their neighbors, their own and their neighbors’ attorneys in the state court action, two state court judges, a Sheriff’s deputy, and the Town of Annsville, alleging a "state-sponsored scheme" to convey the Zavalindrogas’ property to their neighbors."

"As to the other appellees, HN3this Court reviews de novo a district court decision dismissing a complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) or (b)(6). See Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (Rule 12(b)(1)); [*5] Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002) (Rule 12(b)(6)). In each instance, this Court "constru[es] the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff’s favor." Chambers, 282 F.3d at 152; see also Triestman, 470 F.3d at 474.

HN4A district court may dismiss a complaint sua sponte for failure to state a claim, so long as the plaintiff is given notice and an opportunity to be heard. Wachtler v. County of Herkimer, 35 F.3d 77, 82 (2d Cir. 1994). Further, HN5we may "affirm a decision on any grounds supported in the record, even if it is not one on which the trial court relied." Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400, 405 (2d Cir. 2006)."

"Finally, because the District Court properly dismissed all claims over which it had original jurisdiction, the District Court did not err by declining to exercise supplemental jurisdiction over the Zavalidrogas’ state law legal malpractice claim. See 28 U.S.C. § 1367(c)(3)."
 

Upstate New York, Cayuga Lake;  each of the plaintiffs wanted a lake front property on a Finger Lake.  First, the Andersons bought the property only to learn that then had less lake frontage, had an easement running through the property and that their out-buildings were encroaching on the neighbor’s property.  The litigated and then sued their attorney Albanese.  They settled with Albanese. 

Some time later they want to sell the property.  New potential buyers come along, and either intentionally or inadvertently hire Albanese to represent them in the purchase of the lake front property.  Albanese knows about the encroachments and the prior litigation. The purchasers then sued their attorney in Meador v. Albanese Law Office, 2010 U.S. Dist. LEXIS 100243

"The Meadors put down a $25,000 deposit toward the $720,000 purchase price. After the contract was signed, the Meadors retained defendants on June 6, 2005, to represent them in the transaction. The parties dispute whether prior to plaintiffs retaining Albanese, he informed them he had previously represented the Andersons in any capacity and that he had been sued by the Andersons. Defs’. Response to Pls’. SMF ¶ 20, Dkt. No. 40-3. It is undisputed defendants at that [*4] time did not inform the Meadors that the detached garage on the property encroached upon a right-of-way and violated setback requirements, nor did they advise plaintiffs the house was alleged to have structural defects. After engaging defendants, Dr. Meador requested she be kept informed of the progress and be given copies of any correspondence related to the transaction.

On June 23, 2005, the attorney for the Andersons delivered a letter to defendants which disclosed some but not of all the encumbrances and defects to the title. It is disputed whether a telephone call between Albanese and Dr. Meador took place on June 24, 2005. Defendants did not investigate the disclosed defects in the title at that time, opting to wait for voluntary disclosure by the Andersons’ attorney. Albanese did not disclose the encumbrances to plaintiffs, nor did he inform them he was expecting further information regarding the same from the Andersons’ attorney. On July 11, 2005, defendants received additional information regarding the defects. Albanese again failed to inform the Meadors of these disclosures. The parties dispute whether Albanese or the Office informed Dr. Meador the closing would occur on or [*5] about July 20, 2005.

Plaintiffs contend that in reliance upon this communication, they liquidated assets, transferred funds, alerted their lender and secured insurance in anticipation of the closing. Dr. Meador then traveled to Ithaca, New York on or about July 19, 2005, to attend the closing. Pls’. SMF ¶¶ 37-39, Dkt. No. 37. On July 20, 2005, she attended a pre-closing inspection of the property, during which time she discovered several title encumbrances from the Andersons’ realtor as well as the encroachments on the neighboring properties. Id. ¶ 41.

The Meadors contacted defendants and requested they terminate the contract and return plaintiffs’ $25,000 deposit. Albanese then communicated with the Andersons’ attorney and requested the contract be dissolved and the deposit returned. On July 28, 2005, defendants forwarded a list of objections regarding the property prepared by Dr. Meador to the Andersons’ attorney. The Meadors allege they made several attempts to contact Albanese between July 28, 2005, and August 15, 2005, to determine the status of the matter, but were told by staff of the Office that Albanese was "unavailable," and he did not return any of the calls. Pls’. SMF ¶ 46. [*6] On August 10, 2005, Dr. Meador faxed the Andersons’ attorney, demanding dissolution of the contract and return of escrow. On August 15, 2005, plaintiffs retained their current attorney, Michael D. Pinnisi, Sr., ("Pinnisi") as litigation counsel.

On or about August 17, 2005, the Andersons commenced a lawsuit against plaintiffs seeking to enforce the contract. On September 6, 2005, the Andersons’ attorney submitted an offer to cure to the Meadors, which they rejected on September 9, 2005. On November 20, 2008, the Appellate Division Third Department found that questions of fact as to material misrepresentations made by the Andersons existed so that it could not be determined as a matter of law if the contract was void as of its inception. The court let the Meadors’ cross-claim for fraud stand, and reversed the lower court’s order directing the $25,000 escrow funds payment to the Andersons. Anderson v. Meador, 56 A.D.3d 1030, 869 N.Y.S.2d 233 (N.Y. App. Div. 3d Dep’t 2008). Thereafter the Andersons and Meadors settled the action with the return of the $25,000 to the Meadors, the dismissal of all remaining claims, and the exchange of releases."

In MELNICK v. CARY PRESS,;No 06-CV-6686 (JFB) (ARL);UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 77609; August 28, 2009, Decided we find an excellent discussion of the rules of attorney fee liens under the Judiciary Law.
 

"Under New York law, an attorney who is discharged is statutorily entitled to a charging lien on any monetary recoveries obtained by the former client in the proceedings in which the attorney had rendered legal services. 1 See N.Y. Judiciary Law § 475. The Second Circuit has [*7] explained the rationale behind the charging lien:
New York’s statutory charging lien, see N.Y. Judiciary Law § 475 (McKinney 1983), is a device to protect counsel against "the knavery of his client," whereby through his effort, the attorney acquires an interest in the client’s cause of action. In re City of New York, 5 N.Y.2d 300, 307, 184 N.Y.S.2d 585, 157 N.E.2d 587 (1959). The lien is predicated on the idea that the attorney has by his skill and effort obtained the judgment, and hence "should have a lien thereon for his compensation, in analogy to the lien which a mechanic has upon any article which he manufactures." Williams v. Ingersoll, 89 N.Y. 508, 517 (1882).
Butler, Fitzgerald & Potter v. Sequa Corp., 250 F.3d 171, 177 (2d Cir. 2001).

FOOTNOTES

1 A discharged attorney is also entitled to a retaining lien on the former client’s papers and property that are in the attorney’s possession, under New York common law. See Resolution Trust Corp. v. Elman, 949 F.2d 624, 626 (2d Cir. 1991); see also McDermott v. Great Am. Alliance Ins. Co., No. 5:02 Civ. 0607 (NAM/DEP), 2006 U.S. Dist. LEXIS 52878, 2006 WL 2038452, at *2 (N.D.N.Y. July 18, 2006) ("In New York, an attorney who ceases to represent his or her client but has rendered [*8] services for which payment has not yet been received has two forms of recourse against non-payment, other than commencement of a plenary action — one derived from the common law [generally referred to as a retaining lien], and the other created by statute [referred to as a charging lien]."). Wagner Davis’ assertion of a retaining lien is discussed in connection with plaintiffs’ motion to compel infra.

Specifically, Section 475 of the New York Judiciary Law provides:
From the commencement of an action . . . the attorney who appears for a party has a lien upon his client’s cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order in his client’s favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien.
N.Y. Judiciary Law § 475. The Second Circuit has made clear that Section 475 governs attorneys’ charging liens in federal courts sitting in New York, and such liens are "enforceable in federal courts in [*9] accordance with its interpretation by New York courts." Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 449 (2d Cir. 1998) (internal quotation marks and citations omitted). In order to establish a lien under Section 475, "there must be asserted a claim which can eventuate in there being proceeds payable to, or assets recoverable by, the client as a result of the efforts of the attorney." Rosewood Apartments Corp. v. Perpignano, No. 99 Civ. 4226 (NRB), 2005 U.S. Dist. LEXIS 8396, 2005 WL 1084396, at *3 (S.D.N.Y. May 3, 2005). Further, attorneys who terminate their representation are still entitled to enforce their charging liens, as long as the attorney does not withdraw without "good cause" and is not discharged for "good cause." See, e.g., McDermott v. Great Am. Alliance Ins. Co., No. 5:02 Civ. 0607 (NAM/DEP), 2006 U.S. Dist. LEXIS 52878, 2006 WL 2038452, at *2 (N.D.N.Y. July 18, 2006); Hill v. Baxter, No. 98 Civ. 4314 (SJF) (ASC), 2005 U.S. Dist. LEXIS 7157, 2005 WL 465429, at *2 (E.D.N.Y. Feb. 7, 2005); Petition of Harley & Browne, 957 F. Supp. 44, 48 (S.D.N.Y. 1997); Rankel v. Tracey, No. 84 Civ. 3412 (KMW), 1991 U.S. Dist. LEXIS 10673, 1991 WL 156324, at *7 (S.D.N.Y. Aug. 2, 1991); Klein v. Eubank, 87 N.Y.2d 459, 663 N.E.2d 599, 600, 640 N.Y.S.2d 443 (N.Y. 1996).
 

On calculating the actual amount the court wrote: "The Court does, however, find it necessary to subtract those hours that the firm spent on its motion to withdraw and on this pending motion. Such activities were not in furtherance of obtaining a favorable judgment on behalf of plaintiffs in this case and are thus not properly the subject of the charging lien. See, e.g., Cutner & Assocs., P.C. v. Kanbar, No. 97 Civ. 1902 (SAS), 1998 U.S. Dist. LEXIS 1045, 1998 WL 104612, at *3 (S.D.N.Y. Feb. 4, 1998)

"The Johnson factors are: "(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney’s customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitation imposed by the client or the circumstances; (8) the amount involved in the case and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the ‘undesirability’ of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases." 488 F.2d at 717-19."