Legal malpractice cases are unlike anything else…they all have a prior case background, and each must contain proofs of the "but for" variety.  Put another way, law of the case is almost always a consideration in legal malpractice cases.  Could plaintiff have won the underlying case?  Does dismissal of the underlying case fatally flaw a subsequent legal malpractice case?  How does the handling of the underlying case affect the subsequent legal malpractice case are all different formulations of the same question.

Justice York, of Supreme Court, New York County recently wrote on this issue in Metropolitan Plaza WP LLC v. Goetz Fitzpatrick, LLP., 2010 NY Slip OP 32389(U).  There, certain findings of the US Bankruptcy Court seem central to the legal malpractice case.  Defendants claim that the entire complaint should be dismissed pursuant to the doctrine of law of the case because "all of plaintiff’s causes of action are predicated on the erroneous assertion that the findings in the bankruptcy decision also constitute the law of the case in this action…" 

Plaintiffs responded that they "do not rely upon" the bankruptcy decision, "nor claim reliance upon it, nor is it argued that this is the law of the case." 

The Court finds "that the most reasonable interpretation to be accorded to this complaint is to conclude that plaintiffs rely heavily upon the persuasive effect of the bankruptcy decision, but not to the extent of asserting that it constitutes the law of the case in this action.  Simply put, the complaint does not say what defendants say It does.  Therefore, the court rejects defendant’s first dismissal argument."

In Ramirez v. 164  West 146 Street LLC, the question is raised whether a tenant, illegally evicted because the warrant of eviction named a former landlord and not the current landlord may successfully sue the landlords’ attorney.  The answer is, no.  Justice York of Supreme Court, New York County sets forth the reasoning.

Plaintiff here sued all parties with the same causes of action.  In doing so, she sued the attorneys for "procuring the eviction" and "illegal lockout".  These causes of action, which might well be successful against the landlord [and which permit treble damages] may not be raised against attorneys.  Her claims against the attorneys may sound only in legal malpractice.

Here, the question of privity is raised, and it is dispositive against plaintiff.  Absent fraud or collusion, or a malicious or tortious act, a non-client may not sue her opponent’s attorney for legal malpractice.

The City Marshall, in the same position, finds himself in the same boat regarding his cross-claim.  No privity, no case.

It’s not often that one sees an insurer v. defense attorney legal malpractice case, but this one seems to have very big damages.  Law firm Barry, McTiernan & Moore, a well known defense firm in New York defended a synagogue fire case that was valued in excess of $ 16 million.  The insurer alleges malpractice in AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY and LUMBERMENS MUTUAL CASUALTY COMPANY,  – against –BARRY, MCTIERNAN & MOORE, ;09 Civ. 8742;UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2010 U.S. Dist. LEXIS 89553;August 26, 2010, Decided
 

It’s still early going, but plaintiffs successfully added individual defendant attorneys to the caption.

we’ll follow this case as it proceeds.

The relationship between a motion to dismiss [CPLR 3211]. a request to amend the pleadings, and dismissal on the merits is wrought with both emotion yet is based upon logic.  No author of pleadings appreciates a motion to dismiss.  The motion generally brays that there is "no merit", the pleading is "frivolous", is badly written, etc.

Yet, the rule of logic generally prevails.  A pleading in legal malpractice  must adequately plead that the defendants "failed to exercise that degree of care, still, and diligence commonly possessed by a member of the legal community," and that their negligence was "a proximate cause of damages" (DeNatale v Santagelo, 65 AD3d 1006, 1007), and,is sufficient to state a cause of action to recover damages for legal malpractice.

"[M]otions for leave to amend pleadings should be freely granted, absent prejudice or surprise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit" (Aurora Loan Servs., LLC v Thomas, 70 AD3d 986, 987; see CPLR 3025[b]; Tyson v Tower Ins. Co. of N.Y., 68 AD3d 977, 979; Peerless Ins. Co. v Micro Fibertek, Inc., 67 AD3d 978, 979-980).

And so it went in Feldman v Finkelstein & Partners, LLP ,2010 NY Slip Op 06517 ,Decided on August 31, 2010 , Appellate Division, Second Department , a legal malpractice case.  "Contrary to the defendants’ contention, there is no indication that the Supreme Court considered evidentiary submissions and, thus, the issue to be determined at this stage is not whether the plaintiffs have a cause of action, but only whether they have stated one (see Guggenheimer v Ginzburg, 43 NY2d 268, 275; Sokol v Leader, 74 AD3d at 1181-1182). Accordingly, the Supreme Court improperly granted that branch of the defendants’ motion which was to dismiss the first cause of action. "
 

TJS of N.Y. Inc. v. Koppelman, 2010 NY Slip Op 32329(U), by Justice Denise F. Molia of Supreme Court, Suffolk County is something of a cliff-hanger.  When we read it, there was no foreshadowing, no pre-tensioning nor any insight into how the decision would come out.  it’s a classic didhedoit.

Plaintiff claims a longstanding relationship with attorney defendant.  The two of them and others seem to have been in and out of business in the vending and bar areas.  In this case, plaintiff eventually bought a bar, and assumed what he thought was going to be debts of $ 40,000 or so.  it turned into $1 million.  Question:  was the defendant his attorney or not?

In the end, this summary judgment decision went against defendant, and the motion was denied.  Plaintiff’s affidavit seems to be the turning point, especially when it was dotted with several troubling deposition answers by defendant and a few inconvenient facts.

Plaintiff said that he used defendant as an attorney several times over the years, building up a relationship.  Defendant says no, but testified that he may have undertaken an incorporation in which plaintiff was a shareholder.  Plaintiff says that he paid defendant in cash, and defendant says that when he wrote the bar contact that plaintiff may have had some input into the terms.

Plaintiff says that defendant represented him in the transaction, but defendant says that one Navaretta was plaintiff’s attorney.  Inconveniently, defendant sent the contract of sale directly to plaintiff, bypassing the "attorney."  An so it goes, with "facts" that cannot be conclusively found.

In the end, motion for summary judgment denied.

 

We grant that it is a stretch to jump from new statutes to legal malpractice, but it is a given that when the rules change, there will be mistakes made.  Mistakes, the eternal produce of human endeavor is known as legal malpractice within the legal community. 

It is no novelty, nor a surprise that negligent handling of discovery might lead to dismissals and sanctions.  U.S. Judge Shira Scheindlin’s decisions in Zubulake v. UBS Warburg  and Pension Committee are considered groundbreaking, yet merely restate and interpret the existing law. 

Parties in litigation are required to save and exchange electronically stored information.  No clearer message could be stated in the twin decisions.  Now, the State of New York has adopted a set of regulations which are calculated to streamline the discovery proceedings.

Preliminary conferences now must include a complete discussion of ESI, and provisions must be made to preserve and  exchange ESI.  Failures by attorneys to issue "litigation holds" and to preserve ESI will inevitably lead to problems, sanctions and dismissals.  Legal malpractice litigation will follow, as surely as day follows night.

 

 

Legal representation in even simple matters can lead to unintended consequences. As an ExampleH & J Restaurant v, A & J Grand Enterprises and Leigh, 2009 Slip OP 31544, authored by Justice Edmead, demonstrates how a simple ministerial mistake can end up with a potential $ 400,000 loss, with later judgment against the attorney.

It’s a simple transaction, A buys a restaurant from B. As might be expected, Seller exaggerates the sales, or hides underpayment of taxes. Since these commercial transactions have taken place since time immemorial, there are safeguards and protections. Buyer can take the business free of personal liability if it notifies the tax authorities 10 days prior to the sale, in which case the tax authorities have 5 days to assert tax liability. Should it happen, buyer can then back out.

Here, the notification was not made within 10 days, and several months later the tax authorities asserted personal liability to buyer in the neighborhood of $ 400,000. Seller is in default, and no where to be found.

What is the lesson here? Lesson 1: Legal malpractice is everywhere lawyers represent clients. Lesson 2: Know the subject matter of your area of law and don’t make simple transactions difficult. Lesson 3: Review lesson 2.
 

It’s not exactly legal malpractice and its not New York, but the headline and back story of this $ 1.96 Million sanction to Paul, Weiss, Rifkind, Wharton & Garrison and Lowenstein Sandler shocks the eye.  Celebrity sues celebrity over an oral agreement to make a bequest.  This case ends in a finding of frivolity and the largest sanction we remember seeing.  Here is the story from Law.Com:

 "Bergen County, N.J., Superior Court Judge Ellen Koblitz doesn’t seem too worried about sparing the reputations of Paul, Weiss, Rifkind, Wharton & Garrison and Lowenstein Sandler. In June, you’ll recall, she found that the two firms had filed a frivolous suit on behalf of billionaire Ronald Perelman in a family dispute over hundreds of millions of dollars. On Friday she issued a final opinion , rejecting the firms’ arguments for mercy and ordering them to pay $1.96 million in legal fees to the defendants, Perelman’s former father-in-law and brother-in-law.

 

Patent Litigators held their breath all through the summer, as the Supreme Court considered whether a patent could be enforced in the Internet process area.  Bilski v. Kapos was decided by terms end, but did not really put the issues to bed. 

Apparently, while others were holding their breath, this plaintiff/client and her attorney were starting their own litigation cycle.  As Law.Com reports dueling suits in Westchester and New York bring up the question of whether the attorneys abused plaintiff in their billing while representing her in patent litigation.

"A retired university professor who has pursued dozens of electronics companies for patent infringement on Monday filed a notice to sue her former attorneys for $10 million, accusing them of misusing escrow funds and charging her excessive fees.

Gertrude Neumark Rothschild filed a summons in Manhattan Supreme Court against Troutman Sanders; an intellectual property boutique chaired by Albert L. Jacobs Jr. before he became a partner at Troutman; and Jacobs.

Her motion comes only days after Troutman, Jacobs and the now-defunct boutique filed separate lawsuits against her in Westchester County Supreme Court for a combined $4.4 million in unpaid legal bills. Rothschild said in her court papers that she fired Troutman Sanders for cause in June.

 

Jacobs began representing Rothschild, a former Columbia physics professor, in October 2007 after arriving a few months earlier at Dreier from Greenberg Traurig, according to his boutique’s complaint. Rothschild retained him to represent her before the International Trade Commission in cases against companies importing devices using light-emitting diodes that she claimed infringed on patents she held.

Rothschild turned to Jacobs for later disputes both in the United States and abroad, his complaint said. Among those Jacobs targeted for Rothschild were Sony Corporation, Motorola Inc. and Hitachi Ltd. and 31 other companies, according to records filed in February 2008 before the U.S. International Trade Commission.

By November 2009, when Jacobs formally became a partner at Troutman Sanders, he had obtained $14 million in settlements and licensing fees for Rothschild, according to the boutique’s complaint, which said settlements and agreements came from 10 large consumer electronic companies.

Rothschild paid Albert Jacobs LLP on some of its invoices, "but has failed and refused" to pay other ones, the boutique said in its complaint. She "never expressed any dissatisfaction with the legal services" the boutique rendered, the suit claimed, but instead "commended" its efforts. "

 

Sanna v Polizzotto ;2010 NY Slip Op 51496(U) ;Decided on August 23, 2010 ;Supreme Court, Richmond County ;Minardo, J.  discusses several interesting aspects of legal representation, contingent fees, what is unconscionable in contingencies, and legal malpractice.
 

Plaintiffs and their family were in a dispute over property.  Attorneys were retained to represent one of the feuding sides, and successfully concluded the case with a cooperative effort to sell the property and divide the proceeds.  All good, so far.  The rub occurs when fees come into play.  Attorneys:  we offered to do this on an hourly basis.  Client could not pay, so we went to a contingency.  Client:  25% is way too much!

In this decision, the court considered:  how large may a contingency be and what must plaintiff do when they enter into a contingent fee arrangement with the attorneys? 

"According to the retainer agreement, plaintiffs had agreed to pay defendants as consideration for their legal services "twenty-five (25%) of the property or sum recovered, whether recovered by suit, settlement or otherwise" (see Defendants’ Exhibit "E", emphasis supplied).

On the basis of these facts, plaintiffs commenced this action against the defendants on or about April 22, 2008 asserting causes of action for conversion, breach of contract, fraud, breach of fiduciary duty and punitive damages, each arising out of their retainer agreement with defendants and the amount of the legal fees payable thereunder "
 

"Attorney-client fee agreements are a matter of special concern to the courts and, while enforceable, are affected by "lofty principles" different from those applicable to commonplace commercial contracts (Law Off of Howard M. File, Esq., PC v. Ostashko, 60 AD3d 643, 644 [2nd Dept 2009] quoting Matter of Cooperman, 83 NY2d 465, 472 [1994]; Malamut v. Doris L. Sassower, PC, 171 AD2d 780 [2nd Dept 1991]). "

"Contingent fee agreements between attorneys and their clients generally operate to allow a client without sufficient financial means to obtain access to the justice system (see Law Office of Howard M. File, Esq., PC v. Ostashko, 60 AD3d at 644). However, for attorneys entering into such arrangements, there is always the risk that their time and resources will be expended in the pursuit of legal endeavors that may ultimately prove fruitless (see King v. Fox, 7 NY3d 181, 192 [2006]). In addition, it is well settled that while the attorney is obligated to comply with the terms of the agreement, the client may unilaterally terminate the contingent fee arrangement at any time, leaving the lawyer with no cause of action for breach of contract and a recovery limited to quantum meruit (id.). Case law also provides that circumstances arising after contract formation can render a contingent fee agreement unenforceable, even though it was not unconscionable [*3]when entered into, e.g., where the agreed percentage of the recovery allocated to legal fees is deemed disproportionate to the value of the services rendered (see Lawrence v. Miller, 11 NY3d 588 [2008]). In this regard, it is not only the agreed-upon percentage of the recovery that can render a contingent fee agreement unconscionable."

"Assuming arguendo that the defendants have demonstrated prima facie that (1) the legal services which they performed on the plaintiffs’ behalf were rendered in good faith; (2) plaintiffs knowingly accepted those services; and (3) they were fully informed of the terms of the contingency, plaintiffs’ present assertion that they did not fully understand its terms is insufficient to generate a triable issue. There is no evidence to indicate the plaintiffs are under some type of disability which would prevent them from understanding a one (1) page retainer agreement which clearly and unambiguously indicated it was a 25% contingency agreement whether recovered in suit, settlement or otherwise."