Plaintiff suffers a personal injury trip and fall, and hires attorney 1 to sue the landlord.  The landlord is sued.  Case continues and eventually an inquest is ordered.  At the inquest, the Court tells the attorneys that they need medical records.  This seems to be an elementary point, since it’s well known that one needs medical records at an inquest.  Case is marked off.  Time passes by and the client becomes disenchanted.  She files a Disciplinary complaint.  Law firm makes motion to restore this pre-note case.  Motion is denied.  That’s the last client ever hears of law firm.  Disciplinary complaint dismissed.

Client sued defendants in 2010 and the motions to dismiss for statute of limitations comes on before Justice Gische in Supreme Court, New York County.  In Reynolds v Ross, Suchoff, Hankin, Maidenbaum, Handwerker & Mazel, P.C  Justice Gische has to choose between two opposing narratives. Plaintiff’s is that as the law firms formed and ended, her case was lost in the cracks, and no one ever told her the case was actually dismissed.  Law firms view is that she knew and thus the S/L was running against her.

Court dismissed the case, finding that plaintiff knew as of 2005 that her case was dismissed and that the S/L thus started to run.  Legal malpractice action, dismissed.

New York corporation has a California case.  An attorney comes calling, soliciting business and asking the corporation to hire the California attorney.  They agree, and in the retainer agreement are two items.  One is a jurisdiction choice and one is an arbitration clause.  Problems arise, and a fee dispute/legal malpractice counterclaim starts.  Will it be arbitrated or tried?  Will it be in NY or California?  Justice Ling-Cohan decides in Sands Bros. Venture Capital, LLC v Burris, Schoenberg & Walden, LLP ;2010 NY Slip Op 51619(U) ;Decided on September 14, 2010
Supreme Court, New York County ;

Arbitration clauses, especially a "full clause" which covers all disputes are to be strongly upheld.  Corporations claims of "contract of adhesion" and " fraud" fail, and the general principal that arbitration is to be preferred when the parties agree to arbitration is found.  Even though California has a fee-dispute non-binding arbitration scheme, the parties are required to follow the retainer agreement and bring the binding arbitration before a specific arbitration tribunal.

As to jurisdiction for the motion and this particular case, the single visit to New York of an attorney who came to pitch representation, along with the mere fact that telephone and other communications came from California to NY is sufficient for "specific jurisdiction" arising in this case.

Reisner v. Litman & Litman PC is a motorcycle – car collision case in which plaintiff was driving his motorcycle in Nassau County. He was driving on a road that had become known to be dangerous.  At this particular intersection there had been a large number of turning left accidents, which later was said to be caused by a double set of traffic lights, which to a certain extent contradicted each other.

Defendant law firm was retained by motorcyclist and started an action against the driver.  Soon, but not soon enough, they learned of the dangerous road situation and filed a motions seeking leave to file a late notice of claim against the County.  It was denied.

Two things are interesting in this case.  The first is that both sides failed to discuss third-party liability of the traffic light company under Espinal v. Melville Snow Contractors, Inc.., 98 NY2d 136 (2002).

More interestingly, the Court determined that defendants negligently handled the motion for leave, and ordered disgorgement of the fees.  "An attorney may not recover fees for legal services performed in a negligence manner even when that negligence is not a proximate cause of the client’s injury." Kluczka v. Lecci, 63 AD3d 796 (2d Dept, 2009). 

Here, the court ordered disgorgement of the fees involved in the County portion of the case.

A series of loans, a single attorney in the transactions, a failure to file the mortgage, a defense that the clients should have filed the mortgage themselves, a loss of $ 750,000.  How can this happen to sophisticated lenders?

The question is not exactly answered, but the picture that emerges from Brija v. Fernandez NY SlipOp 32559, New York County, Justice Ling-Cohan is of lenders with money but little experience, an attorney who is willing to represent both sides, and what looks like failure to file security interests. 

One reason that the case resisted dismissal was the utter lack of retainer agreements or documents which showed when the attorney was finished with the work.  An otherwise paled defense of statute of limitations failed because there was not a single indicator whether the representation lasted a single day or years.

As Justice Ling-Cohan wrote:"The conflicting statements about the end of his representation, the absence of a retainer agreement by Fernandez with any party, the lack of a document signifying the conclusion of his representation (of either plaintiffs or borrowers) the internal inconsistency of the date ranges provided by either side and the possible relevance of the letters and note"… all rule out dismissal on the statute of limitations.

The rapid transferring back and forth of rights and liabilities, through assignments, factoring and bankruptcy is highlighted in Maggioni v Clyde Meredith Schaefer, Esq., NY SlipOp 32544 [Sup.Ct. New York County, Wooten. J]   

Apparently IFT International Inc. was a worthwhile football.  It and its assets bounced back and forth between Bankruptcy Court and Supreme Court, with liens coming and going.  In the end, the president seems to have arranged to obtain its assets, only to be thwarted by outside creditors.  Later, he purchased assets at a bankruptcy sale.  The effect? 

Justice Wooten found that there was continuous representation through the back and forth and that plaintiff, as president, had sufficient connection with the company and its assets to avoid dismissal under CPLR 3211.

Gatto v Burke & Burke, NY Slip Op 32511, Nassau County, Justice Bucaria illustrates a two part transactional represent ion by attorneys of the clients in a  business sale case.  Facts are simple:  plaintiff sells restaurant to X and uses target attorneys as transactional counsel.  Sale documents do not have a security interest for Plaintiff-seller.  End of phase one.

Sale goes sour, and buyer files bankruptcy.  Seller again retains target attorney to represent them in suit against buyer and then in bankruptcy court.  Seller has no security interest and is treated as an ordinary creditor, losing the proceeds. 

Question is whether statute of limitations begins to run on mistake date when transaction closes without a security interest, or it there is continuing representation, or whether there are two different and non-continuing retentions such that the s/l has already run on the mistake.

Here, the court found that it was continuing.  Read the decision for the Justice’s reasoning.  It is based upon the interconnectedness of the sale and the remedy work by the attorneys.

Result:  motion to dismiss denied.

An attorney must carefully and assiduously guard his client’s confidences, secrets and communications with the attorney.  This remains true until the attorney has to defend himself.  Must this defense be to criminal charges, or to ethical charges only?  The answer is set forth in a recently decided case in the First Department.Hélie v McDermott, Will & Emery ; 2008 NY Slip Op 09289 ; Decided on November 25, 2008 ; Appellate Division, First Department
 

"Code of Professional Responsibility DR 4-101(C) (22 NYCRR 1200.19[c]) provides: "A lawyer may reveal: . . . (4) Confidences or secrets necessary . . . to defend the lawyer . . . against an accusation of wrongful conduct." We decline to make defendants’ invocation of this rule dependent on plaintiff’s demonstration of a prima facie case of defendants’ liability (see Justice Stallman’s later ruling on a related matter in this case, 18 Misc 3d 673, 683 [December 17, 2007]). "

"Even if plaintiff were not defendants’ client, DR 4-101(C)(4) does not require the non-client’s allegation of wrongful conduct to involve criminal or regulatory charges rather than malpractice (see Restatement [Third] of Law Governing Lawyers § 64, Comment c)." 
 

We have commented about the Collateral Estoppel trap in legal malpractice with regard to fee arbitrations and hearings. in short, when a court grants an attorney fee application, it implicitly determines that there can have been no malpractice, as the court may not award fees in the face of malpractice. Fee arbitrations and hearings in state court happen, but not that often. Bankruptcy fee hearings happen in every case, and in every case where fees are awarded to counsel, the question of res judicata comes up.

In re D.A. ELIA CONSTRUCTION CORP., Plaintiff, v. DAMON & MOREY, LLP, Defendant.;07-CV-143A ; UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NEW YORK; 389 B.R. 314; 2008 U.S. Dist. LEXIS 25496 has been the leading case on this issue. There, attorneys who had been granted fees were able to fend off legal malpractice claims based upon res judicata.

Now, in PENTHOUSE MEDIA GROUP, INC., , – against – PACHULSKI STANG ZIEHL & JONES LLP, ;UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; 2009 U.S. Dist. LEXIS 46617 we see a slightly different result. Judge Scheindlin sitting in appeal of a US Bankruptcy decision by Judge Bernstein, finds that the legal malpractice plaintiffs did not have a full and fair opportunity to be heard, and that res judicata does not control the issue of legal malpractice.

"Although Pachulski’s fee application was approved by the bankruptcy court in the prior proceeding, I cannot conclude as a matter of law that PMG had a full and fair opportunity to litigate allegations of Pachulski’s malpractice during that hearing. Many of the factors used to consider whether a party had a full and fair opportunity to litigate an issue favor PMG, particularly given PMG’s continued retention of Pachulski as its counsel. For instance, one of the factors courts have considered is "the importance of the claim in the prior litigation." 45 PMG had just undergone a reorganization with the help of Pachulski as its counsel. The possibility that Pachulski may have committed malpractice while representing PMG during that reorganization may not have been at the forefront of PMG’s concerns. In addition, PMG [*16] had no "incentive [or] initiative to litigate" the malpractice issue, 46 considering that it expected Pachulski to continue to advise PMG in the winding down of its bankruptcy proceeding.

Of particular importance to this Court is the bankruptcy court’s reliance on D.A. Elia Construction Corp. 50 Judge Bernstein concluded that D.A. Elia was directly on point, 51 but D.A. Elia is perhaps even more clearly distinguishable from the instant case than other cases cited by Pachulski, as in that case the malpractice claim was actually litigated during the fee application proceeding. D.A. Elia emphasized that
many of the same allegations made by Elia in its [malpractice] complaint were previously made by Elia in its objections to Damon & Morey’s final fee application. Specifically, Elia argued to the bankruptcy court that the firm had labored under a conflict of interest, had committed legal malpractice and had failed to turn over money owed to the estate. The bankruptcy court provided Elia with ample opportunity [to] raise those claims, but ultimately rejected them as meritless. 52
The district court concluded that "it cannot be said that Elia was denied the opportunity to raise these [malpractice] claims in the prior action." 53 In the instant case, PMG raised no such objections [*19] at the fee hearing."