This case Tavarez v Hill ;2009 NY Slip Op 29002 ;Decided on January 5, 2009 ;Supreme Court, Bronx County ;Victor, J. recently partially decided covers two areas. The first area is disqualification of counsel because of multiple representation of four car accident victims, all in one car. "Should the court, sua sponte, stay the motion made for summary judgment until there is a final resolution of a potential "conflict of interest" issue arising from plaintiffs’ counsel’s representation of multiple parties in the same action? "

"The court’s records reflect that no additional motion on the issue of liability has been made; and thus, there is a meaningful risk that counsel for plaintiffs may be burdened with a conflict of interest, since the issue of liability of each driver is yet to be determined, and, in this proceeding, the passenger plaintiffs may have interests adverse to those of their driver."

"An attorney who chooses to represent multiple parties in the same action will risk being held to have violated the Code of Professional Responsibility (and its applicable Disciplinary Rules); as well as sanctioned for having engaged in a conflict of interest; and in addition thereto, suffer the indignity and cost of becoming a defendant in a malpractice action. "

The second area is shortcomings in opposition to a motion for summary judgment. "In support of the motion, the defendants have submitted, among other things, numerous affirmations from physicians in various specialties. In opposition, counsel for the plaintiffs has submitted only unaffirmed medical reports and test results; and in adddition, failed to address arguments made by the defendants as to "gaps in treatment" and the failure to provide evidence of "recent" examinations supporting the serious injury claims made by each said plaintiff. "

Guardians, Referees and other court appointees have a qualified immunity to suit.  At a bare minimum, permission from the court is required before bringing suit.  Here in Cangro v. Solomon Justice Edmead of Supreme Court, New York County sets forth the rules in three areas:  suing guardians, privity and an eventual requirement that permission be sought before suing either of these attorneys again.

Phyllis C. Solomon, Esq. was retained as attorney for  guardian to plaintiff in a 2001 matrimonial action.  She was tasked with the question of whether the proposed Stipulation of Settlement between plaintiff and her husband appeared to be fair to plaintiff.  Her answer was yes.

Plaintiff then sued Solomon on a number of theories, all in the nature of fraud and misrepresentation.  That law suit was dismissed, on the basis that no permission to sue was obtained before commencing an action against the guardian and its appointees,  and on appeal, plaintiff’s appendix was struck.

Plaintiff then sued Solomon and her attorney in that proceeding.  The attorney, Ms. Shepps, was sued in her individual capacity, and the law firm was not named.

Justice Edmead determined that there was no privity between Solomon and Plaintiff, that the action was time barred, and that litigation against plaintiff’s guardian or the guardian’s agents cannot proceed without court permission. pursuant to section 1(H) of Part 36 of the Rules of the Chief Judge.

All of this ended with an order that plaintiff may not file any future actions against defendants or the respective law firms without prior permission of the administrative judge

One may lose the right to bring a legal malpractice case based on earlier attorney fee dispute resolution. In this case , Margrabe v. Sexter & Warmflash, PC, 07-CV-2798, District Judge Kenneth M. Karas, SDNY, we see just how the process operates. Plaintiff retains attorneys to represent her in a shareholder derivative matter. Attorneys were successful in obtaining a significant amount of money for her, but from then on things went badly. Attorneys were terminated, fees were disputed, escrow accounts started, and a defamation action commenced over the termination letter. Eventually the attorneys smartly started an attorney fee dispute action under Judiciary Law 475, and were awarded fees. This was the end of the issue, although plaintiff did not yet know it.

From the Court: "Plaintiff claims that Defendants failed to exercise the degree of skill and knowledge commonly possessed by members of the legal profession in their representation of her in the Rusciano Lawsuit. (Compl. ¶27.)

In the R&R, Magistrate Judge Yanthis recommended that the Court grant Defendants’ Motion to Dismiss Plaintiff’s legal malpractice claim on res judicata and collateral estoppel grounds. (R&R 4-5.)

Although Plaintiff initially objected to Magistrate Judge Yanthis’s recommendation (Pl.’s Objections to R&R ("Pl.’s Obj.") 4), Plaintiff has since acknowledged to the Court that, based on the Court of Appeals’ denial of Plaintiff’s appeal, her legal malpractice claim "is barred under New York State law by the doctrine of res judicata." (Letter from William Greenberg, Esq. to the Court (Jan. 30, 2009).)

The Court agrees that, in New York, a judgment "fixing the value of a professional’s service necessarily decides that there was no malpractice." Lipani v. Collins, Collins & Dinardo, P.C., No. 90-CV-5278, 1992 WL 168267, at *3 (S.D.N.Y. June 25, 1992) (quoting Nat Kagan Meat & Poultry, Inc. v. Kolter, 416 N.Y.S.2d 646, 647 (App. Div. 1979)); accord Best v. Law Firm of Queller & Fischer, 718 N.Y.S.2d 397, 397 (App. Div. 2000) (holding that plaintiffs were "precluded from asserting a cause of action alleging malpractice" against the defendant law firm inasmuch as the New York Supreme Court had found that law firm was entitled to its agreed-upon legal fee).5 Here, it is undisputed that the Plaintiff’s legal malpractice claim is precluded by the state supreme court decision that Sexter & Warmflash was entitled to its reasonable legal fees. Accordingly, Plaintiff’s malpractice claim is dismissed as barred by the doctrines of res judicata and collateral estoppel."
 

As yet another example of why legal malpractice is a difficult discipline, here is a case in which there was a failure to file a counterclaim, The legal malpractice case ends in dismissal, because the Appellate Division determines that the counterclaim, even if made would have failed. Ginther v Rosenhoch ;2008 NY Slip Op 10292 ;;Appellate Division, Fourth Department
 

"One necessary element of such a cause of action is that, " but for the [defendants’] negligence, the plaintiff[] would have been successful in the underlying action’ " (Oot v Arno, 275 AD2d 1023, 1023). Here, plaintiff alleges that defendants committed legal malpractice by, among other things, failing to assert a counterclaim in the underlying action, for recovery of premiums paid by plaintiff under a disability insurance policy. We note, however, that the Second Circuit affirmed the judgment of the District Court in favor of the plaintiff insurer in the underlying action on the sole ground that the claim for benefits made by defendant, the plaintiff herein, was untimely under the policy (Provident Life & Cas. Ins. Co. v Ginther, 51 Fed Appx 72). Thus, it cannot be said that, but for defendants’ negligence, plaintiff would have been successful on a counterclaim for recovery of premiums in the underlying action (see Oot, 275 AD2d 1023).

Gina Passarella of the Legal Intelligenser reports on a case from Philadelphia that illustrates the difference between Breach of Fiduciary Duty and Legal Malpractice involving  Cravath, Swaine & Moore.  and Airgas, inc.

From the article:  ‘U.S. District Court Judge Eduardo C. Robreno ruled that under Pennsylvania law, Airgas sufficiently showed that Cravath had a fiduciary duty to Airgas and sufficiently supported its four damages claims for attorney fees, cost of obtaining new financing counsel, inability to obtain new financing and disgorgement of fees paid to Cravath. Robreno also upheld, at this juncture, Airgas’ claims for punitive damages.

Airgas sued Cravath after the firm decided to represent other longtime client Air Products & Chemicals in Air Products’ takeover bid for Airgas. Robreno had said the Delaware Chancery Court, which was overseeing litigation between the two companies regarding the takeover bid, should be the one to decide whether Cravath can represent Air Products or if it is barred by a conflict of interest.

The Delaware court in March ruled Cravath could continue in its representation, finding Airgas didn’t show how it would be harmed by Cravath’s involvement. But Airgas’ claims for damages based on an alleged breach of fiduciary duty have continued in the Eastern District of Pennsylvania before Robreno.

In his opinion Tuesday denying Cravath’s motion for judgment on the pleadings, Robreno said the parties "hotly dispute" the nature and scope of Cravath’s representation of Airgas and Air Products, when Cravath officially stopped representing Airgas and what Cravath learned while representing the company. He said he would treat the motion for judgment on the pleadings as a motion to dismiss.

"Airgas has pleaded its claim in detail and alleged facts that Cravath disregarded its duty of undivided loyalty to its client Airgas by accepting, without a prior disclosure, a representation of Air Products designed explicitly to help Air Products take over Airgas," Robreno wrote in a 23-page opinion in Airgas Inc. v. Cravath Swaine & Moore. "Airgas alleges that at the same time (August-October 2009) that Airgas had engaged Cravath and assumed its undivided loyalty, Cravath was covertly advising Air Products on how to end Airgas’s independent corporate existence. This pleading sufficiently sets forth a claim for breach of fiduciary duty."

Legal Malpractice rules are either legislated or court created.  There is no general underpinning such as an amendment to the Constitution, nor is there a basic common law history (with the very notable exception of the area of attorney deceit, which is as old as the Magna Carta.)  But as we have commented before, legal malpractice is the law of lawyers, written by lawyers, prosecuted by lawyers, and ruled on by lawyers.

Criminal defendants have no real ability to sue their attorneys for the mistakes which may have ended in the conviction.  In New York, a criminal defendant must demonstrate "actual innocence" before suing the attorney.  The thinking goes that a criminal was convicted on the evidence and not simply on blunders or shoddy work.  This must be true, no?

Yesterday’s New York Times tells of a simple calendaring mistake by Sullivan & Cromwell which could lead to an execution.  Cory R. Maples was convicted in Alabama of murder, and in the sentence phase, was sentenced to death.  Sullivan & Cromwell offered pro bono work on his case.  When an order, which required a responsive filing was mailed to the attorneys listed at Sullivan & Cromwell, they had moved on, and the envelopes were returned.

This was a most common law office failure/calendaring error.  This time, the consequences were not a loss of money, but, rather a potential execution.  The matter is now before the Supreme Court on a cert application. 

Is this the case that might change the rule in criminal legal malpractice? 

BAKER,  -v.- CHARLES SIMPSON, WINDELS MARX LANE & MITTENDORF, LLP  is the story of a Chapter 7 petitioner whose case was converted into a Chapter 11 proceeding.  He had counsel appointed, who then represented him until the end of the proceedings. The proceedings ended badly, with plaintiff Baker alleging "that: (1) On the advice of counsel, he refinanced through appellee Galster Capital LLC, which he contends misrepresented itself as a lender and failed to fund his mortgage loans as agreed. 1 (2) Galster Capital caused him to incur legal fees, forgo offers from other prospective lenders, and [*4] accrue interest on his debt. (3) During a status conference before the bankruptcy court, attorney Simpson made a misrepresentation concerning the bankruptcy estate. (4) Simpson arranged an improperly "fixed" auction sale of two of his commercial properties without notice to Baker, and after a prospective buyer moved to reopen the sale, the bankruptcy court issued an order vacating the original sale and scheduling a new sale on notice. (5) Allstate Insurance Company acted negligently when, at Simpson’s direction, it deposited insurance proceeds into a JPMorgan Chase bank account in Baker’s name. (6) And, Simpson improperly converted the funds deposited into the JPMorgan account for his personal use."

How did the Second Circuit handle this matter?  In the end, it ruled that there it had no jurisdiction to determine whether Bankruptcy Court had the right to take the state court legal malpractice action over, and then dismiss. The rules of permissive abstention and mandatory abstention are implicated here.

"Having determined that the bankruptcy court had jurisdiction over this matter, we look to the abstention doctrine to [*10] provide guidance as to the proper exercise of that jurisdiction. See In re Southmark Corp., 163 F.3d at 929-30. As we have previously explained, "the abstention provisions implicate the question whether the bankruptcy court should exercise jurisdiction, not whether the court has jurisdiction in the first instance." In re S.G. Phillips Constructors, Inc., 45 F.3d 702, 708 (2d Cir. 1995).

Mandatory abstention applies when "a proceeding based upon a [s]tate law claim or [s]tate law cause of action" is "related to a case under [T]itle 11" but does not arise under or arise in a case under Title 11. 28 U.S.C. § 1334(c)(2). In the proceeding before the district court, Baker conceded that the mandatory abstention provision set out in section 1334(c)(2) is inapplicable to this case. Baker, 413 B.R. at 42 n.4. Therefore, this Court may properly find any argument that the mandatory abstention provision governs this appeal waived. See United States v. Brown, 352 F.3d 654, 663 (2d Cir. 2003); Billing v. Ravin, Greenberg & Zackin, P.A., 22 F.3d 1242, 1245 n.1 (3d Cir. 1994).

In any event, any argument that — in the absence of a waiver — mandatory abstention would apply, is without merit. A bankruptcy [*11] court has "plenary jurisdiction over ‘all cases under [T]itle 11 and all core proceedings arising under [T]itle 11, or arising in a case under Title 11’" Mt. McKinley Ins. Co. v. Corning Inc., 399 F.3d 436, 447-48 (2d Cir. 2005) (quoting 28 U.S.C. § 157(b)(1)). As the Fifth Circuit has explained, although the definition of a proceeding "arising in" Title 11 is not entirely clear, it covers claims that "are not based on any right expressly created by [T]itle 11, but nevertheless, would have no existence outside of the bankruptcy." In re Wood, 825 F.2d 90, 97 (5th Cir. 1987)."
 

Result?  State Court action removed to Bankruptcy Court, Bankruptcy Court dismisses, no effective appeal.

Cases in which attorneys steal money rather than lose money [or commit blunders which lose otherwise meritorious cases] are in the jurisdiction of the New York Lawyers’ Fund for Client Protection.  This fund fills an important role, and covers areas which will not be susceptible to a legal malpractice case.  Malpractice Insurance carriers will not likely cover thefts, nor fraud by the attorneys; hence the added importance of this Fund.

The fund is paid for by attorney fees levied by New York.  Attorneys now pay $ 350. per two year period merely to register.  A significant portion of these monies goes to the fund.  Claims have picked up recently, probably consistent with the economy, as  Joel Stashenko of the NYLJ reports:

"In the first six months of this year, 349 new claims were filed with the fund, a 44.2 percent increase from the 249 received in the same period last year.

As of July 1 of this year, 762 claims were pending. If all were paid out at the maximum eligible reimbursement rate of $300,000, the fund would be liable for $35 million.

By comparison, the fund faced 612 claims on the same date last year with a potential exposure of $24 million. Halfway through 2008 the fund had 536 pending claims.

Awards also are running ahead of last year’s rates. In the first six months of the year, the fund paid out $4.3 million, up $2.9 million in the same period of 2009."