LOK PRAKASHAN, LTD.  -v.- RALPH A. BERMAN, DAVIDOFF MALITO & HUTCHER, LLP,
No. 09-0136-cv; UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT;2009 U.S. App. LEXIS 22988 is an example of the Court’s continued romance with the concept that litigation is an art and not a science.

What is a question of judgment? " "A complaint that essentially alleges either an ‘error of judgment’ or a ‘selection of one among several reasonable courses of action’ fails to state a claim for malpractice." Id.

The District Court concluded that "[b]ecause there is ample evidence in the record that Defendants’ omission of the specified document was a conscious and reasonable decision regarding trial strategy, not negligence, and the omission of the document was not the proximate cause of any loss, Plaintiff has failed to show the elements required to support a claim of legal malpractice." [*4] Order of November 1, 2005. We agree and, substantially for the reasons stated by the District Court in its well-reasoned orders of November 1, 2005 and December 12, 2008, find plaintiff’s arguments to be without merit."
 

Fees and Attorneys seem to be a dyad that never stops recurring.  More correctly put, disputes about  fees and attorneys have been here forever.  we’re certain that the bible contains some commentary, and we do know that Abraham Lincoln had attorney fee cases in his docket.  Here is a decision from Judge Scheindlin on the issue.

Simon v. Unum Group, 07 Civ. 11426;  Decided: June 22, 2010;  District Judge Shira A. Scheindlin; U.S. DISTRICT COURT  SOUTHERN DISTRICT OF NEW YORK. 

"Section 475 of the New York Judiciary Law provides, in pertinent part:

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…. The court upon the petition of the client or attorney may determine and enforce the lien.

However, attorneys are not entitled to a charging liens in all instances. Under New York law, a client has an absolute right to terminate the attorney-client relationship at any time, with or without cause. 7 "If a lawyer is discharged for cause, he or she is not entitled to legal fees." 8 However, "[p]oor client relations, differences of opinion, or personality conflicts do not amount to cause." 9 Cause requires a showing of "impropriety or misconduct on the part of the attorney." 10 If the lawyer is not discharged for cause, then he or she is entitled to legal fees—which may be recovered either (1) in quantum meruit, the fair and reasonable value of the services rendered, or (2) as a contingent portion of the former client’s ultimate recovery if the parties entered into a contingency agreement. 

If awarding fees in quantum meruit, the court may consider multiple factors to determine the fair and reasonable value of an attorney’s legal services, including:

[(1)] the difficulty of the matter, [(2)] the nature and extent of the services rendered, [(3)] the time reasonably expended on those services, [(4)] the quality of performance by counsel, [(5)] the qualifications of counsel, [(6)] the amount at issue, and [(7)] the results obtained (to the extent known).

"It is appropriate, after ‘consider[ing] all the factors relevant to a quantum meruit fee analysis…[to] turn[] to lodestar analysis to reach a specific dollar figure for the value of the services rendered[.]’"  "This method, which results in the determination of the presumptively reasonable fee, is comprised of a reasonable hourly rate multiplied by a reasonable number of expended hours."

In this most simple of legal malpractice cases, plaintiff was the victim of a rear-end Motor Vehicle accident.  She retained attorney who failed to bring the action within the statute of limitations.  Plaintiff sues attorney and settles for $ 50,000. which was the amount of the underlying car insurance.  She is said to have sought the approval of her own carrier for the settlement, but there was no response.

Now, when plaintiff seeks underinsured/uninsured coverage from her own carrier, it declines to cooperate and seeks to stay arbitration.  Was there double legal malpractice?  Should the underlying attorney have been liable for both primary and underinsured coverage amounts?

In Matter of Kemper Mut. Ins. Co. v Russell ;  2010 NY Slip Op 05847 ;Decided on July 1, 2010
Appellate Division, Third Department  we see the majority opinion:
 

"An insurer is obligated to pay under SUM coverage if the bodily injury liability insurance limits of its insured’s policy exceed those of the other policy, subject to the condition that "the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements" (Insurance Law § 3420 [f] [2] [A]; see Matter of Federal Ins. Co. v Watnick, 80 NY2d 539, 546 [1992]). The statute, in short, "requires primary insurers to pay every last dollar, and requires [respondent] to accept no less, prior to the initiation of an underinsurance claim" (Matter of Federal Ins. Co. v Watnick, 80 NY2d at 546). The primary insurer here, however, has paid nothing, as respondent was forced to recover damages in a separate legal malpractice claim. As the other driver’s policy limit was not exhausted by payment, respondent’s own SUM coverage does not come into play, and Supreme Court should have granted petitioners’ application for a permanent stay. "

While the minority opinion comes to the conclusion that it is the amount and not the source of the insurance proceeds that controls, neither opinion asks whether the attorney should have demanded or obtained settlement in the amount of primary and underinsured coverage.

One theme of this blog is that where ever attorneys represent clients [all over] there will be legal malpractice claims.  GUS Consulting GMBH v Chadbourne & Parke LLP ;2010 NY Slip Op 05672 ;Decided on June 24, 2010 ;Appellate Division, First Department  is a prime example.  This case involves the Russian Tax Police, gas service across Europe and legal malpractice here in the US.  Can one get any more global?
 

"The complaint alleges that the SP Structure was illegal under Russian law, specifically Decree No. 529, and that the Russian tax police undertook an investigation because the SP Structure was illegal. However, the contention that the SP Structure was illegal under Russian law was rejected in an arbitration brought against plaintiff CIS Emerging Find Limited (CISEF) in which CISEF asserted that its contract with the claimant was void because it was part of the SP Structure that was illegal under Decree No. 529. Since the issue was actually and necessarily decided in the arbitration, in which CISEF had a full and fair opportunity to litigate the issue, CISEF and the other plaintiffs, who are admittedly in privity with it, are precluded from relitigating it herein (see Kaufman v Eli Lilly & Co., 65 NY2d 449, 455 [1985]; Active Media Servs., Inc. v Grant Prideco, Inc., 35 AD3d 165 [2006]). Thus, to the extent the complaint is based on allegations that Chadbourne negligently advised plaintiffs that the SP Structure was legal, although risky, under Russian law, the malpractice claim is foreclosed.

Summary judgment dismissing the entire legal malpractice action was correctly granted [*2]because CAIB failed to present evidence in admissible form sufficient to raise a triable issue of fact as to proximate cause, which requires a showing that Chadbourne’s alleged failure to warn it of potential criminal consequences of its use of the SP Structure proximately caused reasonably ascertainable damages (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007]; Barbara King Family Trust v Voluto Ventures LLC, 46 AD3d 423, 424-425 [2007]). CAIB submitted no admissible evidence to dispute Chadbourne’s showing that the 1999 tax police raid was precipitated by a terminated employee in an effort to delay CAIB’s discovery of his theft of 100,000,000 shares of Gazprom stock. Further, the shares of Gazprom stock that were "arrested" by Russian authorities following the 1999 raids were eventually released to CAIB, and no formal criminal prosecution was ever commenced against CAIB or any of its affiliates or officers. CAIB’s claim that, had Chadbourne properly advised it of potential criminal exposure, it would have changed or ceased its use of the SP Structure and then would have been able to maintain its presence in Russia and grow its business there over the next six years, while the Russian economy rebounded, is too speculative to support a legal malpractice claim (see AmBase ."
 

A common and recognized mistake resulting in legal malpractice is the double use of an index number.  in Wilk v Lewis & Lewis, P.C. ;2010 NY Slip Op 05897 ;Decided on July 2, 2010 ;Appellate Division, Fourth Department  the index number came from an earl er pre-complaint discovery motion.  It might also come in a motion for leave to file a late notice of claim or some other variant.

Attorneys got the discovery but then sued under the same index number.  At the time, such a filing was a nullity, which had statute of limitations significance. 

"Defendants commenced a pre-action discovery proceeding against plaintiff’s employer to obtain information concerning the accident and, when defendants thereafter commenced a Labor Law and common-law negligence action on behalf of plaintiffs (hereafter, underlying action), they used the same index number that had been used in the pre-action discovery proceeding. Supreme Court granted the motions of the defendants in the underlying action (Labor Law defendants) to dismiss the complaint. Under the law at that time, the failure to purchase a new index number rendered the action a nullity because it was never properly commenced (see Chiacchia & Fleming v Guerra, 309 AD2d 1213, 1214, lv denied 2 NY3d 704). No appeal was taken by plaintiffs from that order, although plaintiffs retained other attorneys (plaintiffs’ successor counsel) shortly prior to the expiration of the time in which to take an appeal. Plaintiffs commenced a second Labor Law and common-law negligence action against the Labor Law defendants, who moved to dismiss the complaint as time-barred. We previously reversed an order denying those motions and instead granted the motions and dismissed the [*2]complaint (Wilk v Genesee & Wyoming R.R. Co., 45 AD3d 1274). We concluded that the second action did not relate back to the filing of the underlying action pursuant to CPLR 205 (a) because the failure to purchase a new index number rendered the underlying action a nullity (id. at 1275).

Defendants also failed to establish that plaintiffs could not prove the remaining elements of a legal malpractice cause of action. Defendants contend that their negligence was not a proximate cause of plaintiffs’ injuries because plaintiffs’ successor counsel did not file a notice of appeal when the Court of Appeals issued its decision in Harris v Niagara Falls Bd. of Educ. (6 NY3d 155). We reject that contention. Defendants are correct that the Court of Appeals changed the law by holding in Harris that a defendant could waive a defect in connection with filing requirements such as the failure to purchase a new index number (see id. at 159). Even assuming, arguendo, however, that we agree with defendants that the time within which plaintiffs could file a notice of appeal expired 35 days after the final Labor Law defendant had served the order dismissing the first complaint against the Labor Law defendants (see Blank v Schafrann, 206 AD2d 771, 773; Williams v Forbes, 157 AD2d 837, 838-839; Dobess Realty Corp. v City of New York, 79 AD2d 348, 352, appeal dismissed 53 NY2d 1054, 54 NY2d 754), we note that the time in which to file a notice of appeal against that final Labor Law defendant expired [*3]approximately 30 hours after the Harris decision was issued. It cannot be said that the failure of plaintiffs’ successor counsel to learn of the Harris decision and file a notice of appeal within that narrow time period constituted an "intervening and superseding failure of plaintiff[s’] successor [counsel]" to file a timely notice of appeal (Pyne v Block & Assoc., 305 AD2d 213). Defendants thus failed to establish that "plaintiff[s’] successor counsel had sufficient time and opportunity to adequately protect plaintiff[s’] rights" (Somma v Dansker & Aspromonte Assoc., 44 AD3d 376, 377; cf. Ramcharan v Pariser, 20 AD3d 556, 557; Albin v Pearson, 289 AD2d 272). "

What partners will do to each other continues to amaze.  here, in Rock City Sound, Inc. v Bashian & Farber, LLP ;2010 NY Slip Op 05533 ;Decided on June 22, 2010 ;Appellate Division, Second Department.  here, "A dispute arose between Kalish and Lindsay as to the Established Value of Kalish’s shares, and in August 2004 Kalish commenced an action against Lindsay (hereinafter the Kalish action). The defendants Gary E. Bashian and Bashian & Farber, LLP (hereinafter Bashian and B & F) represented both Lindsay and Rock City in the Kalish action. Upon Kalish’s application, the Supreme Court, Dutchess County, awarded him a preliminary injunction, inter alia, enjoining Lindsay from exercising any control over [*2]Kalish’s Rock City shares (see Kalish v Lindsay, 47 AD3d 889, 890).

Subsequently, Lindsay authorized himself to vote all of Kalish’s shares, called shareholder meetings at which he was the only one present, deemed himself to have complete authority to operate Rock City, and made decisions about Rock City without notifying Kalish, such as voting to sell all of its equipment and assets. "

Where did that leave Kalish?  Things became even more difficulty when Lindsay filed for personal bankruptcy.  "Kalish appealed both the order and judgment and the order to this Court. By decision and order dated January 29, 2008, this Court modified the order and judgment by deleting the provision thereof denying that branch of Kalish’s motion which was to hold Bashian and B & F in civil contempt pursuant to Judiciary Law § 753, and remitted the matter to the Supreme Court for a hearing and new determination on that branch of the motion. This Court reversed the order denying Kalish’s motion for partial summary judgment, and granted that motion (id. at 890-892). Thereafter, the Supreme Court issued what was denominated a partial judgment, declaring and adjudging the total value of Kalish’s shares to be $1,145,580, and that Rock City was required to perform under the shareholder’s agreement and purchase Kalish’s shares for that amount, which was due and payable at the time of the judgment.

Subsequently, Lindsay filed for personal bankruptcy, and his bankruptcy trustee, Paul Banner, took over his interests in Rock City. Banner and Kalish then voted their shares to authorize Rock City to commence the instant action against the defendants Bashian & Farber, LLP"

For a technical discussion of standing for the bankruptcy trustee and the entities, see the balance of the decision.  "Contrary to the defendants’ contention, Kalish and Banner had the authority to vote their shares to authorize Rock City to commence this action. The Shareholders Agreement entitled Kalish to exercise full voting rights on his shares "until such time as payment in full has been made." Since his shares were never purchased, Kalish’s withdrawal from the corporation was never accomplished, and he had the right, according to the agreement, to vote his shares to bring the instant action (cf. Cooper, Selvin & Strassberg v Soda Dispensing Sys., 212 AD2d 498). Further, a bankruptcy trustee stands in the shoes of the debtor and is able to maintain actions that the debtor could have brought prior to the bankruptcy proceedings (see generally Hirsch v Arthur Andersen & Co., 72 F3d 1085). Since, pursuant to the Shareholder’s Agreement, Lindsay could have voted his shares to authorize this action, his bankruptcy trustee, Banner, had the authority to do so. "

Boone v Bender ;2010 NY Slip Op 05497 ;Decided on June 22, 2010 ;Appellate Division, Second Department is a matrimonial legal malpractice case.  The Appellate Division decision does not shed much light on the allegations in the complaint. 
 

Often, matrimonial legal malpractice cases rest on failures in investigation of the other spouses’ finances, in failures to seek pendente lite relief, in the failure to obtain maintenance, and in one variety of capitulation concerning equitable distribution.  We cannot really tell how this case proceeded.

Notable, however, is the Second Department’s reliance on plaintiff’s statement of satisfaction with her attorney at the settlement.  This is a newly emerging trend in legal malpractice.  In the settlement of some types of cases, matrimonial especially, the court asks whether the client was satisfied with its attorney’s work.  The client is in a bind, as the attorney usually advises the client to say "yes."  Clients universally believe that if they don’t answer, or say "no" then there will be no settlement.  This is a trap.

"The open-court stipulation of settlement established that the plaintiff was satisfied with the defendants’ representation of her, that she had discussed the terms of the settlement with the defendants, that she understood that she would have the right to a trial if she did not wish to enter into the stipulation, that she had not been threatened or forced into entering into the stipulation, that she was entering into the stipulation voluntarily and of her own free will, that she had not taken any medications that would hamper her ability to understand the court proceedings, and that she had no additional questions for the defendants. "The fact that the plaintiff subsequently was unhappy with the settlement obtained by the defendant does not rise to the level of legal malpractice" (Holschauer v Fisher, 5 AD3d 553, 554). "

The recent decision in Gucci  America Inc. v. Guess? Inc.,  doesn’t answer the legal malpractice question, but it does answer the privilege question.  Here’s the back story from Noeleen Walder at the New York Law Journal:

"Mr. Moss, a graduate of Fordham University School of Law, passed the California bar exam in 1993 but went on inactive status three years later.

He was referred to Gucci by two of its outside counsel from Patton Boggs in Washington, D.C., and joined the company’s Secaucus, N.J., office in 2002 to analyze real estate financials.

Just months after joining the company, Mr. Moss, who maintains he was hired as a "legal associate," filed a pro hac vice motion in U.S. Bankruptcy Court for the Southern District to represent Gucci, according to Magistrate Judge Cott’s decision.

In 2003, Gucci promoted Mr. Moss to in-house counsel. In that position, Mr. Moss filed trademark applications in which he was labeled an "attorney-at-law and member of the Bar of California," represented Gucci in employment matters, and appeared before courts and administrative agencies on the company’s behalf. In 2005, Gucci once again promoted Mr. Moss, this time appointing him director of legal services. Three years later, Mr. Moss was appointed vice president and director of legal and real estate.

In an affidavit, Mr. Moss said, "I did not believe that my inactive status in California limited my ability to practice law in any other jurisdiction where such practice was permissible."

Mr. Moss insists that no one ever brought up the issue of his inactive status during his eight years at Gucci.

For its part, Gucci has maintained that it "perceived" Mr. Moss to be an attorney authorized to practice law.

In an affidavit, Christy Leleck, a director of Human Resources at Gucci during Mr. Moss’ tenure, said she never thought to confirm Mr. Moss’ qualifications since "he was already perceived by senior management as the company’s lawyer."

It was not until December 2009 that Gucci launched a "preliminary investigation" into Mr. Moss’ status.

Gucci terminated Mr. Moss on March 1, a month after he reactivated his bar status in California.

In court papers filed in April, Guess maintained that Gucci could have discovered "with a few clicks of the mouse" that Mr. Moss was not licensed to practice law (NYLJ, April 19).

"Gucci could have readily learned that Jonathan Moss was not authorized to practice law simply by asking him whether he was an active member of the California Bar… And this is what Gucci never did in all these years as Gucci’s legal counsel."

Magistrate Judge Cott agreed.