In Denenberg v Rosen ;2010 NY Slip Op 00081 ;Decided on January 7, 2010 ;Appellate Division, ;First Department ; Moskowitz, J. the question of when the relationship begins between client and attorney is discussed.  Plaintiff, who was a knowledgeable investor, as a commodities trader, formed a retirement account that was ultimately disallowed by the IRS.  He incurred big losses.
At the time he formed the tax shelter, his accountants used the name of a law firm to highlight the deal.  Bryan Cave had issued an opinion letter, but in this case it was to be narrowly construed.

"The marketing materials included an opinion letter that Smith and Bryan Cave had issued, on September 10, 1999, to Hartstein/ECI expressing that the Pendulum Plan was legal. The opinion letter contained the caveat that it was solely for ECI:

"This opinion is solely for the information of ECI Pension Services, LLC and its professional advisors. We have not considered whether adoption of the Plan would be appropriate for any particular employer. …"

Privity is the relationship between client and attorney.  At the strongest, there is a contractual relationship, undisputed, between them.  At the far reaches, on some occasions, an opinion letter upon which a person might reasonably rely has been sufficient.

Here, it was not enough. "The motion court should have dismissed the legal malpractice claims against Bryan Cave and Smith because no attorney-client relationship existed in 2002. The motion court was correct that the tax opinion letter was insufficient to support an attorney- client relationship, considering the letter stated it was for ECI solely and contained disclaimers cautioning readers to procure tax advice tailored to their specific plan. The motion court was also correct that the limited power of attorney was insufficient to show an attorney-client relationship as that document could also have [*7]authorized nonattorneys to act on behalf of plaintiff. The limited power of attorney only authorized Bryan Cave to represent "Robert A. Dennenberg, a Sole Proprietorship Defined Benefit Pension Plan" before the IRS and only for "Form 5307," which was the application submitted to the IRS for it to determine whether to approve the Plan. Plaintiff does not contend that Bryan Cave was negligent in submitting the Form 5307.

However, the motion court improperly relied on plaintiff’s entirely conclusory allegations that plaintiff retained the services of Bryan Cave in 2001 to support the legal malpractice claim. Plaintiff points to no communications with Bryan Cave for legal advice about implementation of the Plan. Plaintiff offers no objective facts or actions to show the existence of an attorney-client relationship or the parties’ mutual agreement that Bryan Cave would perform ongoing legal services for plaintiff. "

We have written that legal malpractice cases arise from a large base of underlying matters.  Here is a huge NY case that starts in Austria, travels east to Russia, and then is dismissed in New York.  In this story from the NYLJ by Nate Raymond we see how an Austrian Bank which lost it all in Russia came to New York to sue and lose a legal malpractice case against Chadbourne & Parke.

"Chadbourne in 2004 lost a bid to have the case tried in Russia instead of New York (NYLJ, June 14, 2004). The firm had better success in 2007, when a divided First Department, Appellate Division, panel ruled that the bank had waived its right to attorney client privilege (NYLJ, April 5, 2007).

Creditanstalt, with advice from the Denver-based firm of Holme Roberts & Owen, in 1996 acquired the assets of a Russian company engaged in securities brokerage activities. The bank then allegedly turned to Holme Roberts for advice on a legal structure that would allow its clients to invest in Russian securities. Those securities included Gazprom, the Russian natural gas giant.

Holme Roberts closed its Moscow office in 1998 as its team there joined Chadbourne, which took over the Creditanstalt relationship. The bank said Chadbourne provided a legal opinion on the structure’s legality, specifically with regards to a decree by President Boris Yeltsin in 1997 limiting the extent foreign entities could invest in Gazprom. It also issued a risk assessment letter in 1998 advising on the legality of the structure.

Creditanstalt claimed Chadbourne later realized its advice was faulty but failed to tell the bank. It also claimed Chadbourne failed to warn about any potential repercussions. Chadbourne disputed that its advice was wrong and claimed it warned the bank of tax and political consequences of the structures."
 

We’ve discussed the oft-found fact situation of how a fee determination by a bankruptcy court may block a later legal malpractice action.  In Breslin Realty Dev. Corp. v Shaw ;  2010 NY Slip Op 00087 Decided on January 5, 2010; Appellate Division, Second Department; Chambers, J., J.  the court writes persuasively about the concept:
 

"In bankruptcy proceedings, the general rule arising under 11 USC § 330(a)(4) is that "a finding of malpractice would mean that the attorneys were not entitled to compensation for those services found to be substandard" and, accordingly, failure to raise the malpractice claims when the final fee applications were considered and approved by the Bankruptcy Court barred later litigation of such claims under principles of res judicata (In re Iannochino, 242 F3d 36, 42; see Grausz v Englander, 321 F3d 467; Osherow v Ernst & Young [In re Intelogic Trace], 200 F3d 382; cf. Clement v Brumfield, 2004 Cal. App. Unpub. LEXIS 1031, citing Matter of Boddy, 950 F2d 334). Res judicata bars future litigation between the same parties or those in privity arising out of transactions giving rise to a cause of action which could have been raised in a prior bankruptcy proceeding (see Truesdell v Donaldson, Lufkin & Jenrette Sec. Corp., 281 AD2d 334; Evergreen Bank v Dashnaw, 246 AD2d 814). An exception lies if the plaintiff was deceived in the prior action or proceeding (see Izko Sportwear Co. Inc., v Flaum, 25 AD3d 534; Penthouse Media Group v Pachulski Stang Ziehl & Jones [US Dist Ct, SD NY, 9 Civ 85, Scheindlin, J., 2009]).

Applying these principles, we conclude that the final award of fees in the bankruptcy proceeding bars the plaintiffs’ malpractice claim based upon the same services in the present litigation. The final fee award in the bankruptcy proceeding was a determination on the merits, barring the legal action sounding in legal malpractice pursuant to the doctrine of res judicata (see Izko Sportwear Co. Inc. v Flaum, 25 AD3d 534).

Further, we are unpersuaded that there is evidence in this case that the defendants deceived the debtors or the Bankruptcy Court. The June 2003 agreement demonstrates that the plaintiffs were aware of the factual basis of their malpractice claim at the time of the defendants’ fee application. Moreover, the June 2003 agreement was drafted at least in part by separate and independent counsel—the Dollinger law firm. Thus, on the date that the Bankcuptcy Court entered the defendants’ final award, December 15, 2003, the debtors had ample opportunity to raise their malpractice claims as objections to the fee award. Accordingly, we conclude that the plaintiffs failed to meet their burden of demonstrating under the doctrine of collateral estoppel that they lacked a full and fair opportunity to litigate the legal malpractice claim in the Bankruptcy Court (see Izko Sportswear Co. Inc. v Flaum, 25 AD3d 534; cf. Penthouse Media Group v Pachulski Stang Ziehl & Jones [US Dist Ct, SD NY, 9 Civ 85, Scheindlin, J., 2009]). "

Criminal defendants have a well known and exacting path.  Arrest, Indictment, Trial, Appeal, CPL 440 Motion (or its federal equivalent) habeas proceedings, and finally, they often turn to a legal malpractice action.  In New York there is a strict prohibition against suing ones criminal defense attorney.  Its sort of a quasi-immune situation.  "New York law also demands that, in order to "open the door for even a colorable claim of innocence, criminal defendants must free themselves of the conviction, for the conviction precludes those potential plaintiffs from asserting innocence in a civil suit." Britt v. Legal Aid Soc., Inc., 95 N.Y.2d 443, 447, 741 N.E.2d 109, 718 N.Y.S.2d 264 (N.Y. 2000)." 

So, in Sash, v. Schwartz,No. 07-1249-pr;UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT;2009 U.S. App. LEXIS 27421; December 16, 2009 we see plaintiff lose in summary judgment.  "As Appellant’s brief does not raise the issue of whether he established diversity jurisdiction, that argument is waived on appeal. See LoSacco v. City of Middletown, 71 F.3d 88, 92-93 (2d Cir. 1995) (holding that, where a litigant, including one proceeding pro se, raises an issue before the district court but does not raise it on appeal, it is abandoned).

In any case, the district court properly granted summary judgment to Appellee. [*2] We review orders granting summary judgment de novo and focus on whether the district court properly concluded that there was no genuine issue as to any material fact and the moving party was entitled to judgment as a matter of law. See Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 2003). Under New York law, in order to state a cause of action for legal malpractice arising from negligent representation in a criminal proceeding, the plaintiff "must allege his innocence or a colorable claim of innocence of the underlying offense . . . for so long as the determination of his guilt of that offense remains undisturbed, no cause of action will lie." Carmel v. Lunney, 70 N.Y.2d 169, 173, 511 N.E.2d 1126, 518 N.Y.S.2d 605 (N.Y. 1987). "

Continuing the trend towards a combination of bankruptcy and legal malpractice, we note that bankruptcy follows, and rarely precedes legal malpractice situations, hence, we expect a swell of the intersection following the financial down-trends of the past year.  Here, Tabner v Drake
2009 NY Slip Op 10006; Decided on December 31, 2009 ; Appellate Division, Third Department is an example of how settlement of an underlying case is handled in Bankruptcy Court, even when the attorneys seeking their fee have nothing to do with the bankruptcy.  Apparently, individual Drake had carved out a portion of the settlement that was then taken away from him by the Bankruptcy Court, and as a result he would not sign a stipulation and release so that the law firm which had produced the settlement sums might get paid.
 

"In 1998, plaintiffs commenced an action to recover legal fees for services allegedly rendered to defendant Ralph H. Drake Jr.’s residential and commercial real estate business — defendant RHD Construction Corporation. In response, Drake and RHD asserted negligence and malpractice counterclaims against plaintiffs. Multiple pretrial proceedings ensued (see e.g. Tabner v Drake, 9 AD3d 606 [2004]) and, in 2001, Drake filed for bankruptcy under chapter 7 of the Bankruptcy Code.

Shortly after the start of trial, the parties entered into a stipulation of settlement in open court which, among other things, contemplated the exchange of general releases from the parties with respect to all aspects of the litigation. The parties acknowledged that the Bankruptcy Court’s approval of the settlement was required and, in November 2007, the Bankruptcy Court issued an order approving the settlement and authorizing the bankruptcy estate’s trustee to execute general releases in accordance therewith, specifically authorizing the payment of $50,000 to plaintiffs by the trustee. Nevertheless, citing purported inconsistencies between the actual [*2]terms of the settlement and the "Bankruptcy Court approval relative to the amounts to be paid to each defendant," Drake and RHD refused to execute their respective releases. Consequently, plaintiffs moved in Supreme Court for an order directing that defendants execute the releases called for within the agreement and enforcing the stipulation of settlement. Supreme Court granted the motion, prompting this appeal. "

"Accordingly, although the parties agreed to a total settlement of $350,000, with $50,000 going to plaintiffs, $295,000 to RHD and $5,000 to Drake, the Bankruptcy Court properly observed that the bankruptcy estate was the "legal and equitable owner of the litigation whether through [Drake] directly or as the sole shareholder of RHD" (see 11 USC § 541). Its resultant order — that $50,000 be tendered to plaintiffs and $300,000 be tendered to the bankruptcy trustee — thus adequately reflects the terms and conditions of the settlement. In view of the foregoing, we find no reason to disturb Supreme Court’s order."

Plaintiff suffers a construction accident, and his attorneys wait too long to bring the action.  He had a Labor Law 200.240, 241 and other claims, typical in a gravity-fall construction case.  His attorney admit that they waited too long to commence the action, but was successful in dismissal of the Labor la 200 and 240 causes of action.  Then, after an appeal, plaintiff moved for partial summary judgment on Labor Law 241,  In Long v. Cello & Barnes, 2009 NY Slip Op 09790 ; Decided on December 30, 2009 ; Appellate Division, Fourth Department we see
 

"Plaintiff commenced this legal malpractice action seeking, inter alia, damages resulting from the conceded negligence of defendants in representing him in the underlying action by failing to commence the action against the proper parties in a timely manner. Supreme Court erred in denying plaintiff’s motion seeking partial summary judgment on the first cause of action against defendants insofar as it is based upon the loss of a viable Labor Law 240 (1) claim in the underlying action. We note that, on a prior appeal, we affirmed an order granting, inter alia, those parts of the cross motion of defendants seeking summary judgment dismissing the second and third causes of action against them (Long v Cellino & Barnes, P.C., 59 AD3d 1062). We agree with plaintiff that he met his burden of establishing that he would have prevailed on the Labor Law § 240 (1) claim in the underlying action but for defendants’ negligence (see generally McKenna v Forsyth & Forsyth, 280 AD2d 79, 81, lv denied 96 NY2d 720). In support of his motion, plaintiff established that he was injured by a fall from an elevated work site and that the absence of appropriate safety devices was a proximate cause of his injuries (see Ewing v ADF Constr. Corp., 16 AD3d 1085, 1086). Defendants failed to raise a triable issue of fact in opposition to the motion (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Contrary to defendants’ contention, the nondelegable duty imposed upon the owner and general contractor under section 240 (1) " is not met merely by providing safety instructions or by making other safety devices available, but by furnishing, placing and operating such devices so as to give [a worker] proper protection’ " (Haystrand v County of Ontario, 207 AD2d 978; see Heath v Soloff Constr., 107 AD2d 507, 512). "
 

In today’s NYLJ, Abraham B. Krieger writes a compelling article about "negligent referral ", and gives some history and out of state cases, along with a discussion of NY cases in the area.  To backtrack, Mr. Krieger writes: "Recently, New York’s Appellate Divisions in the First, Second and Third departments, and a number of other state courts, implicitly recognized negligent recommendation/referral as a potential cause of action. While New York does not yet expressly recognize "negligent referral" or "negligent recommendation" as a cause of action, such a claim may be supported by applying the tort of negligent misrepresentation. A claim for negligent recommendation/referral may also be supported by the scope of duty voluntarily taken as part of a professional’s responsibility under the rules governing professional ethics, conduct and responsibility."

Looking from a slightly different viewpoint, both under the old rules and the new (since April 2009) "Rules of Professional Conduct"   Rule 1.5(g):  "A lawyer shall not divide a fee for legal services with another lawyer who is not associated in the same law firm unless: (1) the division is in proportion to the services performed by each lawyer, or, by a writing given to the client, each lawyer assumes joint responsibility for the representation; (2) The client agrees to employment of the other lawyer after a full disclosure that a division of fees will be made, including the share each lawyer will receive, and the client”s agreement is confirmed in writing and (3) the total fee is not excessive."

Under these rules, there is no more "sub silentio" referral of cases to trial attorneys, or to outside attorneys, or to "specialists."  Hence, the theory of referral malpractice seems to be a relic.  Referral malpractice now appears to be simply another variant of legal malpractice, although in this iteration, referring to multiple attorneys.

In Dischiavi v Calli ;2009 NY Slip Op 09773 ;Decided on December 30, 2009 ;Appellate Division, Fourth Department  we see a discussion of the effects of a bankruptcy filing on a legal malpractice claim.  While the governing principal applies to any cause of action which a plaintiff had when bankruptcy was filed. it seems to come up especially frequently in legal malpractice cases.  Briefly put, any claim at all, whether in suit, or simply in existence, which exists at the time a bankruptcy petition is filed, becomes an asset of the debtor’s estate, and thus passes out of the hands of the individual debtor.  The usual scenario is that the debtor obtains a discharge in bankruptcy, then sues an attorney.  Absent some act which allows the debtor to keep the asset [cause of action] it belongs to the estate, and the debtor lacks standing to bring the action.
 

In Dischiavi, the court found it a question of fact whether the debtor [plaintiff] had reason to know of the cause of action at the time of petition filing. "Defendants met their initial burdens in part by establishing that plaintiffs failed to include any of their causes of action against defendants in their schedule of assets for their bankruptcy proceeding, that the causes of action for breach of contract, legal malpractice, breach of fiduciary duty and negligence accrued prior to the commencement of the bankruptcy proceeding, and that plaintiffs obtained a [*2]discharge in bankruptcy (see Wright v Meyers & Spencer, LLP, 46 AD3d 805; Nationwide Assoc., Inc. v Epstein, 24 AD3d 738; see also Whelan v Longo, 23 AD3d 459, affd 7 NY3d 821). Defendants failed, however, to demonstrate that plaintiffs "knew or should have known of" those causes of action against defendants prior to commencing the bankruptcy proceeding (Dynamics Corp. of Am., 69 NY2d at 197; see R. Della Realty Corp. v Block 6222 Constr. Corp., 65 AD3d 1323). Defendants also failed to establish that the fraud cause of action accrued prior to commencement of the bankruptcy proceeding (cf. Wright, 46 AD3d 805). "