One might think that after a loss of the underlying case, a legal malpractice action will undoubtedly be successful.  That thought is, of course, naive.  As an example. suppose you are a landlord and owner of a commercial setting who sells to buyer, who is to pay for the sale over time.  buyer disappears, and the store is left unattended.  Seller watches, then padlocks the store for safety, then later runs the business to pay for the upkeep.  Buyer later returns and sues.  Seller’s attorney defends, does not file a counterclaim, then bails out just before trial.  Seller loses the trial.  Malpractice?  US District Court says no.

In CHARL-HO PARK, v.. REIZES; 5:06-CV-0843 (GTS/GJD)UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK 009 U.S. Dist. LEXIS 117077 the court summarizes: "Plaintiff’s Complaint alleges that Defendant committed legal malpractice in the following ways: (1) he improperly advised Plaintiff of his legal rights regarding the padlocking of the premises in question; (2) he improperly advised Plaintiff of the amount that Plaintiff’s tenants needed to pay to cure a default; (3) he failed to assert affirmative defenses and counterclaims on behalf of Plaintiff in an action filed against Plaintiff; and/or (4) he breached his professional duty by abandoning Plaintiff on the eve of trial, thereby [*2] causing Plaintiff to lose that action."

"Specifically, the Court finds that whatever issue of fact may exist with regard to the padlocking incident is not material to the issue of whether Defendant breached a legal duty to Plaintiff. The Court makes this finding for two reasons.

First, whether Plaintiff notified Defendant that his wife had padlocked the area is immaterial because Plaintiff admitted in his deposition that he asked his wife to lock the store for security reasons, as opposed to locking the store for the purpose of keeping the Lees from entering. (Dkt. No. 23, Part 10, at 30-31 [Plf.’s Deposition].) Defendant properly notes that New York courts recognize a landlord’s padlocking or changing of locks as an eviction only when the landlord does so for the purpose of keeping a tenant out. 1 As a result, even assuming that Defendant owed Plaintiff a duty to advise him with regard to whether to padlock the premises in question, Defendant would have had a reasonable basis for not advising Plaintiff to remove the lock. As a result, Defendant [*7] did not breach any duty to Plaintiff with regard to the padlocking incident.

"In any event, whether or not Defendant gave this advice or calculated the amount owed (or even whether the calculation was incorrect) is immaterial to Defendant’s motion for summary judgment. This is because, just as Plaintiff has done with regard to the issue of the padlocking of the doors discussed above in Part III.A. of this Decision and Order, Plaintiff has failed to provide admissible evidence to meet the burden needed to survive summary judgment on the element of causation in his claim regarding the default claim. "

"However, even assuming that Defendant erroneously notified Plaintiff that filing a counterclaim would cost more money (rather than notifying him that it merely could cost more money and time), Plaintiff has failed to adduce admissible record evidence from which a rational factfinder could conclude that such an error caused him any harm. "The object of compensatory damages is to make the injured client whole. Where the injury suffered is a loss of a cause of action, the measure of damages is generally the value of the claim lost." Campagnola v. Mulholland, Minion and Roe, 76 N.Y.2d 38, 42 (N.Y. 1990).."

Nate Raymond of the NYLJ reports a second unusual legal malpractice case, this time with an attorney as the plaintiff.  He sues over a case concerning his former law office and whether he was due money in the wake of its breakup.  "Partnership law expert Leslie Corwin is being sued by an attorney he represented who claims Mr. Corwin mishandled an arbitration with the attorney’s former firm.  The case seems to revolve around the failure of either plaintiff or defendant to list an expert witness for use in the arbitration.  Because he was listed as a witness, but not an expert witness, his testimony on valuation was precluded.

Unanswered, but discussed in the case is why plaintiff did not take advantage of the right to offer documentary evidence on valuation.  Is that comparative negligence?

Allen Roberts, a partner at Epstein Becker & Green, sued Mr. Corwin and his firm, Greenberg Traurig, in October, claiming they were negligent in failing to prove liability against Mr. Roberts’ former partners at New York employment boutique Roberts & Finger. Mr. Roberts is seeking more than $6.6 million in damages (See the Complaint).

Mr. Corwin, in an answer filed earlier this month, acknowledged Mr. Roberts lost the dispute but said the fault lies with Mr. Roberts, who, as an experienced lawyer, acted as co-counsel in his own case. Mr. Roberts "failed to heed advice" from Mr. Corwin, the answer claims, and caused the alleged damages himself. Greenberg also said Mr. Roberts owes the firm more than $141,000 in legal fees."
 

"Mr. Roberts’ side rested without offering other testimony to support theories of valuation and liability, according to Mr. Roberts complaint.

The arbitration panel gave Mr. Corwin the opportunity to submit valuation theories in a chart or addendum. Mr. Corwin did not submit those, the complaint said, nor did he seek to reopen the hearing to receive further evidence"
 

Nate Raymond of the NYLJ reports on a $55 Million legal malpractice case  Ableco Finance LLC v. Hilson, Ippolito and Paul Hastings Janofsky & Walker LLP arising from loans made to a large retailer, and events after the loan went sour, bankruptcy filings, and apparently a big pay back by the lender in Bankruptcy Court.

"A financing unit of Cerberus Capital Management L.P. has sued Paul, Hastings, Janofsky & Walker, claiming the law firm gave it bad advice in connection with a loan the private equity firm made last year to a company looking to bring retailer Steve & Barry’s out of bankruptcy.

Ableco Finance LLC, a unit of Cerberus with more than $6 billion under management, filed an amended complaint Friday in Manhattan Supreme Court against its former lawyers seeking more than $55 million it said it lost because of the $125 million loan. Ableco claims it would never have made the loan last year if the Paul Hastings team had advised it that the buyer would not have rights to all of Steve & Barry’s inventory, which Ableco understood would back the loan.

"No competent, diligent finance lawyer would have put his client in such a vulnerable position," Ableco’s complaint reads in part."

We obtained the Amended Complaint which  has as its main point "Paul Hastings Failed to Advise Ableco That the Terms of the BH/S&B Agency Agreement Made it  Impossible for Ableco to Get a Perfected First Priority Lien on S&B’s Entire Inventory"

The Amended Complaint has but a single claim in Legal Malpractice against all defendants.

As the NYLJ article continues: "It was a difficult time to make a loan, given "an economy that was suffering major disruptions in the housing and credit markets," Ableco said in its complaint. To ensure it got paid back in full, Ableco said it told Paul Hastings lawyers to require a first priority lien on Steve & Barry’s entire inventory, which Ableco estimated to be worth $183.7 million. Language agreeing to a first priority lien made it into the commitment letter drafted by Paul Hastings, and Ableco agreed to make the loan.

But according to the complaint, Ableco had not been advised about an earlier agreement between Bay Harbour and Steve & Barry’s that would have made a right to the entire inventory impossible. Bay Harbour’s earlier agreement with Steve & Barry’s left the retailer with control of more than 50 percent of its stores. While the estate had given Bay Harbour a lien on the assets at these stores, the estate kept priority rights to the inventory and sales proceeds that came ahead of that lien.

As a result, Ableco claimed it was in fact impossible for it to receive its lien on a large portion of Steve & Barry’s inventory. Ableco said Paul Hastings did not provide a copy of the earlier agreement between Bay Harbour and the retailer’s estate, nor communicated its terms, before Ableco made the loan.

With the economy worsening, the company created by Bay Harbour, BH S&B Holdings, began to struggle and it filed for Chapter 11 bankruptcy in the Southern District in November 2008. "

One has to shake the head and ask why all the effort goes into a law suit that will [or is so likely to] fail?  The question is multiplied when plaintiff is an attorney seeking fees.

Rule 137 seems pretty comprehensive and exacting.  Attorney who seeks a fee needs to serve th client with an opportunity to arbitate.  Here in Messenger v Deem ; 2009 NY Slip Op 29501 ;Decided on December 7, 2009 ;Supreme Court, Westchester County ;Giacomo, J. we see what turns out to be a total waste of time for everyone, including the jurors.
 

"In his complaint, plaintiff alleged that "Pursuant to Second Department case law, notice of right to arbitrate legal fees need not be provided to a client who never disputes the reasonableness of an attorney’s legal fees…Defendant never disputed the reasonableness of Plaintiff’s fees." (Complaint at ¶¶6-7.)

In her answer [FN1], defendant denied the allegations of the complaint and plead thirteen affirmative defenses including that plaintiff was not entitled to an attorney’s fee because of his: failure to provide defendant with notice of arbitration before commencement of the suit ."
 

"Part 137 of the Rules of the Chief Administrator of the Courts provides for a Fee Dispute Resolution Program. A mandatory Arbitration Procedure is set forth therein for all representations that commenced on or after January 1, 2002, and is applicable "to all attorneys admitted to the bar of the State of New York who undertake to represent a client in any civil matter." 22 NYCRR 137.1.

Plaintiff argues that the mandatory arbitration provisions of Part 137 are inapplicable to the instant matter because, like in the Scordio matter, there was no disagreement as to the amount of attorney’s fee due to plaintiff, and that defendant [*3]simply did not pay what was due. In Scordio, the Appellate Division, Second Department held that the mandatory arbitration notice provided for by then Court Rule 136.5 did not apply where the client did not dispute the reasonableness of the fees charged, and specifically declined "to follow the rule adopted by the Appellate Division, First Department, which obligates an attorney to send such a notice even in the absence of any fee disagreement with a client." Scordio v. Scordio, 270 AD2d at 329, 705 NYS2d at 59.

Court Rule 136.5, upon which Scordio was premised, was repealed in January 2002 and replaced with Court Rule 137.6. Former Rule 136, which was applicable only to domestic matters has been subsumed by the newer Part 137 which, with limited exceptions that are not alleged here, is applicable to all civil matters. Court Rule 137.6 is applied in the same manner as former Rule 136.5. See, Abinanti v. Pascale, 41 AD3d 395, 837 NYS2d 740 (2nd Dept., 2007); Borah, Goldstein, Altschuler, Schwartz & Nahins, PC v. Lubnitzki, 13 Misc 3d 823, 822 NYS2d 425 (N.Y.Civ.Ct., 2006). "

"A "fee dispute" (22 NYCRR §137.2) or a disagreement as "to the attorney’s fee" [22 NYCRR §137.6(a)] is not only found when the former client complains as to time billings on a line by line basis. Under Part 137, arbitrators are entrusted to "determine the reasonableness of fees for professional services". 22 NYCRR §137.0. Here the defendant "disputed the reasonableness of the fees" plaintiff was charging. See, Scordio v. Scordio, supra , 270 AD2d at 329, 705 NYS2d at 59. The "reasonableness" of the fee cannot be limited to disputes as to whether an attorney should have charge "1.0 hours of billing time" instead of "1.2 hours of billing time". If such were the case a simple audit of the bill would be all that was necessary. Instead, arbitrators are given authority to evaluate and make a subjective finding of reasonableness. For something to be reasonable it must be fair and proper under the circumstances. To hold otherwise would render the Rule impotent and unenforceable. "

Yesterday we discussed the plaintiff v. her own attorney part of Dupree v Voorhees ; 2009 NY Slip Op 09183 ; Decided on December 8, 2009 ; Appellate Division, Second Department .  Today we look at Dupree v. her husband’s attorneys.  Traditionally this type of case has been out of bounds.  For policy reasons, courts do not like suits against your adversary’s attorney…they might come after every case if allowed.  Here, however, after the Judiciary Law 487 claims were initially dismissed,, continued to remain dismissed on renewal, and then reversed on appeal.
For the bizarre events, see yesterday’s blog entry.  It is alleged that the husband’s attorneys deceived the court on an Order to Show Cause application, which permitted a receivership to be established while the wife’s attorney was kept from knowing about the application.

"Based upon events which occurred in an underlying divorce action, the plaintiff commenced this action against her former attorney, Oliver Raymond Voorhees III, her former husband’s attorney, Karyn A. Villar, and Villar’s law partner, Dorothy A. Courten. As is relevant [*2]to this appeal, the third cause of action sought damages for abuse of process against Villar and Courten, alleging that Villar made certain misrepresentations in applying for a receivership order in the underlying action. In the fourth cause of action, the plaintiff seeks treble damages against Villar and Courten under Judiciary Law § 487, alleging that Villar intended to deceive the court in connection with a receivership application. The complaint further alleged that because Courten and Villar were partners in the same law firm, Courten was vicariously liable for the damages the plaintiff sustained as a result of Villar’s alleged wrongdoing. "

"The court determined that a subsequent decision of the Court of Appeals in Amalfitano v Rosenberg (12 NY3d 8) provided a reason for granting renewal, and, upon renewal, to deny that branch of the motion which was to dismiss the complaint as against Villar with respect to the Judiciary Law § 487 cause of action. The court, however, denied the plaintiff relief with respect to the Judiciary Law § 487 cause of action against Courten, noting that Judiciary Law § 487 is rooted in the criminal law and that it would be inconsistent with this history and the statute itself to hold a second attorney responsible for the deceit of another unless the attorney participated in or ratified the wrongdoer’s actions. We disagree.

Partnership Law § 24 provides that "[w]here, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership, or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act" (Partnership Law § 24 [emphasis added]). Partnership Law § 26(a)(1) provides that "all partners are liable . . . [j]ointly and severally for everything chargeable to the partnership under section[ ] twenty-four." The pivotal test for liability in this regard is whether the wrong was committed on behalf of and within the reasonable scope of the partnership business, not whether the wrongful act was criminal in nature, or whether the other partners condoned the offending partner’s actions (see Rudow v City of New York, 642 F Supp 1456, affd 822 F2d 324; Muka v Wiliamson, 53 AD2d 950; see also Clients’ Sec. Fund v Grandeau, 72 NY2d 62). Therefore, the Supreme Court erred in adhering to the determination in the order dated May 1, 2008, dismissing the Judiciary Law § 487 cause of action against Courten. "

Dupree v. Voorhees, 2009 NY Slip Op 09183 ;Decided on December 8, 2009 ;Appellate Division, Second Department  is an example of the breathtaking reversals that might happen on appeal, and how the law can "change" in the period between dismissal and the appeal.  Today we will look at the legal malpractice part of this case which is more traditional; on Monday we will look at the Judiciary Law 487 reversal, and how it kept two attorneys in the case.
In this matrimonial case, it appears that some very strange motion practice took place.  we;ll quote:

"Specifically, the record reveals that the attorneys representing the plaintiff’s former husband in a matrimonial action failed to provide advance notice to the appellant, the plaintiff’s [*2]former counsel in the matrimonial action and a solo practitioner, of a closing scheduled for November 21, 2003, for the refinancing of the former marital residence. Rather, on the date in question, the appellant, who was in Suffolk County serving jury duty, received a voice mail message from one of those attorneys, Karyn A. Villar, advising him of a purportedly "emergency" application being made that day before Justice John C. Bivona in the Supreme Court, Suffolk County (hereinafter the motion court). Shortly thereafter, during a break, the appellant returned Villar’s call and was informed by Villar that the closing would be taking place later that day. The application made by order to show cause ostensibly was to allow the former husband to effectuate the refinancing transaction.

Although Villar advised the motion court that the appellant was unavailable, and although the order to show cause had a return date of November 25, 2003, four days later, the order to show cause was signed by the motion court on November 21, 2003. The order to show cause granted the ultimate relief requested therein, essentially appointing the former husband receiver of the plaintiff’s interest in the marital residence without her consent. The former husband, after the closing, failed to comply with an earlier stipulation in the matrimonial action requiring him to buy out his wife’s interest in the marital property for the sum of $95,000.

Notably, a copy of the order to show cause signed by the motion court was faxed to the appellant’s office at 3:54 P.M., approximately one hour after the time the closing was scheduled to occur. The appellant submitted opposition papers on the return date but, necessarily, after the closing had occurred. Under these circumstances, the appellant demonstrated the absence of any negligence on his part.

Result?  Case dismissed and affirmed against this attorney.  But, the case continues against two others under Judiciary Law 487.  Tomorrow, we’ll see how a motion to renew worked and how the Court of Appeals decision in Amalfitano v. Rosenberg alerted Supreme Court that a lot had changed.

Reading between the lines in Minkow v. Sanders, plaintiff was a difficult client.  To begin, he was her third attorney.  As a digression, defense attorneys in legal malpractice cases often tee off with the assertion that their client is the "third" or "fourth" attorney that plaintiff has had, and boot strap from that to the assertion that only a despicable person has more than one attorney.  While in the main this is unwarranted, in this particular case, it seems that the client was already about to be held in contempt for financial issues in the matrimonial action when defendant attorney took over.

Plaintiff seems to have had the money in this relationship, as there was eventually a pre-nup agreement found, and she had control of the bank accounts, and the kid’s money.  Needless to say, it turned sour, and Ms. Minkow ended up in jail over Christmas.  In matrimonial litigation, this is almost unheard of.

She sued and had her case dismissed by Justice Solomon in Supreme Court, New York County for the basic reasons:  failure to state a cause of action   Interestingly, Justice Solomon "summarily dismissed" several of the causes of action, and then dismissed the balance of them

The decision should be read for two reasons.  The first is a discussion of termination of the attorney-client relationship when "trust and confidence" has fled.  The second is Justice Solomon’s treatment of a cause of action for the attorney’s "inability to gain plaintiff’s compliance with a court order."  As Justice Solomon states:"A client’s wilful disregard of a court order cannot be attributed to her attorney who consistently advised compliance" no matter that it got her locked up over Christmas.

What do the parties really think in an attorney – fee dispute which totals in the $6 million range.  Most attorney fee disputes are less than $50,000,  In NY that qualifies for the court monitored Attorney-Fee dispute program  Here, in a startling NYLJ article Nate Raymond writes about the Debevoise & Plimpton cases against Candlewood Timber Group LLC.
 

Here are some of the issues in the case, from the NYLJ:  "Debevoise, which grossed $760.8 million in 2008, in its complaint said it submitted invoices and requests for payment to Candlewood for a year after trial wrapped in May 2006. Debevoise also attempted earlier this year to take Candlewood to arbitration.

But in March, Candlewood filed a petition to stay the proceedings, arguing its engagement letter with the firm did not cover arbitration.

Debevoise withdrew its notice to arbitrate in June, according to an affirmation in the proceedings in Debevoise & Plimpton LLP v. Candlewood Timber Development, LLC, 103982-2009. It then sued Candlewood and its principal, Jeffrey Kossak, on Nov. 12 (Debevoise & Plimpton LLP v. Candlewood Timber Group, LLC, 603479-2009).

According to the state court complaint, the fee dispute stems from Debevoise’s representation of Candlewood in litigation against Pan American Energy LLC, a joint venture of BP p.l.c. and Bridas Corporation, which had subsurface rights to extract oil and gas in Argentina on land owned by Candlewood.

In an interesting side note to the article, a "legal cost" expert tells the firm not to sue for $6 million in fees.  Aside from the astounding concept, we wonder about the advice:

"John Marquess, president of Legal Cost Control Inc. in Haddonfield, N.J., said he would counsel a firm not to sue for fees, even with a "significant" demand like the more than $6.37 million Debevoise is seeking.

"If I were advising any law firm, I would tell them suing a client over fees is a no-win situation," he said. "It’s going to get you adverse publicity you may or may not recover from. And if it went before a jury, juries hate lawyers."

Mr. Marquess said law firms usually attempt to resolve the disputes quietly to avoid litigation, which Debevoise tried to do."