in Williams v Omrani & Taub, P.C. ;2009 NY Slip Op 51832(U) ;Decided on August 25, 2009 ;Supreme Court, Kings County ;Rivera, J. rendered a tri-partate decision, reviewing a dismissal motion pursuant to CPLR 3211(a)(1)  (a)(5) and  (a)(7).  Reading like a thriller, first the court denies dismissal on documentary grounds by the unusual reasoning:
 

"On a motion to dismiss based upon documentary evidence, dismissal is only warranted if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Klein v Gutman, 12 AD3d 417, 418 [2004]; CPLR 3211 [a] [1]; see also Saxony Ice Co., Div. of Springfield Ice Co., Inc. v Ultimate Energy Rest. Corp., 27 AD3d 445 [2006]). A complaint containing factual claims that are flatly contradicted by documentary evidence should be dismissed (Well v Rambam, 300 AD2d 580, 581 [2002]; Kenneth R. v Roman Catholic Diocese of Brooklyn, 229 AD2d 159, 162 [1997], cert. denied 522 US 967 [1997]). However, in considering a motion to dismiss, the plaintiff’s pleadings must be given their most favorable intendment (Arrington v New York Times Co., 55 NY2d 433, 442 [1982]), and the plaintiff’s allegations which are contrary to the documentary evidence must be accepted (Scheller v Martabano, 177 AD2d 690 [1991]).

Here, defendants rely on documentary evidence that allegedly conclusively demonstrates that defendants’ representation of plaintiff ended prior to April 12, 2005 (rendering the instant action untimely). However, this court must accept the sworn statement of plaintiff’s current counsel, who stated that pursuant to a referral arrangement, Omrani (and, by extension, Fink), continued to represent plaintiff until December 20, 2007"
 

For the same reasons, the court denied plaintiff’s CPLR 3211(a)(5) motion on S/L grounds.

However, and contrary to this reader’s expectation as the decision was followed, the court dismissed under CPLR 3211(a)(7).

"The Second Department of the Appellate Division recently stated in Kluczka v Lecci (63 AD3d 796 [2009]) that:

"[i]n order to prevail in an action to recover damages for legal malpractice, a plaintiff must establish that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Malik v Beal, 54 AD3d 910, 911 [2008]; Carrasco v Pena & Kahn, 48 AD3d 395, 396 [2008]). To establish the element of causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages but for the attorney’s negligence (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 442; Wray v Mallilo & Grossman, 54 AD3d 328, 329 [2008]; Carrasco v Pena & Kahn, 48 AD3d at 396). The failure to demonstrate proximate cause requires dismissal of a legal malpractice action regardless of whether the attorney was negligent (see Leder v Spiegel, 31 AD3d 266, 267-268 [2006], affd 9 NY3d 836 [2007])" (id. at 797).

Here, plaintiff cannot show either that defendants failed to exercise reasonable attorney skill and knowledge or the requisite causation. First, although plaintiff conclusorily states that "defendants have offered no defense or explanation" for their failure to file the Reliance proof of claim, the court notes that there is in fact a defense and explanation—the failure of outgoing counsel Don Carlos Jr. to transfer the subject file to Omrani until after March 17, 2004. Indeed, given that Omrani (and, by extension, Fink) did not possess the file before December 31, 2003, it would have been difficult, if [*7]not impossible, for Omrani to file the subject proof of claim before the deadline. Thus, plaintiff has failed to plead facts that demonstrate defendants breached the duty of professional legal representation. "

This is part 3 of a series based on the case of ASTON BAKER,  -against- CHARLES SIMPSON, ESQ., WINDELS MARX LANE & MITTENDORF, LLP, STANLEY GALLANT, GALSTER CAPITAL LLC, GARLSTER MANAGEMENT CORP., ALLSTATE INSURANCE COMPANY, AND JP MORGAN CHASE BANK, N.A.,

Here the court discusses the "abstention" question, whether the court should permit state court actions to go on, or to remove them to the Bankruptcy court as a "core" issue.

"Appellant contends that, even if the bankruptcy court had jurisdiction over his claims, it should have abstained from hearing the state court action. Section 1334(c)(1) [*16] gives the district court the power to abstain from hearing civil proceedings arising under Title 11, or arising in or related to cases under Title 11 "in the interest of justice, or in the interest of comity with State courts or respect for State law." 28 U.S.C. § 1334(c)(1). This section "is informed by and interpreted according to ‘the principles developed under the judicial abstention doctrine,’" which impose on federal courts a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Norkin, 2006 U.S. Dist. LEXIS 14254, 2006 WL 839079, at *5 (citations omitted). Accordingly, federal courts "may abstain only for a few ‘extraordinary and narrow exceptions.’" Id. (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976)).

Courts often apply a twelve-factor test, or some variation of it, to decide whether to abstain from hearing a lawsuit related to a bankruptcy under Section 1334(c)(1). See, e.g., In re Bay Point Assocs., No. 07 Civ. 1492 (JS), 2008 U.S. Dist. LEXIS 108402, 2008 WL 822122, at *2-3 (E.D.N.Y. Mar. 19, 2008); In re Twin Labs. Inc., 300 B.R. 836, 841 (S.D.N.Y. 2003). The twelve factors are:
(1) the effect or lack thereof on the efficient administration of the estate if a Court [*17] recommends abstention, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than form of an asserted "core" proceeding, (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden [on] the court’s docket, (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties, (11) the existence of a right to a jury trial, and (12) the presence in the proceeding of nondebtor parties.
See In re Twin Labs. Inc., 300 B.R. at 841 (citations omitted). Here, these twelve factors do not favor discretionary abstention.

Most significantly, although appellant’s causes of action "are styled as New York State law claims, they turn largely on issues that [*18] are intertwined" with his bankruptcy, including the propriety of Simpson and Windel Marx’s advice regarding his bankruptcy proceedings. Norkin, 2006 U.S. Dist. LEXIS 14254, 2006 WL 839079, at *5. In Norkin, which also involved allegations of legal malpractice for advice rendered by a law firm during a debtor’s Title 11 proceedings, the court refused to exercise discretionary abstention because "[s]tate law issues do not predominate here," and where such issues did arise, "they are in the well settled areas of professional malpractice, negligence, and breach of fiduciary duty." Id. A similar conclusion is warranted here."

We reviewed this case in part yesterday.  Here is the balance of the case, ASTON BAKER, , -against- CHARLES SIMPSON, ESQ., WINDELS MARX LANE & MITTENDORF, LLP, STANLEY GALLANT, GALSTER CAPITAL LLC, GARLSTER MANAGEMENT CORP., ALLSTATE INSURANCE COMPANY, AND JP MORGAN CHASE BANK, N.A.,

Curiously, Footnote 3 seems to say that the entire case has been dismissed. ":FOOTNOTES

3 In addition to denying appellant’s motion to remand, the bankruptcy court also dismissed appellant’s case in its entirety. (See Tr. at 18:24-19:6.) Indeed, appellee JP Morgan Chase invites the court to consider on appeal whether the bankruptcy court properly dismissed the underlying action. However, Appellant does not challenge the merits of the bankruptcy court’s dismissal of the complaint, but rather limits his appeal to review of the bankruptcy court’s assertion of jurisdiction over this matter and its refusal to abstain from considering the same. Accordingly, the court need not address the merits of appellant’s substantive claims."

However: "Appellant contends that the bankruptcy court’s jurisdiction over his claims was circumscribed by the disposal of his estate. Once all the property has been disposed of, he argues, the Title 11 proceeding terminated, and, with it, the court’s original jurisdiction under Section 1334(a) over the instant case.

The court finds that the disposal of appellant’s estate is immaterial to the jurisdictional issue for two reasons. First, "a bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders, particularly when disputes arise over a bankruptcy plan of reorganization." In re Millenium Seacarriers, Inc., 419 F.3d 83, 96 (2d Cir. 2005) (internal quotation [*11] marks omitted). Second, the Title 11 case ends only when it is closed under Section 350(a) of Title 11, and not, as appellant argues, with disposition of the estate. See 11 U.S.C. § 350(a) (2006).

The question of whether the bankruptcy court has exclusive jurisdiction over appellant’s claims is similarly immaterial, as is appellant’s assertion that it is unlikely that his state court claims will have any conceivable effect on the bankruptcy case. For this court to uphold the exercise of jurisdiction, the bankruptcy court need not have exclusive jurisdiction under Section 1334(a), or find that appellant’s claims are "related to" his bankruptcy petition. As set forth below, the court finds that appellant’s claims are civil proceedings arising in a case under Title 11, and are thus subject to the bankruptcy court’s jurisdiction under Section 1334(b). 28 U.S.C. § 1334(b).

District courts in this circuit have found that "[a] matter ‘arises in’ [T]itle 11 when ‘the gravamen of the proceeding arises in the particular bankruptcy case and would have no existence outside of bankruptcy,’" even if the matter is not based on any right expressly created by Title 11. D.A. Elia Constr. Corp. v. Damon & Morey, LLP, 389 B.R. 314, 317 (W.D.N.Y. 2008) [*12] (citation omitted). Since claims arising out of services rendered in connection with a debtor’s bankruptcy proceeding "are inextricably connected to the bankruptcy proceeding," courts generally find "no bar, statutory, constitutional, or otherwise, to the [b]ankruptcy [c]ourt exercising jurisdiction" over such claims. In re SPI Commc’ns & Mktg., Inc., 114 B.R. at 18.

For instance, in D.A. Elia Construction Corp., a plaintiff asserted various claims against a law firm for failure to provide adequate legal representation in connection with a Title 11 petition and related proceedings, alleging, inter alia, legal malpractice and conversion of funds belonging to the bankruptcy estate. 389 B.R. at 317. The district court found that "there can be no doubt that all of [plaintiff’s] state law claims ‘arise in’ the bankruptcy proceeding within the meaning of 28 U.S.C. § 1334 . . . But for [the law firm’s] representation of [plaintiff] in the bankruptcy case, there would be no cause of action." Id.

Similarly, in Norkin v. DLA Piper Rudnick Gray Cary, LLP, a plaintiff sued a defendant law firm alleging legal malpractice and breach of fiduciary duty for advice rendered during his personal bankruptcy [*13] and the bankruptcy of a company that he owned and managed. 05 Civ. 9137 (DLC), 2006 U.S. Dist. LEXIS 14254, 2006 WL 839079 (S.D.N.Y. March 31, 2006). The district court upheld the exercise of jurisdiction over state law claims by a bankruptcy court, finding, inter alia, that because some of the claims "arise out of advice provided by [law firm] to [plaintiff] in his bankruptcy proceeding, they cannot be considered independent of that petition." 2006 U.S. Dist. LEXIS 14254, [WL] at *3.

Here too, the gravamen in each claim is that Simpson and Windels Marx provided substandard legal services in the course of representing appellant in his Title 11 and related legal proceedings. Appellant’s case, which asserts claims of legal malpractice, conversion, negligence, fraud and intentional misrepresentation, would have no existence but for the bankruptcy. The bankruptcy court appointed Simpson and Windels Marx as bankruptcy counsel, and appellant’s relationship with all appellees arose only in connection with his Title 11 proceeding. The Galster mortgage loans that appellant complains about were authorized and approved by the bankruptcy court, as were the allegedly fixed auction sales. Moreover, to the extent that Simpson made misrepresentations during [*14] a bankruptcy court hearing and fraudulently or negligently added certain tenants to his list of creditors, this claim is inseparable from the bankruptcy context. With respect to appellant’s claims concerning the collection and disbursement of insurance proceeds, appellees respond that the JP Morgan Chase account and insurance proceeds were handled pursuant to and consistent with bankruptcy court orders. (See Tr. 12:2-21; 18:2-5.) The alleged malpractice thus implicates the integrity of the entire bankruptcy process. As such, appellant’s claims "arise in" the Title 11 case, and Section 1334(b) clearly gives the bankruptcy court jurisdiction over them. See Elia Constr. Corp., 389 B.R. at 318.

Although the Second Circuit has not directly considered whether claims of professional malpractice based on services rendered pursuant to a Title 11 petition fall within Section 1334’s scope of jurisdiction, this court’s holding is consistent with the conclusions reached by other circuit courts addressing the issue. See, e.g., In re Seven Fields Dev. Corp., 505 F.3d 237, 259, 262 (3d Cir. 2007) (internal quotation marks omitted) (finding that state law "claims of professional malpractice . . . based [*15] on services provided during the bankruptcy, under the supervision of, and subject to the approval of, the bankruptcy court," are subject to the court’s Section 1334(b) "arising in" jurisdiction); In re V&M Mgmt., Inc., 321 F.3d 6, 7 (1st Cir. 2003) (where allegations of fraud, professional malpractice, and breach of fiduciary duties by legal counsel "wholly arise out of the . . . counsel’s performance of their duties with respect to the Debtor after the petition for bankruptcy was filed," such claims are subject to the court’s jurisdiction under Section 1334(b)); Grausz v. Bradford, 321 F.3d 467, 469 (4th Cir. 2003) (holding that the district court had bankruptcy jurisdiction over a professional malpractice action filed by a Title 11 debtor against the law firm that represented him in his bankruptcy case under Section 1334(b) "because the malpractice claim arose in the bankruptcy case"); see also In re Southmark Corp, 163 F.3d 925, 931 (5th Cir. 1999); In re Ferrante, 51 F.3d 1473, 1476 (9th Cir. 1995)."

When may plaintiff bring a state court action for legal malpractice and when may it be removed, as a "core" proceeding, to US Bankruptcy Court.  It’s an involved question, and ASTON BAKER,  -against- CHARLES SIMPSON, ESQ., WINDELS MARX LANE & MITTENDORF, LLP, STANLEY GALLANT, GALSTER CAPITAL LLC, GARLSTER MANAGEMENT CORP., ALLSTATE INSURANCE COMPANY, AND JP MORGAN CHASE BANK, N.A.,   08-CV-1855 (DLI);

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK;

2009 U.S. Dist. LEXIS 73098;August 18, 2009,  discusses this issue.

"On February 8, 2002, Simpson and Windels Marx, the law firm to which Simpson belonged, were appointed by the bankruptcy court as counsel for appellant and two additional entities for which appellant was the sole or controlling shareholder, in their jointly administered Title 11 cases. (See Order Authorizing Retention of Windels Marx Lane & Mittendorf [*3] as Attorney for Debtor-in-Possession, Dkt. # 20.) Appellant brings claims related to legal malpractice, conversion, negligence, fraud and intentional misrepresentation, based primarily on four incidents that occurred during the course of Simpson’s engagement as counsel in connection with appellant’s bankruptcy petition.

First, appellant independently found a broker that allegedly would refinance all his properties and net him enough money to pay off his creditors. On the advice of Simpson, appellant did not retain such broker, and, instead, refinanced through appellee Galster Capital LLC ("Galster"), whose services were procured by Simpson. The bankruptcy court issued three orders, dated April 17, 2003 (Dkt. # 142), June 4, 2004 (Dkt. # 207), and July 2, 2004 (Dkt. # 214), authorizing and approving mortgage loans from Galster to appellant. Appellant now claims that Galster misrepresented itself as a lender, and, after two years, failed to fund the loan as agreed, causing appellant to forgo offers from other prospective lenders, incur legal fees, and accrue interest on his debt.

Second, at the inception of the Title 11 case, during a status conference before the bankruptcy court, Simpson [*4] allegedly misrepresented that appellant was holding security deposits for the tenants at one of the buildings that formed part of appellant’s bankruptcy estate. Simpson then allegedly produced a document bearing appellant’s forged signature to substantiate said misrepresentation. As a result, all tenants were erroneously added to appellant’s list of creditors pursuant to Rule 1007-1 of the Eastern District of New York’s Local Bankruptcy Rules.

Third, Simpson allegedly arranged an auction sale of two of appellant’s commercial properties that resulted in winning bids by Simpson’s friends or affiliates. Although appellant alleges that Simpson arranged these sales without communicating to appellant his intent to proceed, the record shows that at least one of these sales was approved by the bankruptcy court. (See Order Granting Mot. to Sell Free and Clear of Liens Real Property located at 1801 Pitkin Avenue, Brooklyn, NY on April 23, 2002, Dkt. # 37.) After a prospective buyer moved to reopen the sale, the bankruptcy court issued an order on May 3, 2002 vacating the original sale and scheduling a new sale on notice. (See Decision and Order Granting Mot. to Vacate the Oral Decision of the [*5] Court on April 23, 2002, Approving the Sales of Pitkin Avenue Property & Forest Avenue Property, Dkt. # 52.) 1 The winning bids were for significantly higher amounts than those offered in the initial, allegedly fixed auction arranged by Simpson.

"Appellant contends that the bankruptcy court’s jurisdiction over his claims was circumscribed by the disposal of his estate. Once all the property has been disposed of, he argues, the Title 11 proceeding terminated, and, with it, the court’s original jurisdiction under Section 1334(a) over the instant case.

The court finds that the disposal of appellant’s estate is immaterial to the jurisdictional issue for two reasons. First, "a bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders, particularly when disputes arise over a bankruptcy plan of reorganization." In re Millenium Seacarriers, Inc., 419 F.3d 83, 96 (2d Cir. 2005) (internal quotation [*11] marks omitted). Second, the Title 11 case ends only when it is closed under Section 350(a) of Title 11, and not, as appellant argues, with disposition of the estate. See 11 U.S.C. § 350(a) (2006).

The question of whether the bankruptcy court has exclusive jurisdiction over appellant’s claims is similarly immaterial, as is appellant’s assertion that it is unlikely that his state court claims will have any conceivable effect on the bankruptcy case. For this court to uphold the exercise of jurisdiction, the bankruptcy court need not have exclusive jurisdiction under Section 1334(a), or find that appellant’s claims are "related to" his bankruptcy petition. As set forth below, the court finds that appellant’s claims are civil proceedings arising in a case under Title 11, and are thus subject to the bankruptcy court’s jurisdiction under Section 1334(b). 28 U.S.C. § 1334(b).

District courts in this circuit have found that "[a] matter ‘arises in’ [T]itle 11 when ‘the gravamen of the proceeding arises in the particular bankruptcy case and would have no existence outside of bankruptcy,’" even if the matter is not based on any right expressly created by Title 11. D.A. Elia Constr. Corp. v. Damon & Morey, LLP, 389 B.R. 314, 317 (W.D.N.Y. 2008) [*12] (citation omitted). Since claims arising out of services rendered in connection with a debtor’s bankruptcy proceeding "are inextricably connected to the bankruptcy proceeding," courts generally find "no bar, statutory, constitutional, or otherwise, to the [b]ankruptcy [c]ourt exercising jurisdiction" over such claims. In re SPI Commc’ns & Mktg., Inc., 114 B.R. at 18."
 

As we have reported before, sometimes legal malpractice cases arise by action of the plaintiff, and sometimes they arise after the attorney sues for legal fees.  Courts often take the later situation as a "reflexive" or "defensive" maneuver, and may not always believe that the client is genuinely prosecuting a legal malpractice case so much as avoiding paying a fee. 

In this case, it appears that the Appellate Division came down half-way between the two poles.  Bender Burrows & Rosenthal, LLP v Simon ;2009 NY Slip Op 06296 ;Decided on August 25, 2009 ; Appellate Division, First Department holds that plaintiff, who is defending a fee claim, is unable to prove legal malpractice, but has demonstrated a question of whether the law firm is aptly holding escrowed monies or not.

"Defendant’s first counterclaim for malpractice should have been dismissed since she failed to demonstrate that she would have succeeded on the merits of the underlying action for divorce but for plaintiff’s negligence (Maillet v Campbell, 280 AD2d 526, 527 [2001]). Defendant was not prejudiced by plaintiff’s mid-trial motion to withdraw. On defendant’s earlier appeal from the judgment of divorce (55 AD3d 477 [2008]), this Court found that the trial court appropriately exercised its discretion in granting a five-day adjournment rather than the longer one requested by defendant’s counsel since successor counsel had nearly a month to prepare for trial. Moreover, although this Court remanded the matter for recalculation of the parties’ respective child support obligations and a finding as to the cost of health insurance for defendant at the predivorce level of coverage, it found defendant’s arguments relating to the classification, valuation and distribution of property and the award of maintenance unavailing (id. at 478). Cruciata v Mainiero (31 AD3d 306 [2006]), which was decided on the specific facts of that case, is not to the contrary.

As to defendant’s second counterclaim seeking recovery of her escrow funds, the motion court aptly concluded that there are triable questions of fact as to what agreement, if any, the parties had reached as to the disposition of those funds. [*2]"

The New York Court of Appeals determined that a medical insurance provider has the right to intervene in a personal injury case to protect its right to subrogation and to assert  "lien" on the proceeds of the case.  In a well researched article, J. Michael Hayes writes:

"Recent developments have changed the way that lien law is applied given Arkansas Department of Health and Human Services v. Ahlborn, 126 S.Ct. 1752 (2006) and Fasso v. Doerr, MD, et al., 12 NY3d 80, 875 NYS2d 846 (2009). Medicare, Medicaid and Workers’ Compensation carriers claim they are entitled to full recovery of their expenses under the lien statutes. The reality is that recent decisions in Ahlborn and Fasso, combined with New York’s shift to comparative negligence and itemized verdicts since the 1970s, confirm that at best, they have a right of apportionment for their "subrogation" claims.

Whether the right is a lien or subrogation affects the relationships between the co-claimants and the attorney as well as his fees. If these constitute subrogation rights then the attorney is clearly representing two claimants, negotiating an aggregate settlement and taking a fee from each. A conflict arises because the attorney must reduce/assign part of his client’s recovery to the insurance carrier for medical expenses. Ethically, an attorney is barred from representing more than one party where there may be a lump sum award that has to be divided/allocated. "

For as long as there have been attorneys, it seems that there have been fee disputes.  Fee disputes and legal malpractice counterclaims go together like, well you fill in the simile…love and marriage, horse and carriage…

Here is a case from Nassau which illustrates that question of whether defendant counterclaminant has the right to a jury trial, when plaintiff elects to have a bench trial.

"The plaintiff also submits, essentially, that the defendant waived her right to serve a Demand for Jury pursuant to CPLR §4101, as plaintiff has asserted a cause of action for unjust enrichment, (equitable), along with plaintiff’s claim for legal fees, (law), and the defendant has asserted the affirmative defense of estoppel, (equitable), and a counterclaim sounding in breach of fiduciary duty and legal malpractice, (equitable and legal).

"A plaintiff cannot, by artful pleading, deprive a defendant of his constitutionally guaranteed right to a trial by jury by limiting his demand for relief to a declaration of rights instead of seeking whatever coercive relief would be appropriate in enforcing the rights thus established." (Gordon v. Continental Casualty Company, 91 AD2d 987). When the facts pleaded permit a judgment for a sum of money, the defendant’s jury demand must be honored under CPLR §4101 despite plaintiff’s framing his demand for relief in equity. (Id.) Where one cause of action seeks equity, and another law, the plaintiff may have waived its right to a jury trial, but the plaintiff cannot deprive defendant of its rights to a jury trial of all issues so triable. (L.C.J. Realty Corp. v. Back, 37 AD2d 840). An executor was held to be entitled to a jury trial on a legal malpractice claim even where the attorney fee proceeding was equitable. (Sackler v. Breed, Abbott & Morgan, 222 AD2d 9). In Behrins & Behrins, P.C. v. Chan, 15 AD3d 515, following a divorce action, the law firm that represented the wife brought an action against her seeking payment of outstanding attorney fees. The wife also brought a legal malpractice action against the firm and made a jury demand on both actions. The Second Department reversed the lower court’s decision that held that the wife was not entitled to a jury trial on such claims. The Court found that plaintiff’s action involved actions at law seeking money judgments, and thus the wife was entitled to a jury trial. (Id.) The Court also stated that although the jury may have to incidentally have to examine a prior equitable distribution award, it is irrelevant as the jury is not being called upon to change the prior distribution of the assets between the appellant and her former husband. (Id.)

Here, the defendant is entitled to a jury trial as the defendant has asserted a counterclaim sounding in malpractice, and the plaintiff’s action seeks a money judgment from the defendant in order to recoup its legal fees in connection with the plaintiff’s representation of the defendant in her divorce action.

In light of the foregoing, the plaintiff’s motion is denied."

Often, the only way plaintiff knows whether target attorney defendant has legal malpractice insurance is by the name of the attorneys who answer the complaint.  If they are attorneys who normally are retaied by legal malpractice insurance carriers, then plaintiff knows there is insurance.  If not, then there is trouble brewing.  What happens if the attorney simply is out of the picture, and completely refuses to answer any correspondence, and never notifies his carrier?

McCabe v St. Paul Fire & Mar. Ins. Co. ;2009 NY Slip Op 29341 ;Decided on August 19, 2009 ;Supreme Court, Erie County ;Nemoyer, J. is one such case.  "Factually speaking, the focus of the motion and cross motion is on the repeated efforts by plaintiffs to communicate with Fretz, the eventual communications by both Fretz and plaintiffs with St. Paul, and St. Paul’s responses to those communications. Apparently, plaintiffs’ first attempt to communicate with Fretz following his catastrophic neglect of their insurance claim came in late September 2006, after plaintiffs had consulted with attorney John J. Fromen for the purpose of engaging in such communication. Plaintiffs apparently do not contend that Fromen’s September 22, 2006 letter to Fretz constituted the making of a claim against Fretz, so this Court will not summarize that letter. It is enough to note that Fretz did not respond to Fromen’s entreaties to contact Fromen with regard to plaintiff’s matter. "

"The fundamental question is whether the instant policy insuring Fretz against liability for attorney malpractice is a "policy or contract insurance liability for injury to person," within the meaning of Insurance Law § 3420 (a). St. Paul says that it is not, relying on a decision of the Federal District Court in Sirignano v Chicago Ins. Co. (192 F Supp 2d 199, 206-207 [SDNY [*6]2002]). The Court cannot accept that contention for several reasons. First, Sirignano was concerned with the applicability to a malpractice insurance policy of Insurance Law § 3420 (d) — which pertains to the timeliness of a disclaimer by an insurer of a liability for "death or bodily injury" arising out of an "accident" — not the discernibly distinct provisions of section 3420 (a), which are by no means limited to "accident" insurance. The same is true with regard to various New York cases cited by St. Paul on this question on the applicability of section 3420 (see e.g. Doyle v Siddo, 54 AD3d 988, 989 [2d Dept 2008]; Iafalo v Nationwide Mut. Fire Ins. Co. 299 AD2d 925, 926-927 [4th Dept 2002]; Fairmont Funding Ltd. v Utica Mut. Ins. Co., 264 AD2d 581 [1st Dept 1999]). This case has nothing to do with section 3420 (d). "

"Having determined the applicability of Insurance Law § 3420 (a) (2), it remains for this Court to determine the validity of St. Paul’s disclaimer under the policy. St. Paul now contends that it validly disclaimed coverage under the policy on two grounds: first, that no claim was made during the policy period; and second, that no claim was reported to St. Paul during the policy period or the 60-day extension period. The problem for St. Paul is that only the second of those disclaimer grounds was articulated in St. Paul’s July 17, 2007 disclaimer letter to Fretz. The pertinent paragraph of the letter stated that St. Paul was denying Fretz any defense and indemnity in the malpractice action on the ground that "this Claim’ was neither reported to St. Paul during the Policy Period,’ nor was the Claim’ or your disability reported within the 60 days following the date of the St. Paul Policy’s" lapse. It is of course a fundamental principle of the law in this realm that an insurer’s attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer, and that a ground not raised in a disclaimer letter may not be later asserted by the insurer (see General Accident Ins. Co v Cirucci, 46 NY2d 862, 864 [1979]; City of Kingston, Harco Nat. Ins. Co., 46 AD3d 1320, 1321 [3d Dept 2007]; Benjamin Shapiro Realty Co. v Agric. Ins. Co., 287 AD2d 389 [1st Dept 2001]; see also Wraight v Exchange Ins. Co., 234 AD2d 916, 917-918 [4th Dept 1996] [held: where insurer disclaimed coverage based solely upon its insured’s failure to provide timely notice, insurer is subsequently estopped from raising the injured party’s allegedly untimely notice as a defense in the declaratory judgment action]). Indeed, St. Paul’s July 17, 2007 letter explicitly assumed, based on Doyle’s representations, that the claim was first made against the insured on January 2, 2007, within the policy period. The Court understands that St. Paul entertained that assumption without having seen the January 2, 2000 letter, but St. Paul’s own lack of reasonable investigation into the circumstances is not a ground for departing from the aforementioned principle that the insurer is strictly limited to those disclaimer grounds articulated in the letter of disclaimer (see 2540 Associates, Inc. v Assicurazioni Generali, S.p.A., 271 AD2d 282, 284 [1st Dept 2000] [held: "as a matter of policy, [*8]reasonable investigation is preferable to piecemeal disclaimers"]; see also DiGuglielmo v Travelers Property Cas., 6 AD3d 344, 346 [1st Dept 2004], lv denied 3 NY3d 608 [2004]). Contrary to St. Paul’s contention, enforcement of the rule that an insurer’s attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer does not involve the creation of coverage where none would otherwise exist. St. Paul’s belated attempt to supplement its disclaimer letter to Fretz by adding or resurrecting the "claim not timely made" disclaimer ground — an attempt not made until October 7, 2008, after the commencement of this declaratory judgment action by plaintiffs and indeed following the interposition of St. Paul’s answer and counterclaim asserting only that the malpractice claim had not been timely reported — cannot avail for obvious reasons, both procedural and substantive. "{