Plaintiff has a right to sue target attorney, and then, for strategic reasons, agrees to put the case aside for the time being.  Plaintiff and target attorney reach a stand-still agreement, but the question of tolling or abatement of  the statute of limitations remains.  How is the statute of limitations calculated in this situation?

In  CMI Capital Mkt. Inv., LLC v Buchanan Ingersoll & Rooney P.C., 2009 NY Slip Op 31708(u) we see Justice Tolub’s definitions and answer.  In that case, the statute of limitations was tolled, not abated.  Tolling is the suspension of the running of a statute for a period of time.  Abatement is the ending of the statute, allowing for it to start running again, from the beginning.

Both parties wanted to "temporarily suspend the running of the statute to await the outcome of [other] litigation."  Abatement would "nullify the period of the statute of limitations and for it to run anew at the expiration of the parties agreement."

The court then goes on to set forth how one decides whether an agreement is ambiguous:

"Despite CMI’s best arguments, contractual language does not become ambiguous simply because the parties to the litigation argue different interpretations. Riverside S. Planning Corp.,60 AD3d 61."

Defendant hired plaintiff to represent him in a Federal Court law suit over NYC placard holders parking on sidewalks and curbs in front of his commercial establishments, depriving defendant of use of his properties.  He retained plaintiff who started the Federal law suit, and was attorney until a settlement conference.  Defendant’s story is that he was so taken aback by the negligence of plaintiff, that he settled the case for $ 2,125,000 against the City.

We are amazed that the case settled at all, but confess not to have seen anything by Justice Gische’s decision in Bellinson Law LLC. v. Iannucci.  Justice Gische found enough in the motion to deny the attorney’s dismissal request.  While the decision does not discuss the shortcomings in any sort of detail, it does give a good blackletter recitation of the standard for a motion to dismiss.

Defendant was required to place the sum of $ 376,000 in escrow pending the outcome of the case.

In MICHAEL S. JOHNSON, DONNA DYMKOWSKI, PATRICIA LONG-CORREA, , –against- NEXTEL COMMUNICATIONS, INC.,  LEEDS, MORELLI & BROWN, P.C.,  , which ws reviewed on Friday we see more of a clutch of definitions which are quite useful:

Breach of Contract:  To state a claim of breach of contract, the plaintiff must establish 1) the formation of a contract between the plaintiff and defendant, 2) performance by the plaintiff, 3) failure by the defendant to perform, and 4) resulting damages. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (citing Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996); Furia v. Furia, 116 A.D.2d 694, 498 N.Y.S.2d 12, 13 (2nd Dep’t 1986).

To state a claim of breach of contract, the plaintiff must establish 1) the formation of a contract between the plaintiff and defendant, 2) performance by the plaintiff, 3) failure by the defendant to perform, and 4) resulting damages. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (citing Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996); Furia v. Furia, 116 A.D.2d 694, 498 N.Y.S.2d 12, 13 (2nd Dep’t 1986).
 

Common Law Fraud:, the plaintiff must show that the defendant (1) made a material false representation or omission of an existing fact; (2) defendant made such false representation with knowledge of its falsity; (3) with the intent to defraud; (4) which plaintiffs justifiably relied upon to their detriment. Compudyne Corp. v. Shane, 453 F. Supp. 2d 807, 831 (S.D.N.Y. 2006) (citing Kline v. Taukpoint Realty Corp., 302 A.D.2d 433, 754 N.Y.S.2d 899 (2nd Dep’t 2003)); Century Pacific, Inc. v. Hilton Hotels Corp., 528 F. Supp. 2d 206, 217 (S.D.N.Y. 2007) (citing PPI Enters., Inc. v. Del Monte Foods Co., No. 99 Civ. 3794, 2003 U.S. Dist. LEXIS 16006, 2003 WL 22118977, at * 19 (S.D.N.Y. Sept. 11, 2003)). Additionally, in the complaint, the plaintiff must specify the particulars of the alleged [*20] fraud such as the misleading statements along with the speaker, time, place, individuals involved, and specific conduct at issue. Sullivan v. Kodsi, 373 F. Supp. 2d 302, 306 (S.D.N.Y. 2005) (citing United Feature Syndicate, Inc. v. Miller Features Syndicate, Inc., 216 F. Supp. 2d 198, 221 (S.D.N.Y. 2002)); Dover Ltd. V. A.B. Watley, Inc., 423 F. Supp. 2d 303, 317 (S.D.N.Y. 2006) (citing Acito v. IMCERA Group, Inc., 47 F.3d 47, 51 (2d Cir. 1995)).
 

Legal Malpractice:   the plaintiff must show that the attorney acted negligently, such negligence was the proximate cause of the loss sustained, and the loss sustained is actual and ascertainable. Mega Group, Inc. v. Pechenik & Curro, P.C., 32 A.D.3d 584, 819 N.Y.S.2d 796, 798 (3rd Dep’t 2006) (citing Ehlinger v. Ruberti, Girvin & Ferlazzo, 304 A.D.2d 925, 758 N.Y.S.2d 195 (3rd Dep’t 2003)); Flutie Bros. v. Hayes, No. 04 Civ. 4187, 2006 U.S. Dist. LEXIS 31379, 2006 WL 1379594, at *5 (S.D.N.Y. May 18, 2006) (citation omitted). To qualify as negligence, the conduct of the lawyer [*22] must fall below "the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession." Achtman v. Kirby McInerney & Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006) (citing Grago v. Robertson, 49 A.D.2d 645, 370 N.Y.S.2d 255 (3rd Dep’t 1975). To adequately plead causation, the plaintiff must show that "but for" the attorney’s negligence "what would have been a favorable outcome was an unfavorable outcome." Flutie Bros., 2006 U.S. Dist. LEXIS 31379, 2006 WL 1379594, at *5; Even Street Productions, Ltd. v. Shkat Arrow Hafer & Weber, LLP, No. 05 Civ. 3834, 2008 U.S. Dist. LEXIS 42397, 2008 WL 2224297, at *3 (S.D.N.Y. 2008) (citing D’Jamoos v. Griffith, No. 00 Civ. 1361, 2001 U.S. Dist. LEXIS 17595, 2001 WL 1328592, at *5 (E.D.N.Y. Aug. 1, 2001)).
 

Conversion:  conversion is the unauthorized dominion over property by the defendant that interferes with the plaintiff’s superior right of possession. U.S. v. New York State Div. Of Lottery, No. 92 Civ. 9001, 2007 WL 1703656, at *4 (S.D.N.Y. Mar. 13, 2007); see Zendler Const. Co. v. First Adjustment Group, Inc., 59 A.D.3d 439, 873 N.Y.S.2d 134, 2009 WL 260905, at *1 (2nd Dep’t 2009). To establish a conversion claim, the plaintiff must show: (1) a specific identifiable thing is the subject of the conversion claim; (2) prior to the conversion plaintiff retained ownership or [*26] possession of the property; (3) exercise of unauthorized dominion by the defendant was to the exclusion of the plaintiff’s rights. Moses v. Martin, 360 F. Supp. 2d 533, 541 (S.D.N.Y. 2004).
 

This case presents a most unusual fee arrangement and litigation strategy in which the attorneys took on a large number of discrimination cases against a single employer, fashioned a reverse payment strategy for themselves and then settled a large number of discrimination cases through arbitration and other ADR means.  Was this malpractice? 

In MICHAEL S. JOHNSON, DONNA DYMKOWSKI, PATRICIA LONG-CORREA, , –against- NEXTEL COMMUNICATIONS, INC.,  LEEDS, MORELLI & BROWN, P.C., ;07 CV 8473 (GBD); UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 35137;March 31, 2009,  we see a longish explanation of how the attorneys adequately advised their clients and why there was no conflict.  This case is notable for its definitions.

Breach of Fiduciary Duty:  To state a claim for breach of fiduciary duty in New York, 3 "plaintiff must allege three elements: (1) the existence of fiduciary relationship; (2) knowing breach of a duty that relationship imposes; and (3) damages suffered." Nay ex. rel. Thiele v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 05 Civ. 10264, 2006 U.S. Dist. LEXIS 52074, 2006 WL 2109467, at *6 (S.D.N.Y. July 25, 2006) [*10] (quoting Carruthers v. Flaum, 388 F. Supp. 2d 360, 380 (S.D.N.Y. 2005)) (internal quotation marks omitted).
 

Common Law Fraud: In New York, to establish common law fraud, the plaintiff must show that the defendant (1) made a material false representation or omission of an existing fact; (2) defendant made such false representation with knowledge of its falsity; (3) with the intent to defraud; (4) which plaintiffs justifiably relied upon to their detriment. Compudyne Corp. v. Shane, 453 F. Supp. 2d 807, 831 (S.D.N.Y. 2006) (citing Kline v. Taukpoint Realty Corp., 302 A.D.2d 433, 754 N.Y.S.2d 899 (2nd Dep’t 2003)); Century Pacific, Inc. v. Hilton Hotels Corp., 528 F. Supp. 2d 206, 217 (S.D.N.Y. 2007) (citing PPI Enters., Inc. v. Del Monte Foods Co., No. 99 Civ. 3794, 2003 U.S. Dist. LEXIS 16006, 2003 WL 22118977, at * 19 (S.D.N.Y. Sept. 11, 2003)). Additionally, in the complaint, the plaintiff must specify the particulars of the alleged [*20] fraud such as the misleading statements along with the speaker, time, place, individuals involved, and specific conduct at issue. Sullivan v. Kodsi, 373 F. Supp. 2d 302, 306 (S.D.N.Y. 2005) (citing United Feature Syndicate, Inc. v. Miller Features Syndicate, Inc., 216 F. Supp. 2d 198, 221 (S.D.N.Y. 2002)); Dover Ltd. V. A.B. Watley, Inc., 423 F. Supp. 2d 303, 317 (S.D.N.Y. 2006) (citing Acito v. IMCERA Group, Inc., 47 F.3d 47, 51 (2d Cir. 1995)).
 

In this highly complicated case, COBALT MULTIFAMILY INVESTORS I, LLC, , -against- MARK A. SHAPIRO, et al., Defendants.;06 Civ. 6468 (KMW) (MHD);UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 60481 we see what may turn out to be a blueprint for a legal malpractice niche.  In this case a receiver brings legal malpractice actions against the attorneys for a situation in which "The Complaint alleges that Mark A. Shapiro, Irving J. Stitsky, and William B. Foster (collectively, "Individual Defendants" or "managers") engaged in a massive fraud on the investing public by founding the Cobalt entities and making egregious misrepresentations in order to persuade members of the public to invest millions of dollars in Cobalt. 2 In the written materials disseminated to potential and actual investors, Individual Defendants allegedly misrepresented: (1) their personal and professional backgrounds, such as failing to disclose their past criminal histories; (2) Stitsky and Foster’s involvement in Cobalt; (3) their plans for [*4] the investors’ funds; and (4) the nature and scope of Cobalt’s property holdings. Individual Defendants allegedly appropriated the majority of the funds invested in Cobalt for their own personal use."

This case has already been to a magistrate’s hearing, a decision by Judge Kimba Wood, to the 2d Circuit, and now back.  Turning in large part on the Waggoner rule, the question before the court was whether the receiver had standing to sue on behalf of the corporation, or whether the receiver was divested of standing based upon the acts of the managers of the corporation.

"The Complaint alleges that all of Law Firm Defendants assisted the Individual Defendants in committing investor fraud, and in subsequently looting the Cobalt entities of corporate assets. Law Firm Defendants allegedly: (1) approved documents that they should have known contained material misrepresentations; (2) assisted the Individual Defendants in siphoning corporate funds into the Individual Defendants’ bank accounts; and (3) helped conceal the Individual Defendants’ criminal activities from both investors and law enforcement."
 

We will discuss this rule in upcoming posts.

In ST. PAUL FIRE & MARINE INSURANCE COMPANY, v.SLEDJESKI & TIERNEY, PLLC,;  No 08-CV-5184 (JFB) (ETB);  UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK; 2009 U.S. Dist. LEXIS 61393; July 17, 2009, Decided  we see an excellent discussion of the standard for a 12(b)(6) motion in this post-Iqbal world, as well as a discussion of legal malpractice insurance coverage for defendants. 
 

Here, the insurance company for defendant attorneys wishes to disclaim coverage on the basis of lack of notice.  So far, they are succeeding.  The court denied a 12(b)(6) motion with a fulsome discussion of the new standards there.

The facts are simple:  "Candice Nelson retained that firm to represent her and the Nelson estate for recovery of damages resulting from the death of her husband, Jeffrey Nelson, in a July 26, 2003 motor vehicle accident. (Compl. P 16.) The firm of Michael T. Clifford & Associates thereafter dissolved, and S&T assumed the representation of Candice Nelson and the Nelson estate. (Compl. PP 17-18.) The applicable statute of limitations for recovery of damages for the wrongful death of Jeffrey Nelson expired on July 26, 2005, two years after the death. (Compl. P 19.) On July 26, 2005, S&T filed a summons and complaint in the Supreme Court, Suffolk County, captioned Candice Nelson as proposed Administratrix for the Estate of Jeffrey Nelson, and Candice Nelson, individually, v. Bonnie A. Rubin and Maier A. Rubin (hereinafter, "the wrongful death action"). "

"Prior to the filing of the malpractice action, in October 2007, Tierney mailed a letter to S&T’s broker, which St. Paul received on November 8, 2007, regarding the alleged error that could potentially lead to the legal malpractice action" 

Notice, rather than occurrence [service of the malpractice complaint] is important,  "Despite defendants’ insistence that the policy is a "claims-made," as opposed to "occurrence-based" policy, discussed in more detail infra, that fact does not change the analysis; although the general rule of a claims-made policy may be that coverage is triggered upon filing of a claim or suit against an insured and/or notice to the insurer thereof, that does [*15] not mean that the potential claim provision cannot provide for an earlier policy period under certain circumstances. It also does not mean that all claims filed during that period are automatically covered by the policy, as then any exclusion policy would be meaningless, and it is clear under New York law that the policy should be interpreted to give meaning and effect to all of the provisions, if possible."

Fraud is often alleged in legal malpractice cases, for one of several reasons.  One common reason is for a longer statute of limitations, 6 years rather than 3.  For as long as there has been a different statute of limitations in fraud and tort, this tension has existed.  After the NY legislature enacted CPLR 214(6) in reaction to a Court of Appeals decision in Santulli v. Englert, 78 NY2d 700 (1992), the tension escalated.  CPLR 214(6) determined that there was a 3 year statute whether the theory of liability is described in tort or fraud, so long as it is for professional work done by non-medical professionals.

A second reason is that the behavior feels more like fraud than malpractice, and the temptation is to plead and describe it as a misrepresentation type of wrong rather than a departure type of wrong.  However, the fraud must be more than a mere variant of the malpractice, and it must be more than the hiding of malpractice.

Here, in Reichenbaum v Cilmi ;2009 NY Slip Op 05954 ;Decided on July 21, 2009 ;Appellate Division, Second Department we see one description of the issue:
 

"The factual allegations in support of the cause of action to recover damages for fraud fail to meet the heightened pleading requirement of CPLR 3016(b) (see Kline v Taukpoint Realty Corp., 302 AD2d 433) and, in any event, the "mere failure to disclose malpractice does not give rise to a cause of action alleging fraud or deceit separate from the underlying malpractice cause of action" (Ferdinand v Crecca & Blair, 5 AD3d 538, 539). "
 

When does the statute of limitations start to run in legal malpractice?  Is it on the day that former attorneys are "substituted out" or perhaps on the day that successor counsel sign a retainer agreement?  One answer is found in Fur Online v. Rivkin Radler, LLP, Supreme Court, New York County, Index No. 113292/08. 

There, Justice Friedman determines that CPLR 214(6) applies, and that the rule in Matter of Kliment, 3 NY3d 535 (2004) is illustrative.  Where the "underlying complaint is one which essentially claims that there was a failure to utilize reasonable care or where acts of omission or negligence are alleged or claimed, the statute of limitations shall be three years if the case comes within the purview of CPLR Section 214(6) regardless of whether the theory is based in tort or in breach of contract."

Here, the decision illustrates the problems inherent.  In a US District Court case, Judge John G. Koeltl so ordered a letter application to be relieved as counsel on September 14, 2005.  The attorney-client relationship ended on that day.  One Roberta Ashkin purportedly took over the case on October 14, 2005, but this "does not show that plaintiff was continuously represented by defendant up until that date."

Result?  Case dismissed.