Plaintiff loses a commercial law case, and sues his attorneys for legal malpractice.  During discovery, while preparing responses to interrogatories, he discovers, and then sues over what he claims is a forged affidavit said to be prepared by the attorneys and unsuccessfully used in his case.  Worse he says, the affidavit contained inaccurate information which was the cause of the loss, and hence a sort of double malpractice.  Defendants say, its too late, and what kind of a cause of action is this, anyway?

In Shelly v. Mintz Levin Cohn Ferris Glovsky & Popeo PC we see Justice Emily Jane Goodman’s answer to these two questions.  Forgery is a civil cause of action, akin to fraud, but without some of the more onerous elements.  No "reliance" is necessary in a forgery case; it is "counterintuitive."

Forgery is "the fraudulent making of a writing to the prejudice of another’s rights, or the making malo animo of any written instrument for the purpose of fraud and deceit…."  It is subject to a 6 year from the making or two year from the reasonable discovery statute of limitations.

Attorney takes on case for client, and the job is to check whether client can erect a Walgreens in Brooklyn.  Attorney does research, and determines that the building and parking lot will be legal in that zoning.  Attorney, however, fails to check if any new laws have been passed by the NYC Council on zoning recently. Two weeks prior to the report, the Council had passed a law which made the parking lot illegal, and those changes were certified. 

$5 million in loans and construction pre-costs later, plaintiff cannot build the Walgreens,  Legal Malpractice law suit follows.  Will a restrictive retainer agreement be applicable ?  Is the attorney responsible for checking the up-to-date law?

In Santo Nostrand LLC v. Cozen O’Connor  602415/08 we see the answer, at least at the pleading stage.  Plaintiff states a cause of action.  The importance of a parking lot to plaintiff in attempting to contract with Walgreens was known to defendants, and it was their obligation to be up to date on the law.  The case continues.

Legal representation in even simple matters can lead to unintended consequences.  As an Example  H & J Restaurant v, A & J Grand Enterprises and Leigh, 2009 Slip OP 21544, authored by Justice Edmead, demonstrates how a simple ministerial mistake can end up with a potential $ 400,000 loss, with later judgment against the attorney. 

It’s a simple transaction, A buys a restaurant from B.  As might be expected, Seller exaggerates the sales, or hides underpayment of taxes.  Since these commercial transactions have taken place since time immemorial, there are safeguards and protections.  Buyer can take the business free of personal liability if it notifies the tax authorities 10 days prior to the sale, in which case the tax authorities have 5 days to assert tax liability.  Should it happen, buyer can then back out.

Here, the notification was not made within 10 days, and several months later the tax authorities asserted personal liability to buyer in the neighborhood of $ 400,000.  Seller is in default, and no where to be found.

What is the lesson here?  Lesson 1:  Legal malpractice is everywhere lawyers represent clients.  Lesson 2:  Know the subject matter of your area of law and don’t make simple transactions difficult.  Lesson 3:  Review lesson 2.

Today we look at a second legal malpractice motion decided this week by Justice Emily Jane Goodman in Supreme Court, New York County.  This case involves a divorce action between a US husband and a Czech wife, with immigration and fraud elements mixed in.  On top of the international aspects of the case, Justice Goodman upheld [in a motion to dismiss] the viability of a Judicary Law 487 claim.

 IN Koch v. Sheresky, Aronson & Mayersky,  2009 NYSlip Op 31520 (u), the claim is that husband left the Czech Republic and his marriage to her, after adopting her son, and commenced a marital action in NY.  In that marital action he claimed that there were no children of the marriage, and that significant commercial assets were marital property, rather than being subject to partnership agreements.In the case plaintiff-wife alleges that her attorneys failed to challenge subject matter as well as personal jurisdiction issues, and withdrew without resolving partnership/business interests. More interesting is the Judiciary Law 487 claim against the Husband’s attorneys [with whom she had no privity] over alleged immigrration advice which led to her not being able to come to the US to contest the divorce proceedings.

An inquest followed, and not until much later was the default judgment vacated. By then all the business assets had vaporized. Husband is now himself absent and in default, and the legal malpractice action, after mixed results in the motions to dismss, continues.
 

In Supreme Court, New York County, Justice Emily Jane Goodman issued not one but two legal malpractice decisions this week.  We’ll cover Koch tomorrow.  Today, Esterman v. Schwartz, New York Slip Op. 2009-31523.

Plaintiffs are a subset of a group of owners of a waterfront Staten island development which suffered retaining wall damage in a storm.  The group was divided into waterfront owners and inland owners, and they did not agree on who had to pay for the retaining wall to be fixed.  Plaintiff’s group retained defendant attorneys, and in the end, they were the only group that did not sue the City and other defendants who constructed the wall which failed.

This case is interesting for three reasons.  The first is a question of how parol evidence may affect a limited retainer agreement between attorney and client.  The retainer agreement was only for investigation, not litigation.  The claim was that the attorneys did not file a notice of claim and did not move for permission to file a late notice of claim, although the unaffected waterfront owners who hired other counsel were successful in bringing suit.

Justice Goodman held that in the absence of a merger clause in the retainer agreement [ e.g.,"this is the complete agreement and may not be changed or altered without express written agreement"] parol evidence that the attorneys orally agreed to bring suit was permissible.

The second area of interest is the "but for" aspect of the case.  As do all defendants, here they argued that there is no evidence that plaintiffs would be successful against the city.  Justice Goodman made an interesting observation.  If there is no possible merit to such a claim against the City, why did the attorneys send a contingent retainer agreement which called for them to bring such an action.  That the retainer remained unsigned is of no moment.

Lastly, the court gruffly laid aside questions of sanctions. 

Here, in GURVEY,, v. COWAN, LIEBOWITZ & LATMAN, PC., CLEAR CHANNEL COMMUNICATIONS, INC., INSTANTLIVE CONCERTS, LLC, LIVE NATION, INC., NEXTICKETING, INC. DALE HEAD, STEVE SIMON, and DOES I-VIII, INCLUSIVE, ; 06 Civ. 1202  UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 34839; 2009-1 Trade Cas. (CCH) P76,623; we see a unique combination of legal malpractice claims, cliams of "passing off", Lahham Act claims and general conversion causes of action.  Plaintiff, who was of counsel to Cowan, brought a new ticketing/management/sales "invention" to the law firm, and it was eventually filed with the Patent office.  Beyond that,Phish is a part of it all.

"At that time, CLL agreed to represent the Plaintiff before the US Patent and Trademark office ("USPTO") to file Provisional Patent Applications ("PPA"s) for inventions developed by Plaintiff prior to joining CLL. (TAC PP28, 33).

Plaintiff’s inventions included business plans to edit, package and distribute live recordings of live music events, as well as electronic ticketing methods related to these recordings. (TAC PP 28, 33.)

Shortly after beginning at CLL, Plaintiff presented her projects, business plans, and inventions at the firm’s monthly partners’ conference. (TAC P34).

After the meeting a CLL [*3] Partner told Plaintiff that the her business plans would be of significant interest to the firm’s client CCC. (TAC P36). This same CLL Partner also told Plaintiff that he preferred to have her as a client of CLL rather than as Of Counsel. (TAC P37.)

In early May 2002, Plaintiff was notified that she would no longer be employed Of Counsel, but that CLL continued to have interest in the subject matter of her patents and would file the Plaintiff’s PPA’s before the USPTO. (TAC P43). On May 22, 2002 and May 24, 2002, CLL filed two patents with the USPTO naming the plaintiff as sole inventor and CLL as attorneys of record. (TAC P44).

In August 2002, Plaintiff returned from a business trip to find that she had been locked out of her office. (TAC P47)

On or about February 16, 2003, the Plaintiff received notification from the USPTO that CLL had withdrawn as the attorney on one of her patents because of a conflict of interest. (TAC P50).

In March 2003, the CCC affiliated entity InstantLive posted ads/statements on their website announcing a new program that would allow concert-goers to purchase its recordings. (TAC P55). On May 5, 2003, The New York Times published an article describing InstantLive. [*4] Plaintiff alleges that this description mirrored her business models for the onsite distribution of live recordings at concerts. (Band members of Phish were also interviewed for the article and identified their interest in this new product. (TAC P52). A member of Phish is married to a CLL attorney.)
 

"Here, Plaintiff offers only vague and non-actionable challenges to CLL’s legal representation. Plaintiff first pleads that CLL "failed to protect and safeguard her trade secrets." TAC P120(1). This allegation appears to refer either to the presence of non-attorney CLL employees at the initial presentation of Plaintiff’s inventions or to the misappropriation at the heart of Plaintiff’s TAC. However, neither instance is premised on anything more than speculation, and neither presents a challenge to the actual quality of CLL’s legal representation Plaintiff also alleges that CLL "fail[ed] to properly advise [her] with respect to the opportunities for commercial exploitation of [her] [*20] inventions and trade secrets" (TAC P120(2)). This allegation again does not address CLL’s legal representation and merely challenges the "selection of one among several reasonable courses." Finally, Plaintiff alleges that CLL failed to eliminate a conflict of interest to its representation of Plaintiff TAC PP120(3) and (4). Because this allegation includes no detail, even in speculation, as to the supposed conflict, the allegation does not provide a basis for a malpractice claim."
 

In Boglia v Greenberg ; 2009 NY Slip Op 05278 ; Decided on June 23, 2009 ; Appellate Division, Second Department  wee see a successful opposition to summary judgment based upon a claim of failure to report a settlement  offer to plaintiff.
 

"To sustain a cause of action alleging legal malpractice, a plaintiff must establish that the attorney "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession," and that the attorney’s breach of this duty proximately caused the plaintiff actual and ascertainable damages (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442, quoting McCoy v Feinman, 99 NY2d 295, 301-302; see Bauza v Livington, 40 AD3d 791, 792-793; Magnacoustics, Inc. v Ostrolenk, Faber, Gerb & Soffen, 303 AD2d 561, 562). To obtain summary judgment dismissing a complaint in an action to recover damages for legal malpractice, a defendant must demonstrate that the plaintiff is unable to prove at least one of the essential elements of its legal malpractice cause of action (see Kotzian v McCarthy, 36 AD3d 863, 863; Fasanella v Levy, 27 AD3d 616, 616).

However, the Supreme Court should have denied that branch of the defendants’ cross motion which was for summary judgment dismissing the second cause of action, alleging legal malpractice based upon their alleged failure to convey her former husband’s $250,000 settlement offer to her, as triable issues of fact exist regarding whether the defendants failed to convey the settlement offer to the plaintiff and whether the plaintiff would have accepted that offer (cf. Bauza v Livington, 40 AD3d at 793). "

There are two traps for the unwary legal malpractice litigant in Bankruptcy Court.  One is the failure to list a potential or actual legal malpractice claim in the schedules, depriving the emergent litigant from bringing a legal malpractice case later.  A second trap is the attorney fee hearing, which if it allows fees to the attorney may insulate that attorney from a later legal malpractice case.

Here is an example where there is no res judicata. In PENTHOUSE MEDIA GROUP, INC.,  – against – PACHULSKI STANG ZIEHL & JONES LLP, UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 46617; June 2, 2009, Decided  we see:
 

"Even when all of the elements of res judicata are satisfied, a malpractice claim remains viable unless a party "could and should have brought [it] in the former proceeding." 40 "In this context, important factors in this analysis include whether the fee hearing [*12] was an adversary proceeding or contested matter, the nexus between the order awarding [] fees and the claims now being asserted, and ‘the amount of time that has elapsed since the case commenced.’" 41 Such a determination depends on "whether and to what extent [the party] had actual or imputed awareness prior to the fee hearing of a real potential for claims . . . and whether the bankruptcy court possesse[s] the procedural mechanisms that . . . allow [the party] to assert such claims." 42

40 In re Intelogic Trace, Inc., 200 F.3d 382, 388 (5th Cir. 2000). Accord EDP Med. Computer Sys., Inc. v. United States, 480 F.3d 621 (2d Cir. 2007) HN8("Under the doctrine of res judicata, or claim preclusion, ‘[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.’") (quoting St. Pierre v. Dyer, 208 F.3d 394, 399 (2d Cir. 2000) (emphasis added)); Sure-Snap Corp. v. State Street Bank & Trust Co., 948 F.2d 869, 875 (2d Cir. 1991) (finding that a claim for tortious infliction of emotional distress against creditors should have been brought as part of a prior bankruptcy proceeding and was therefore [*13] barred by res judicata).

41 In re Intelogic, 200 F.3d at 388 (quoting Matter of Howe, 913 F.2d 1138, 1147 n.28 (5th Cir. 1990)).

42 Id.

For the reasons discussed above, the bankruptcy court’s Order granting Pachulski’s motion for summary judgment is reversed. This case shall be remanded to the United States Bankruptcy Court for the Southern [*25] District of New York for actions consistent with this opinion. The Clerk of the Court is directed to close this case."