Attorneys deal in areas of well settled law and in areas of "unsettled law."  Clients have problems or issues which exist, no matter how settled the law is in that area.  Attorneys are held to a standard of reasonable care in all aspects of their representation.  How does one square these contradictory settings?

An answer is given in HNH Intl., Ltd. v Pryor Cashman Sherman & Flynn LLP ; 2009 NY Slip Op 04964 ; Decided on June 18, 2009 ;Appellate Division, First Department .
 

"Plaintiffs allege that defendant, a law firm, incorrectly advised them concerning the early 20th century sound recordings they proposed to re-engineer, re-master and distribute as CDs. After the CDs had been manufactured and distributed, plaintiffs were sued and found liable for common-law copyright infringement.

The court dismissed the legal malpractice complaint, pursuant to CPLR 3211(a)(1), based on documentary evidence from which it concluded that the state of the law at the time the advice was given was unsettled and defendants therefore had not " failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession’" at that time (quoting Darby & Darby v VSI Intl., 95 NY2d 308, 313 [2000]).

We conclude, however, that the state of the law was not so unsettled at the time the advice was given as to bar as a matter of law plaintiffs’ claim that a reasonably skilled attorney would have advised that the CDs were or might be entitled to common-law copyright protection and would not have advised that the release of the CDs would not result in any copyright liability. Although defendant maintains that it did advise plaintiffs of the possibility of common-law liability and did not advise plaintiffs that the release of the CDs would not result in any copyright liability, we must accept the facts alleged in the complaint as true and accord plaintiffs the benefit of every possible
favorable inference (Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & [*2]Steiner, 96 NY2d 300, 303 [2001]). "
 

In Weksler v Kane Kessler, P.C. ;2009 NY Slip Op 04957 ;Decided on June 16, 2009 ;Appellate Division, First Department  we see the fatal duo of lack of privity and lack of proximity.  The short story is that Plaintiff, while married to decedent was promised a life-long annuity of $ 4000 per month, said to come from the adult sons, so long as she remained married until decedent’s death.  He went into the hospital, came out and filed for divorce.  The sons never funded the annuity.  Plaintiff sues the decedent’s attorney who prepared the plan and the sons, and loses all around.
 

"As to the claim for legal malpractice, there was never an attorney-client relationship between plaintiff and the firm. Even assuming plaintiff had been the firm’s client, she failed to show how such alleged malpractice caused her injury, as the agreement simply effectuated the intent of the parties, i.e., to provide plaintiff with an annuity during her lifetime subject to the stated terms and conditions (see Finova Capital Corp. v Berger, 18 AD3d 256 [2005]; cf. Mandel, Resnik & Kaiser, P.C. v E.I. Elecs., Inc., 41 AD3d 386 [2007]).

Plaintiff’s remaining causes of action against the firm, for negligent misrepresention and tortious interference, are dismissed as redundant of the legal malpractice claim (see Shwartz v Olshan Grundman Frome & Rosenzweig, 302 AD2d 193 [2003]; Reyes v Leuzzi, 2005 NY Misc LEXIS 2914, *3, 2005 WL 3501578, *4; cf. William Kaufman Org. v Graham & James, 269 AD2d 171 [2000]). Finally, although such affirmative relief was not sought, the court did not err in denying plaintiff an opportunity to amend her complaint for a second time, as the proposed speculative allegations failed to establish any viable cause of action (see Davis & Davis v Morson, 286 AD2d 584 [2001]). "

The short answer is when there is spoliation.  Spoliation is the intentional or negligent destruction of evidence.  It may take place prior to, or during litigation, and it always deprives one side of the use of otherwise admissible evidence. 

In the helicopter case, it seems to have been intentional. IN RE HELICOPTER CRASH NEAR WENDLE CREEK, BRITISH COLUMBIA, ON AUGUST 8, 2002; Docket No. 3:04md1649 (SRU)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT; 2009 U.S. Dist. LEXIS 41477; May 18, 2009,

Spoliation comes into the legal malpractice picture when, for example, defendant attorney fails to take discovery of important evidence in the underlying case, and the ability later to obtain that evidence no longer exists.  In a matrimonial legal malpractice case, it may no longer be possible to discovery the other spouse’s financial records, and so plaintiff cannot show exactly how much she lost by target attorney’s negligent failure to take discovery.

In the helicopter case: "…defendants’ alleged failure to maintain or produce the allegedly "missing" records materially impaired her prosecution of her medical negligence and informed consent claims.

Plaintiff’s "negligent spoliation" claim is akin to a legal malpractice claim [*6] in that "damages arise from the loss" — or diminution of value — of an underlying claim. . . . [P]plaintiff’s primary medical negligence and informed consent claims ultimately failed for lack of proof of scientific/medical causation. Plaintiff argues that, if the allegedly absent records had been created or maintained and produced, Williamson might have been provided with the "missing link" that would have enabled him to identify and persuasively explain the causal relationship between gadolinium extravasation and Raynaud’s syndrome. Specifically, plaintiff points to the fact that no records reflect the amount of gadolinium used during the procedure. . . .
 

We have commented about the Collateral Estoppel trap in legal malpractice with regard to fee arbitrations and hearings.  in short, when a court grants an attorney fee application, it implicitly determines that there can have been no malpractice, as the court may not award fees in the face of malpractice.  Fee arbitrations and hearings in state court happen, but not that often.  Bankruptcy fee hearings happen in every case, and in every case where fees are awarded to counsel, the question of res judicata comes up.

In re D.A. ELIA CONSTRUCTION CORP., Plaintiff, v. DAMON & MOREY, LLP, Defendant.;07-CV-143A  ;  UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NEW YORK;   389 B.R. 314; 2008 U.S. Dist. LEXIS 25496 has been the leading case on this issue.  There, attorneys who had been granted fees were able to fend off legal malpractice claims based upon res judicata.

Now, 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 we see a slightly different result.  Judge Scheindlin sitting in appeal of a US Bankruptcy decision by Judge Bernstein, finds that the legal malpractice plaintiffs did not have a full and fair opportunity to be heard, and that res judicata does not control the issue of legal malpractice.

"Although Pachulski’s fee application was approved by the bankruptcy court in the prior proceeding, I cannot conclude as a matter of law that PMG had a full and fair opportunity to litigate allegations of Pachulski’s malpractice during that hearing. Many of the factors used to consider whether a party had a full and fair opportunity to litigate an issue favor PMG, particularly given PMG’s continued retention of Pachulski as its counsel. For instance, one of the factors courts have considered is "the importance of the claim in the prior litigation." 45 PMG had just undergone a reorganization with the help of Pachulski as its counsel. The possibility that Pachulski may have committed malpractice while representing PMG during that reorganization may not have been at the forefront of PMG’s concerns. In addition, PMG [*16] had no "incentive [or] initiative to litigate" the malpractice issue, 46 considering that it expected Pachulski to continue to advise PMG in the winding down of its bankruptcy proceeding.

Of particular importance to this Court is the bankruptcy court’s reliance on D.A. Elia Construction Corp. 50 Judge Bernstein concluded that D.A. Elia was directly on point, 51 but D.A. Elia is perhaps even more clearly distinguishable from the instant case than other cases cited by Pachulski, as in that case the malpractice claim was actually litigated during the fee application proceeding. D.A. Elia emphasized that
many of the same allegations made by Elia in its [malpractice] complaint were previously made by Elia in its objections to Damon & Morey’s final fee application. Specifically, Elia argued to the bankruptcy court that the firm had labored under a conflict of interest, had committed legal malpractice and had failed to turn over money owed to the estate. The bankruptcy court provided Elia with ample opportunity [to] raise those claims, but ultimately rejected them as meritless. 52
The district court concluded that "it cannot be said that Elia was denied the opportunity to raise these [malpractice] claims in the prior action." 53 In the instant case, PMG raised no such objections [*19] at the fee hearing."

Clients often ask whether it matters that their legal malpractice case comes as a defense to an attorney fee case.  It should not, but judges are swayed by the procedural setting of cases before them.  Does it make a difference whether the legal malpractice case is a main action or a counterclaim?  Taking a look at this case gives possible insight.

Kluczka v Lecci  2009 NY Slip Op 04867  Decided on June 9, 2009  Appellate Division, Second Department  holds that:
 

"The plaintiff retained the defendant attorney to represent him in a divorce action commenced by his former wife. The divorce action was settled by a stipulation pursuant to which the plaintiff agreed, inter alia, to waive his interest in the marital residence and give his former wife a share of his pension benefits, while she agreed to waive her interest in another property, and forgive certain child support arrears. The plaintiff thereafter commenced this action, contending that the defendant had committed legal malpractice by recommending that the plaintiff enter into the stipulation without obtaining appraisals of the subject real property or his pension.

Here, the defendant made a prima facie showing that he was entitled to summary judgment by demonstrating that the stipulation in the underlying divorce action was a provident agreement which provided both parties with benefits, and that his allegedly negligent failure to obtain appraisals did not cause the plaintiff to incur any damages. In opposition, the plaintiff failed to raise an issue of fact as to whether he incurred damages by submitting evidentiary proof that, but for the defendant’s alleged negligence, he would have been able to negotiate a more favorable settlement (see Rapp v Lauer, 229 AD2d 383, 384; Rogers v Ettinger, 163 AD2d 257, 258). Accordingly, the Supreme Court should have granted that branch of the defendant’s motion which was for summary judgment dismissing the complaint.

However, the court properly denied that branch of the plaintiff’s cross motion which was for summary judgment dismissing the defendant’s counterclaim to recover unpaid legal fees. An attorney may not recover fees for legal services performed in a negligent manner even where that negligence is not a proximate cause of the client’s injury (see Martin, Van de Walle, Guarino & Donohue v Yohay, 149 AD2d 477, 480; Campagnola v Mulholland, Minion & Roe, 148 AD2d 155, 158, affd 76 NY2d 38). Here, the submissions of both parties demonstrate that there is a sharply disputed issue of fact as to whether the defendant’s performance of legal services, as measured against that of an attorney of reasonable skill and knowledge, was negligent (see Kutner v Catterson, 56 AD3d 437). Thus, the issue of whether the defendant is entitled to recover legal fees on his counterclaim must await resolution at trial. "

CPLR 3211 (a)(1) is the "documentary evidence" portion of a general pre-answer motion to dismiss.  The standard applied to dismissal motions under this particular sub-section is:

"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; see CPLR 3211[a][1]; Saxony Ice Co., Div. of Springfield Ice Co., Inc. v Ultimate Energy Rest. Corp., 27 AD3d 445). Moreover, where "evidentiary material is submitted and considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the court must determine whether the plaintiff has a cause of action, not whether the plaintiff has stated one" (Steve Elliot, LLC v Teplitsky, 59 AD3d 523, 524, citing Guggenheimer v Ginzburg, 43 NY2d 268, 275). "[U]nless it has been shown that a material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it . . . dismissal should not eventuate" (Guggenheimer v Ginzburg, 43 NY2d at 275).
 

Here, in the quote taken from Walker v Kramer ; 2009 NY Slip Op 04414 ;  Decided on June 2, 2009 ;  Appellate Division, Second Department we see a situation in which neither defendant demonstrated their right to dismissal.  Plaintiff has adequately stated a cause of action, or indeed, has a cause of action which the court discerned, in this matrimonial legal malpractice case.
 

A "client’s unilateral belief" in the attorney-client relationship is insufficient to prove privity between the attorney and client, sufficient for a legal malpractice lawsuit, but subsequent behavior or acts by the attorneys might provide the necessary proof.  Here, in Terio v Spodek ;  2009 NY Slip Op 04412
Decided on June 2, 2009 ; Appellate Division, Second Department  we see how that might happen:
 

"To recover damages for legal malpractice, a plaintiff must prove, inter alia, the existence of an attorney-client relationship (see Velasquez v Katz, 42 AD3d 566, 567; Moran v Hurst, 32 AD3d 909; Wei Cheng Chang v Pi, 288 AD2d 378, 380; Volpe v Canfield, 237 AD2d 282, 283). While a plaintiff’s unilateral belief does not confer upon him or her the status of client (see Volpe v Canfield, 237 AD2d at 283), an attorney-client relationship may exist in the absence of a formal retainer agreement (see e.g. Swalg Dev. Corp. v Gaines, 274 AD2d 385, 386). To establish an attorney-client relationship there must be an explicit undertaking to perform a specific task (see Wei Cheng Chang v Pi, 288 AD2d 378; Volpe v Canfield, 237 AD2d at 283).

Here, Reich failed to establish, as a matter of law, that an attorney-client relationship was not formed and did not exist during the time that the alleged acts of negligence occurred. Reich’s submissions demonstrated that it consulted with the plaintiff, advised her of her chances of success, and negotiated a settlement with a bankruptcy trustee. Contrary to Reich’s arguments, the fact that it was purportedly not the attorney of record at the time of a hearing before the United States Bankruptcy Court to determine whether the particular asset at issue qualified as an exemption, is not dispositive of the existence of an attorney-client relationship during the period of the alleged negligence. "

In the past six months, new life has been breathed into Judiciary law 487.  It may well be the oldest statute in Anglo-American jurisprudence.  Dating from1275  the statute provides that an attorney who is guilty of any deceit or collusion, may be guilty of a misdemeanor and held for treble damages.

Since the Court of Appeals decided Amalfitano v Rosenberg   12 NY3d 8 a rise in the acceptance of, and application of the statute has been seen.  Here, in a Fourth Department case, Scarborough v Napoli, Kaiser & Bern, Llp ;2009 NY Slip Op 04475 ;Decided on June 5, 2009 ;Appellate Division, Fourth Department  we see summary judgment being denied to the target attorney defendants,

"The medical malpractice action was dismissed against the underlying medical defendants after defendants failed to file a timely note of issue. Following the dismissal of that action, defendants asked plaintiff to sign a stipulation of discontinuance with respect to the underlying action, which in fact had already been dismissed. According to plaintiff, he was informed that he could not prevail in his underlying action but was never informed that the action already had been dismissed as a result of defendants’ failure to file [*2]a timely note of issue. Subsequently, a member of defendants’ firm telephoned plaintiff and told him the actual basis for the dismissal of the underlying action.

Plaintiff thereafter commenced this action asserting causes of action for legal malpractice and for treble damages pursuant to Judiciary Law § 487. Defendants moved for summary judgment dismissing the amended complaint in its entirety on the ground that no acts or omissions by the underlying medical defendants were the proximate cause of the death of plaintiff’s father, an essential element of a cause of action for legal malpractice.

Contrary to the further contention of defendants, the court properly determined that none of the defendants is entitled to summary judgment dismissing the Judiciary Law § 487 cause of action. That statute provides in relevant part that an attorney who is "guilty of deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party . . . [i]s guilty of a misdemeanor, and . . . he [or she] forfeits to the party injured treble damages, to be recovered in a civil action." "A violation of Judiciary Law § 487 may be established either by the defendant’s alleged deceit or by an alleged chronic, extreme pattern of legal delinquency by the defendant’ " (Izko Sportswear Co., Inc. v Flaum, 25 AD3d 534, 537; see Amalfitano v Rosenberg, 12 NY3d 8; Schindler v Issler & Schrage, 262 AD2d 226, lv dismissed 94 NY2d 791, rearg denied 94 NY2d 859). Here, the documents submitted by defendants in support of their motion establish that some of the attorneys at defendant law firm engaged in intentional deceit, and thus by their own submissions defendants defeated their entitlement to summary judgment dismissing that cause of action. "