The collapse of a hedge fund gives rise to a legal malpractice claim by various of the investors.  The hedge fund impresario is convicted of securities fraud, and then turns around to help the investors sue the funds’ attorney. 

In Eurycleia Partners, LP v Seward & Kissel, LLP ; 2009 NY Slip Op 04299 ; Decided on June 4, 2009 ; Court of Appeals ; Graffeo, J. we see that there is not enough connection between the attorneys and plaintiffs, and that plaintiffs cannot show the requisite relationship between the attorneys and the funds.
 

"The July 2007 amended complaint presents three main allegations against S & K. First, plaintiffs assert S & K learned at some point in 2005 that Wood River invested more than 10% of its assets in Endwave stock in violation of the 10% restriction contained in the offering memoranda. According to plaintiffs, S & K nonetheless persisted in drafting offering memoranda falsely representing that Wood River was adhering to the 10% cap as part of its investment policy. Second, plaintiffs claim that S & K falsely stated in the offering memoranda that TBS was Wood River’s auditor even though S & K knew from the inception that TBS had not been retained to perform any auditing work. Third, plaintiffs allege S & K learned in January 2005 that Wood River had violated securities laws by failing to file required notices when Wood River obtained 5% and, later, 10% of Endwave’s stock [FN5]. Plaintiffs maintain that S & K breached fiduciary duties owed to them, as limited partners, by failing to disclose the SEC violations to them.

Here, whether the claim is labeled fraud or aiding and abetting fraud, we conclude that neither the allegations in the complaint nor the surrounding circumstances give rise to a reasonable inference that S & K participated in a scheme to defraud or knew about the falsity of the two contested statements in the offering memoranda. The amended complaint conclusorily alleges that at some unspecified point in 2005 S & K became aware that more than 10% of Wood River’s holdings were invested with Endwave but, nonetheless, S & K continued to issue offering memoranda falsely representing that Wood River would not invest more than 10% of its assets in any given security.

We likewise find the amended complaint’s alternative allegation of fraud or aiding and abetting fraud — that S & K knew TBS was not Wood River’s auditor yet continued to list TBS in the offering memoranda — to be similarly conclusory. As the Appellate Division recognized, the complaint elsewhere alleges that in the summer of 2005 TBS falsely represented that it was the fund’s auditor and would conduct an audit. In short, although we are mindful that a plaintiff need not produce absolute proof of fraud and that there may be cases in which particular facts are within a defendant’s possession, it is also true that the strength of the requisite inference of fraud will vary based on the facts and context of each case.

A fiduciary relationship arises "between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005] [internal quotation marks and citation omitted]). Put differently, "[a] fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other" (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 11 NY3d 146, 158 [2008] [internal quotation marks and citation omitted]). Ascertaining the existence of such a relationship inevitably requires a fact-specific inquiry. [*6]

Here, plaintiffs do not allege that they had direct contact or any relationship — contractual or otherwise — with S & K. Indeed, plaintiffs acknowledge that the offering memoranda advised prospective limited partners to consult their own legal counsel prior to investing in Wood River. Plaintiffs nevertheless contend that S & K’s attorney-client relationship with Wood River in and of itself created a fiduciary relationship between S & K and the limited partners themselves. We disagree. "

 

Aside from the precatory "You’ve got to be crazy…", 

" on occasion, true mental incompetence does collide with questions of legal malpractice, and in this case, criminal conviction.  In ALLEN WOLFSON, -v- AVRAHAM MOSKOWITZ,  08 Civ. 8796 (DLC);UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK’; 2009 U.S. Dist. LEXIS 45822;  May 29, 2009, Decided   we see the result:
 

"Allen Wolfson has filed suit against Avraham Moskowitz, Wolfson’s former attorney in a criminal matter. Moskowitz moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. . For the following reasons, the Report is adopted, and the motion is granted.

Following trial, Wolfson moved for a new trial and to vacate his conviction, as well as to vacate his guilty plea entered in another case, arguing, inter alia, that the jury instructions were defective, that he was incompetent at the time of his trial and plea, and that his counsel was ineffective. The Honorable John G. Koeltl, United States District Judge, denied these motions in two separate opinions issued on the same day.  Judge Koeltl did find that Wolfson was not competent to be sentenced. Wolfson, . Wolfson was therefore provisionally sentenced and ordered to a facility for treatment, and will be given a final sentence when he is deemed competent.

The Report states that in a diversity action such as this case, a federal court applies the choice-of-law rules of the state in which the court sits. See Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 147 (2d Cir. 2008). Finding that the complaint against Moskowitz for failure to inform Wolfson that the indictment failed to charge a crime was a claim for the tort of legal malpractice, the Report applied New York’s "interest analysis," see White Plains Coat & Apron Co., Inc. v. Cintas Corp., 460 F.3d 281, 284 (2d Cir. 2006), and concluded that New York’s interest was paramount and therefore [*6] New York law applied. See, e.g., LNC Inv., Inc. v. First Fidelity Bank, N.A., 935 F. Supp. 1333, 1350-51 (S.D.N.Y. 1996).

The Report correctly concluded that under New York law, a party cannot maintain a cognizable claim for legal malpractice in connection with representation provided in a criminal case when his conviction still stands. See Britt v. Legal Aid Soc, Inc., 95 N.Y.2d 443, 447, 741 N.E.2d 109, 718 N.Y.S.2d 264 (2000); Carmel v. Lunney, 70 N.Y.2d 169, 173, 511 N.E.2d 1126, 518 N.Y.S.2d 605 (1987). Thus, because Wolfson has not had his conviction vacated and remains incarcerated, he fails to state a claim for malpractice and his complaint must be dismissed."

 

 

This recent Court of Appeals Case, Wyly v Milberg Weiss Bershad & Schulman, LLP
2009 NY Slip Op 03628 ; Decided on May 7, 2009 ; Court of Appeals  discusses the rights of a client to "its" case file for use in a later proceeding…which is often a legal malpractice action.  Wyley is the offshoot  of the Computer Associates class actions, and one in which millions of dollars were at stake.
The rule in New York concerning whether a client is entitled to look at and copy a file  is generally set forth in Matter of Sage Realty Corp. v Proskauer Rose Goetz & Mendelsohn, 91 NY2d 30 [1997]  The Court of Appeals held that the joined the "majority of courts and State legal ethics advisory bodies," which take the position that "upon termination of the attorney-client relationship, where no claim for unpaid legal fees is outstanding," a client is "presumptively accord[ed] . . . full access to the entire attorney’s file on a represented matter with narrow exceptions" (Sage Realty, 91 NY2d at 34).

"The petitioners in Sage Realty retained Proskauer to represent them in a multi-million dollar mortgage financing and a restructuring of ownership interests, all involving New York City properties. After a falling out with Proskauer, the petitioners retained a different firm to represent them in the transaction. Proskauer refused to turn over certain documents relating to its representation of the petitioners, prompting them to commence a special proceeding to recover the documents. "
 

A recurring theme in legal malpractice is how to obtain the documents from the underlying representation.  A confounding factor is that often there is a fee dispute between the plaintiff and its prior counsel, and the prior counsel refuse to allow plaintiff a copy of the file under the authority of a Judiciary Law retaining lien.  Sage remains the authority in this area.

In Leone v Silver & Silver, LLP ; 2009 NY Slip Op 04204 ; Decided on May 26, 2009
Appellate Division, Second Department we see that merely settling a case does not deprive plaintiff of the right to sue the attorney, so long as the settlement was effectively compelled by the acts of the target attorney. If the attorney’s acts caused plaintiff to be in a position where settlement was the correct choice, there may still be liability for the attorney.
 

"The gravamen of the plaintiff’s complaint is that the defendants failed to protect her interest in connection with the fraudulent conveyance of certain real property. In order to prevail on this claim, the plaintiff must establish both that the defendants "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442; see Davis v Klein, 88 NY2d 1008, 1009-1010) and that their breach of this duty proximately caused her actual and ascertainable damages (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 442; see Hearst v Hearst, 50 AD3d 959, 963; Bauza v Livington, 40 AD3d 791, 792-793). To succeed on their motion for summary judgment, the defendants were required to establish, through the submission of evidentiary proof in admissible form, that the plaintiff is unable to prove at least one of the essential elements of the cause of action (see Suydam v O’Neill, 276 AD2d 549; Ostriker v Taylor, Atkins & Ostrow, 258 AD2d 572). The Supreme Court correctly concluded that the defendants failed to do so here. Contrary to the defendants’ contention, the plaintiff’s decision to settle an action to recover the property, rather than risk dismissal on the basis of the defense of laches allegedly caused by their conduct, does not preclude the plaintiff from maintaining a subsequent action against them to recover damages for legal malpractice (see N.A. Kerson Co. v Shayne, Dachs, Weiss, Kolbrenner, Levy & Levine, 45 NY2d 730, 732; Tortura v Sullivan Papain Block McGrath & Cannavo, 21 AD3d 1082, 1083; Rau v Borenkoff, 262 AD2d 388, 389; Lattimore v Bergman, 224 AD2d 497). The Supreme Court, therefore, properly denied the defendants’ motion for summary judgment dismissing the complaint. "
 

 

Slip and fall cases are a major part of the personal injury oeuvre, and personal injury litigation remains a large part of the world of the bar.  Accordingly the laws of personal injury, and specifically those relating to trips and falls are widely known and highly important.  Mistakes and bad outcomes in personal injury litigation often lead to legal malpractice litigation.

One perennial problem in trips and falls is causation. The problem arises in the tension between whether one should have seen a defect, and proving that the defect was significant enough to cause the fall.  In sidewalk negligence, there is the principal of a defect that is "de minimus" and as a matter of law insufficient to support a negligence claim.

In Hamoudeh v Mandel ;2009 NY Slip Op 04195 ;decided on May 26, 2009 ; Appellate Division, Second Department we see the effect of plaintiff stating in a deposition [likely in the underlying action] that  he did not see what caused him to fall.  Whether this was the result of the attorney’s affirmative coaching, the attorney’s negligence failure to prepare plaintiff for a deposition, or the truth, it was fatal to both the underlying personal injury action and the legal malpractice action.
 

"During a deposition, the plaintiff stated that he did not know what had caused him to fall. The defendants moved for summary judgment, contending that the plaintiff would not have prevailed in the underlying action even if they had timely commenced an action. The Supreme Court denied the motion. We reverse.

To establish a cause of action to recover damages for legal malpractice, a plaintiff must prove 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" (Maiolini v McAdams & Fallon, P.C.,AD3d, 2009 NY Slip Op 02755, *2 [2d Dept 2009] [citations omitted]). "To establish 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 lawyer’s negligence" (id. [citations omitted]; see also Pedro v Walker, 46 AD3d 789; Lichtenstein v Barenbaum, 23 AD3d 440; Porello v Longworth, 21 AD3d 541; Dimond v Kazmierczuk & McGrath, 15 AD3d 526; Iannarone v Gramer, 256 AD2d 443, 444).

Here, the defendants established, prima facie, that even if they had commenced a timely action, the plaintiff would not have been successful on the merits, since he could not identify what had caused him to fall (see Costantino v Webel, 57 AD3d 472; Karwowski v New York City Tr. Auth., 44 [*2]AD3d 826; Manning v 6638 18th Ave. Realty Corp., 28 AD3d 434; Golba v City of New York, 27 AD3d 524; Tejada v Jonas, 17 AD3d 448). In opposition, the plaintiff failed to raise a triable issue of fact (see Denicola v Costello, 44 AD3d 990; Tejada v Jonas, 17 AD3d 448; Sanchez v City of New York, 305 AD2d 487). "

 

Some time ago the legislature passed a statute of limitations for legal malpractice, overruling the Court of Appeals which permitted both a 3 year and a 6 year statute.  Of course, now there is but a single 3 year statute.  At the same time, it was determined that no matter whether one calls the attorney’s mistakes fraud, breach of fiduciary duty or something else, there is a single 3 year statute, and it’s all called legal malpractice except in certain unusual circumstances.

Here in Kullahsi v. Marengo, NY Slip Op 31154, Justice Tolub, Supreme Court, New York County, Mary 27, 2009, we see a more detailed explanation.  The allegation of fraud must be separate and distinct from the allegation of malpractice.  There must be damages separate and different from those which were caused by the malpractice.  The fraud must be independent, intentionally tortuous conduct.

 

Retainer agreements or letters of engagement are required in New York, and there is a large body of law concerning attorney fees and the necessity of retainer agreements.  On a different dimension, the question of what work an attorney has agreed to perform, and the limits of that attorney’s liability may well be determined by the scope of the retainer agreement.  May one, for example, limit representation to a single issue, and not be responsible for other issues?

in Douglas v Dashevsky ;2009 NY Slip Op 04187 ; Decided on May 26, 2009 ;Appellate Division, Second Department we see this issue illustrated.  Plaintiff retains attorney in a wrongful termination case, and alleges that he told her not to file a disability claim with the employer.  He says that his sole obligation was the wrongful termination matter. Is he responsible?
 

"To demonstrate entitlement to dismissal of a complaint pursuant to CPLR 3211(a)(1), the documentary evidence submitted must conclusively establish a defense to the asserted claims, as a matter of law (see Leon v Martinez, 84 NY2d 83, 87-88; Williams v Williams, 36 AD3d 693, 695; New York Community Bank v Snug Harbor Sq. Venture, 299 AD2d 329, 330). Here, the retainer agreements submitted by the defendant do not establish, as a matter of law, that the defendant’s obligation was to advise the plaintiff solely with respect to her wrongful termination action against her employer. The one page of the disability carrier’s policy along with the complaint from the action alleging wrongful termination fails to conclusively establish that the plaintiff would not otherwise have been entitled to receive benefits under the policy, had she filed a timely claim.

Further, "in reviewing a motion pursuant to CPLR 3211(a)(7) to dismiss a complaint for failure to state a cause of action, the facts as alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court’s function is to determine only whether the facts as alleged fit within any cognizable legal theory" (Kupersmith [*2]v Winged Foot Golf Club, Inc., 38 AD3d 847, 848; see Leon v Martinez, 84 NY2d at 87-88; Board of Educ. of City School Dist. of City of New Rochelle v County of Westchester, 282 AD2d 561, 562). Here, the plaintiff has pleaded sufficient facts to fit within a theory of legal malpractice.

The action is not barred by the doctrine of judicial estoppel since the plaintiff’s action predicated upon wrongful termination was settled and did not result in a judgment (see Kimco of New York, Inc. v Devon, 163 AD2d 573, 575). "
 

One might not expect a legal malpractice case such as this to take place in Brooklyn.  It would be far more plausible in a small upstate hamlet, where everyone knows everyone else, and there are strongly intersecting lines of business and social life.  But, even here in the big city, attorneys are fiduciaries and must bring all their knowledge and experience to the table.

In this case , Romano v Ficchi , 2009 NY Slip Op 51011(U) , Decided on May 22, 2009 , Supreme Court, Kings County , Rivera, J. plaintiff sought to buy a condo with a view.  She found one, and hired an attorney to handle the closing.  In a big city/small town twist, it turns out that the attorney had dealings with the next door real estate and knew that there were plans to build up next door, and that the plans would eventually block plaintiff’s view.

From the decision: "Plaintiff alleges that defendant knew that the purchaser of an adjoining property was going to build on the land in a way that would obstruct her view from her condominium. She further alleges that he gained this knowledge by representing the seller of the adjoining property in the sale to the new owner. She contends he did not inform her of this fact to her detriment and damage. The damage was the loss of the market value of the unit caused by the loss of the view and not having the opportunity to take into consideration the anticipated loss of the view before making a decision to buy the unit for the price she paid. Accepting all of the plaintiff’s allegations fact as true, and according her every favorable inference, the remaining question is whether these facts support a claim for legal malpractice.

It is well settled that the relationship of client and counsel is one of "unique fiduciary reliance" (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 [1st Dept.,2008] citing Matter of Cooperman, 83 NY2d 465 at 472 [1994] and that the relationship imposes on the attorney "[t]he duty to deal fairly, honestly and with undivided loyalty … including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the clients’ interests over the lawyer’s"(Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, supra).

The attorney’s obligation is to exercise professional judgment "solely for the benefit of the client and free of compromising influences and loyalties" (Code of Professional Responsibility EC 5-1) to represent the client zealously within the bounds of the law ( see Code of Professional Responsibility Canon 7), and "to seek the lawful objectives of the client through reasonably available means permitted by law and the Disciplinary Rules" (Code of Professional Responsibility DR 7-101 [A] [1], (Sedore v. Epstein, 56 AD3d 60 [2nd Dept.,2008]).

Defendant’s knowledge of the intention of an adjoining buyer to develop his property in a way that would obstruct the view of the condominium unit plaintiff was considering to purchase and his failure to inform the her that she was going to lose the very view which induced her to purchase it may support a claim of legal malpractice. It cannot be said as a matter of law that it does not. A lawyer should look out for his client’s interest and inform his client of those matters within his knowledge that are material to the client’s informed decision making process. Plaintiff’s contention that she would not have bought the unit had she known this fact is reasonable. Her claim that the unit has lost value because of the loss of her view is also reasonable and supports the damage element of a legal malpractice claim. Whether or not the plaintiff can ultimately establish the truth of their allegations before the trier of fact is irrelevant (Campaign for Fiscal Equity, Inc. v. State, 86 NY2d 307 [1995]). [*4]"

 

Legal Malpractice cases frequently involve a series of attorneys, each of whom comments or gives advice concerning the acts of a predecessor.  When will these communications be protected and when will the protection be waived ?  A simple answer would be that all communications are protected, forever.  The wise commentator amongst us knows that some communications will be protected, and some placed "at issue," and thus lose their attorney-client privilege.

Here, in Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP ; 2009 NY Slip Op 04099 ; Decided on May 26, 2009 ; Appellate Division, First Department we see a well reasoned discussion of the difference. 
 

"We find no merit to defendant’s argument that privileged materials relating to and created after commencement of the Doctor’s Hospital Action have been put "in issue" by this litigation and are therefore discoverable. Such argument fails to recognize that nothing that plaintiff’s attorneys could have said or done in the prior lawsuit could have possibly affected plaintiff’s reliance on defendant’s allegedly erroneous advice given years earlier in connection with the [*2]formation of the D5 Trust. " At issue’ waiver of [the attorney-client] privilege occurs where a party affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the party asserting the privilege, and application of the privilege would deprive the adversary of vital information" (Deutsche Bank Trust Co. of Ams. v Tri-Links Inv. Trust, 43 AD3d 56, 63 [2007]). While any communications between plaintiff and its attorneys in the Doctor’s Hospital Action that evaluated defendant’s prior advice in the allegedly bungled D5 Trust transaction are certainly relevant to the issue of defendant’s alleged malpractice, plaintiff disavows any intention to use such communications and defendant fails to show that any such communications are necessary to either plaintiff’s claim or its defense (see id. at 64 [relevance alone insufficient to put privileged materials "at issue"; "if that were the case, a privilege would have little effect"]; see also Veras Inv. Partners, LLC v Akin Gump Strauss Hauer & Feld LLP, 52 AD3d 370, 374 [2008]). "

Taken verbatim from the New York Law Journal by Andrew Longstreth
 

"McDermott Will Settles Malpractice Claim

McDermott, Will & Emery has settled a malpractice claim brought by the litigation trustee in the bankruptcy of Saint Vincent’s Catholic Medical Centers of New York, according to court records. News of the settlement, which is filed under seal at the request of the trustee, was first reported by Crain’s New York.  The trustee alleged that the law firm purposefully delayed the bankruptcy filing of Saint Vincent’s to keep members of the hospital’s restructuring team in place and run up its own bills, which delayed the hospital’s emergence from bankruptcy. (St. Vincent’s substituted McDermott with Weil, Gotshal & Manges as its debtor’s counsel in September 2005.) One of the reasons cited in the trustee’s motion to file the settlement under seal is to protect McDermott Will from competitors. "MWE has a strong interest in maintaining the confidentiality of the proposed settlement agreement because it contains confidential information about MWE, disclosure of which could adversely affect its commercial activities," it states. "Specifically, disclosure of the terms of the proposed settlement agreement could provide a road map for any disgruntled current or former client of MWE for the pursuit of litigation against the firm, giving an unfair advantage to MWE’s competitors in the marketplace."