Today’s Outside Counsel Column in the New York Law Journal is "The Use of Lawyer-Targeted Judiciary Law 487.  It discusses the 740 year history of what may be the oldest statute in Anglo-
American jurisprudence, and certainly the oldest to affect attorney conduct in and out of court.

As a treble damage statute, it has been sparsely used in its long history, and as as the article argues, may be trending higher.  This month’s The Court of Appeals decision  in Amilfatano v, Rosenberg will likely boost litigator’s awareness of the statute. 

"As the District Court correctly observed, however, Judiciary Law § 487 does not derive from common law fraud. Instead, as the Amalfitanos point out, section 487 descends from the first Statute of Westminster, which was adopted by the Parliament summoned by King Edward I of England in 1275. The relevant provision of that statute specified that

"if any Serjeant, Pleader, or other, do any manner of Deceit or Collusion in the King’s Court, or consent [unto it,] in deceit of the Court [or] to beguile the Court, or the Party, and thereof be attainted, he shall be imprisoned for a Year and a Day, [*3]and from thenceforth shall not be heard to plead in [that] Court for any Man; and if he be no Pleader, he shall be imprisoned in like manner by the Space of a Year and a Day at least; and if the Trespass require greater Punishment, it shall be at the King’s Pleasure" (3 Edw, c 29; see generally Thomas Pitt Taswell-Langmead, English Constitutional History 153-154 [Theodore F.T. Plucknett ed, Sweet & Maxwell, 10th ed 1946]).
Five centuries later, in 1787, the Legislature adopted a law with strikingly similar language, and added an award of treble damages, as follows:

"And be it further enacted . . . [t]hat if any counsellor, attorney, solicitor, pleader, advocate, proctor, or other, do any manner of deceit or collusion, in any court of justice, or consent unto it in deceit of the court, or to beguile the court or the party, and thereof be convicted, he shall be punished by fine and imprisonment and shall moreover pay to the party grieved, treble damages, and costs of suit" (L 1787, ch 36, § 5).

In 1836, the Legislature carried forward virtually identical language in section 69 of the Revised Statutes of New York, prescribing that
"[a]ny counselor, attorney or solicitor, who shall be guilty of any deceit or collusion, or shall consent to any deceit or collusion, with intent to deceive the court or any party, shall be deemed guilty of a misdemeanor, and on conviction shall be punished by fine or imprisonment, or both, at the discretion of the court. He shall also forfeit to the party injured by his deceit or collusion, treble damages to be recovered in a civil action" (2 Rev Stat of New York, chap III, art 3, § 69 [1836]).
 

Right now the legal press centers around attorney lay-offs and the general economic situation.  In this case homeowners were completely unable to either pay the mortgage or obtain new financing.  Eventually they went to a lender whose interest rate exceeded 25%.  Will we be seeing more of this type of case as the mortgage market continues to fester?

In Abir v Malky, Inc. ;2009 NY Slip Op 01432 ; Decided on February 24, 2009 ;Appellate Division, Second Department  we see that even while battling with the lenders over usury, they have also sued the attorney.  For the moment, he seems to have dropped out, but the decision does not say that his action has been terminated.  In the meantime we see:
 

"In an action, inter alia, to recover damages for legal malpractice, the plaintiffs appeal, as limited by their brief, from so much of a judgment of the Supreme Court, Nassau County (Winslow, J.), entered September 12, 2007, as, upon an order of the same court entered August 15, 2007, which, upon reargument, among other things, adhered to a determination in an order entered May 10, 2007, denying those branches of their cross motion which were for summary judgment declaring that a certain judgment of foreclosure and sale entered August 10, 2000, is null and void.

In 1995 the plaintiffs, Fereydoon Abir and Flora Abir (hereinafter together the Abirs) stopped repaying the mortgage loan referable to their home. Their mortgagee, Bank of America (hereinafter the Bank) sought, and in 2000 obtained, a judgment of foreclosure and sale against them, which included a deficiency judgment in the approximate sum of $2,100,000. Subsequently, the Abirs negotiated a settlement in which the Bank agreed, inter alia, to accept the sum of $1,300,000 from the Abirs, or their designee, in full satisfaction of the judgment. The Abirs then sought a bridge loan from Hamerkaz, a not-for-profit entity, in the principal sum of $1,300,000, and thereafter attempted to secure a conventional loan. However, after entering into a contract with the plaintiffs, Hamerkaz was unable to provide the necessary funding and, sometime in mid-December 2001, the plaintiffs received notice that the Bank had scheduled a foreclosure sale of their home for December 18, 2001. The Abirs then contacted the defendant Malky, Inc. (hereinafter Malky), which agreed to provide them with the necessary funds for the bridge loan.

On December 18, 2001, Malky entered into an agreement with the Abirs (hereinafter the Abir/Malky agreement) which, inter alia, provided that the Abirs had 8 to 10 months to repay the debt, at an annual interest rate, including assorted charges, that ranged from 25.6% to 28.5%. The Abir/Malky agreement also provided that if the Abirs did not repay this obligation at the end of that 10-month period, Malky would have the right to enforce the judgment of foreclosure and sale, and take possession of the Abirs’ house. The Abirs entered into the Abir/Malky agreement despite the fact that the Bank had yet to sell the judgment of foreclosure and sale to Malky since the Abirs understood that the sale of the judgment of foreclosure and sale was imminent. Moreover, the Abirs never designated Malky as their agent for the purpose of repaying their obligation to the Bank. "

 Refund Plus Life Insurance policies were purchased by Long Island attorneys including Daniel Buttafuoco.  When Boston Life refused to refund the premiums litigation erupted.  In the Virgin Islands, the insurance company asked for a declaratory judgment that it did not have to refund the premiums.  Things spiraled downward, and ended in EDNY legal malpractice litigation.  From the decision in Law Practice Management Consultants LLC v. M & A Counselors & Fiduciaries LLC, 08-CV-4557; Decided: February 28, 2009; District Judge Arthur D. Spatt;U.S. DISTRICT COURT. EASTERN DISTRICT OF NEW YORK
 

"In 2006, Boston Life terminated the Policies and allegedly refused to return the premiums paid by the Plaintiffs. In March of 2006, Boston Life commenced a suit in the British Virgin Islands ("the BVI Litigation") seeking a declaratory judgment that it properly terminated the Policies and was not required to repay any of the premiums. The Plaintiffs in the present action were among the 63 defendants ("the BVI defendants") that Boston Life named in the BVI Litigation. In April of 2006, the BVI defendants retained Hoilman, a member of M & A Counselors & Fiduciaries, to represent them in the BVI litigation.
 

Buttafuoco’s deposition was scheduled for October 13, 2008 at his office in Woodbury, New York. The night before the deposition, Hoilman met with Buttafuoco at his office to prepare him for his testimony. The Plaintiffs allege that during this meeting, Hoilman advised Buttafuoco not to provide certain information in his deposition. On the day of the deposition, to Hoilman’s surprise, the Plaintiffs discharged him and his local counsel from representing them in the Miami Litigation. At the conclusion of the deposition, Hoilman was served with the summons and complaint that initiated the instant lawsuit.

The complaint, filed in New York State Supreme Court, Nassau County, alleged that Hoilman committed legal malpractice by failing to timely file the opposition papers in the BVI Litigation. The essence of the Plaintiffs’ legal malpractice claim is that although the British Virgin Islands Court of Appeal ultimately permitted them to file their opposition papers, the delay caused by the missed filing deadline prevented them from any meaningful recovery because Boston Life went into liquidation while the appeal was pending. In other words, the Plaintiffs contend that if Hoilman did not missing the filing deadline, they would have been able to obtain a judgment against Boston Life before it went into liquidation.

On November 11, 2008, the case was removed to this Court. Shortly thereafter Hoilman and his firm moved to dismiss the Plaintiffs’ cause of action for malpractice contending, among other things, that they have failed to state a claim under Fed. R. Civ. P. 12(b)(6). The Court finds that the Plaintiffs have failed to state a claim for legal malpractice, and therefore, it need not address the issue of whether personal jurisdiction is lacking in this case."
 

One may lose the right to bring a legal malpractice case based on earlier attorney fee dispute resolution.  In this case , Margrabe v. Sexter & Warmflash, PC,  07-CV-2798, District Judge Kenneth M. Karas, SDNY, we see just how the process operates.  Plaintiff retains attorneys to represent her in a shareholder derivative matter.  Attorneys were successful in obtaining a significant amount of money for her, but from then on things went badly.  Attorneys were terminated, fees were disputed, escrow accounts started, and a defamation action commenced over the termination letter.  Eventually the attorneys smartly started an attorney fee dispute action under Judiciary Law 475, and were awarded fees.  This was the end of the issue, although plaintiff did not yet know it.

From the Court: "Plaintiff claims that Defendants failed to exercise the degree of skill and knowledge commonly possessed by members of the legal profession in their representation of her in the Rusciano Lawsuit. (Compl. ¶27.)

In the R&R, Magistrate Judge Yanthis recommended that the Court grant Defendants’ Motion to Dismiss Plaintiff’s legal malpractice claim on res judicata and collateral estoppel grounds. (R&R 4-5.)

Although Plaintiff initially objected to Magistrate Judge Yanthis’s recommendation (Pl.’s Objections to R&R ("Pl.’s Obj.") 4), Plaintiff has since acknowledged to the Court that, based on the Court of Appeals’ denial of Plaintiff’s appeal, her legal malpractice claim "is barred under New York State law by the doctrine of res judicata." (Letter from William Greenberg, Esq. to the Court (Jan. 30, 2009).)

The Court agrees that, in New York, a judgment "fixing the value of a professional’s service necessarily decides that there was no malpractice." Lipani v. Collins, Collins & Dinardo, P.C., No. 90-CV-5278, 1992 WL 168267, at *3 (S.D.N.Y. June 25, 1992) (quoting Nat Kagan Meat & Poultry, Inc. v. Kolter, 416 N.Y.S.2d 646, 647 (App. Div. 1979)); accord Best v. Law Firm of Queller & Fischer, 718 N.Y.S.2d 397, 397 (App. Div. 2000) (holding that plaintiffs were "precluded from asserting a cause of action alleging malpractice" against the defendant law firm inasmuch as the New York Supreme Court had found that law firm was entitled to its agreed-upon legal fee).5 Here, it is undisputed that the Plaintiff’s legal malpractice claim is precluded by the state supreme court decision that Sexter & Warmflash was entitled to its reasonable legal fees. Accordingly, Plaintiff’s malpractice claim is dismissed as barred by the doctrines of res judicata and collateral estoppel."
 

On first blush this decision is a tad confusing.  Legal malpractice plaintiff sues his former defense attorney who defended him in a cross-over head-on car crash.  Plaintiff in legal malpractice case had driven the cross-over car, and had no memory of the accident.  After he loses the car crash case on summary judgment, and then sued the other driver in a second case, he sues the attorneys. The case is Luscher v One Beacon Ins. Group ;2009 NY Slip Op 29076 ;Decided on February 25, 2009 ;Supreme Court, Kings County ;Kramer, J. 
 So far, simple.

Attorneys seek to depose victim of car crash case, in legal malpractice case.  Theory against target attorneys is that they failed adequately to oppose summary judgment with an affidavit of a person with knowledge.  It appears from this decision that only the two drivers have actual knowledge.

Court denies deposition.  One might think this a defeat for attorneys?  We don’t think so. Once it is determined that no one has actual knowledge of how the accident occurred, we think the defense has undermined the plaintiff.  Here is the court:

"Defendants argue that they need to depose Arrua in the instant action because he was never actually deposed with respect to liability in the predicate action and the affidavit he submitted with his summary judgment motion did not provide any information about the details of the collision; the lights on the road, the traffic signs, the speed of the vehicles or whether he uses glasses or contacts and whether he is familiar with the area. Defendants argue that this information cannot be obtained from other sources because their former client, Luscher, did not have any memory of the accident.[FN4] The witness argues that the facts and circumstances of the underlying accident were already decided in the predicate action and consequently the defendants are barred by the doctrine of collateral estoppel from taking his testimony.

In order to defend a legal malpractice action, the defendants must show that they were not negligent or that their negligence was not the but for cause of the plaintiff’s failure to prevail in the underlying action. (Wray v. Mallilo & Grossman, 54 AD3d 328[2d Dept. 2008]). The appropriate analysis in a legal malpractice case does not include or permit a collateral attack upon the underlying judgment. Thus although New York’s liberal discovery rules require "disclosure upon request of any facts bearing on the controversy," Allen v. Crowell-Collier Publishing Co., 21 NY2d 403[1968], the discovery of facts and circumstances whose sole purpose is to launch a collateral attack on the underlying judgment by revealing possible defenses to the predicate action does not fall within this rubric. The information sought to be obtained from this witness with respect to the circumstances attendant at the time of the collision would serve only to undermine the judgment in the predicate action and thus is not relevant [*3]here. "

Here is a rare case in which attorney represents farm owners on a wrongful death case, which does not settle within policy limits.  Instead of settling for $ 300,000 there is a verdict of $ 4.2 million.  Afterwards, everything turns upside down.  The farmer’s insurance company approached the attorney’s legal malpractice carrier and from there on in the versions diverge:

"After the trial ended, Claverack approached Zurich with six "contemporaneous memorializations" of phone conversations among Mr. Roche and Ms. Hess and Ms. Buckley purporting to show that Mr. Roche had ignored Claverack’s instructions and fumbled the case. Claverack requested that Zurich, as holder of the attorney’s professional liability insurance policy, contribute to the judgment.

Mr. Roche argued that Ms. Hess and Ms. Buckley misstated their conversations with him and that the memos are defamatory fakes.

According to Claverack’s brief before the appellate court, Zurich eventually paid $193,750 toward the verdict and then canceled its policy with Mr. Roche.

Spencertown attorney David Seth Michaels said the dispute between Mr. Roche and Claverack ended a 25-year relationship in which Mr. Roche represented Claverack’s insureds. Of the panel’s ruling, Mr. Michaels said, "I am delighted and so is my client."

Mr. Roche’s action does not specify the damages he is seeking.
After the trial ended, Claverack approached Zurich with six "contemporaneous memorializations" of phone conversations among Mr. Roche and Ms. Hess and Ms. Buckley purporting to show that Mr. Roche had ignored Claverack’s instructions and fumbled the case. Claverack requested that Zurich, as holder of the attorney’s professional liability insurance policy, contribute to the judgment.

Mr. Roche argued that Ms. Hess and Ms. Buckley misstated their conversations with him and that the memos are defamatory fakes.

According to Claverack’s brief before the appellate court, Zurich eventually paid $193,750 toward the verdict and then canceled its policy with Mr. Roche.

Spencertown attorney David Seth Michaels said the dispute between Mr. Roche and Claverack ended a 25-year relationship in which Mr. Roche represented Claverack’s insureds. Of the panel’s ruling, Mr. Michaels said, "I am delighted and so is my client."

Mr. Roche’s action does not specify the damages he is seeking."
 

In the law, "attorney’s fees are awarded…" carry awesome power.  Traditionally, the American rule is that each side bears its own attorney fees unless there is an agreement or a statute which grants attorney fees to the prevailing party.  Attorney fees are awarded in L & T litigation, based upon the usual rental lease; in discrimination cases by statute, and so on.

Then there is the unique New Jersey legal malpractice fee shifting rule.  In a story by the National Law Journal, we see:

"A New Jersey appeals court ruled Feb. 18 that a plaintiff who won a $20,000 settlement from a lawyer and two business entities can pursue the lawyer for the entire $144,000 legal fee expended in the case, even though the non-lawyers paid two-thirds of the settlement.

The three-judge panel ruled in Geranio v. FEC Mortgage Corp. , A-4839-06, that under New Jersey’s unique fee-switching rules, West Orange, N.J., lawyer Anthony Gualano is liable for the entire legal fees of the plaintiff in the underlying case, which alleged malpractice in the handling of a property refinancing. The new and old mortgage holders were also defendants.

The suit by Steven Geranio alleged that Gualano, as lawyer for FEC Mortgage Co. — and as the only attorney at the closing — failed to spot a $15,000 error in the payoff statement. Geranio also sued FEC for not noticing the error and claimed that the mortgage company being paid off, LHW Development Corp., unjustly enriched itself by accepting the $15,000.

The case settled for $20,000 — the full substantive damages plus interest — but that didn’t end the matter.

Under Saffer v. Willoughby , 143 N.J. 256 (1996), the costs of pursuing errant lawyers are considered consequential damages of malpractice and can be recovered. That meant a malpractice liability trial was necessary to determine that a fee award was warranted.

Bergen County Superior Court Judge Lawrence Smith found Gualano liable and a subsequent judge, Richard Donohue, set the damages at $38,000 — not the $144,000 requested — on the principle that much of the plaintiffs fees were caused by the pursuit of the business entities.

That was wrong, the appeals court said. "The judge failed to consider the legal fees plaintiffs incurred in having to litigate claims against FEC and LHW in order to recoup the $15,000 overpayment," Judges Michael Winkelstein, Jose Fuentes and William Gilroy said in a per curiam opinion.

The judges said Gualano was negligent in various ways that caused the plaintiffs to pay off their mortgage. "Thus, were it not for Gualano’s negligence, plaintiffs would not have had to file suit against FEC and LHW to recoup the overpayment," they said. "The motion judge, therefore, should have considered plaintiffs’ counsel’s legal work [performed] before the $20,000 settlement was reached."

There have been rulings that lawyers can be assessed only the percentage of the plaintiffs fees attributed to the lawyers’ negligence if the percentage is apportioned at a trial.

In this case, the defendants agreed on a three-way split before the end of the trial. Gualano’s lawyer, Allan Maitlin of Sachs, Maitlin, Fleming & Green in West Orange, argued that the one-third split should apply to the fee as well or that there should be a retrial to apportion liability among the defendants.

But the court said Gualano agreed to the settlement knowing there was no court determination of percentage of liability and that he is on the hook for the cost of the pursuit of all the defendants."

Anecdotally, we see major economic changes in the US.  It changed the course of the Presidential elections, and it has changed the climate in legal malpractice.  Viewed through the lens of daily layoffs of attorneys, daily firing of staff, and realignments of law firms, this story from the American Bar Association underlines the trend.

"Attorney malpractice claims are escalating in numbers and intensity, making us wonder if clients, anxiously looking to recoup the hefty sums of money lost because of the struggling economy, are recalling the literal interpretation of Shakespeare’s well-known verse.

“Over the past several months, we have seen a dramatic increase in legal malpractice filings, a trend that would never been seen in a better economic environment,” Fisher, Rushmer, Werrenrath, Dickson, Talley & Dunlap shareholder John E. Fisher told the ABA Journal. “Now, more than ever, attorneys need to be mindful of their actions when dealing with clients."

In Florida, the depressed real estate market is driving many distressed buyers to look for any way out of housing contracts, including blaming their lawyers for their financial issues, said Mike Downey, a partner at Hinshaw & Culbertson.

“People are feeling a bit more desperate,” Downey said. Lawyers are delving into unfamiliar practice areas, and some clients are being less honest, putting attorneys at risk for professional liability issues, he added.

It’s not only clients who are spiteful. Downey said his phone is ringing with phone calls from lawyers complaining about malicious conduct from opposing counsel.

Chicago-based lawyer George B. Collins of Collins, Bargione & Vuckovich, agrees there is a meaner spirit to the recent spate of malpractice suits—and it’s aimed at unexpected targets. “The nastiness is hitting lawyers in substantial law firms, not the type of people you would expect to be in a malpractice suit,” Collins said. “It’s savage the way big firms are attacking each other.”