The NYLJ reports a Judiciary Law 487 case today in which the claim survives.  Empire Purveyors, Inc. v. Brief Justice & Kleinman, [subscription necessary] which was written by Justice Solomon in Supreme Court,  New York County, holds that Judiciary Law 487 is applicable in both of its applications.  The first application, deceit in an ongoing legal proceeding was supported by defendant’s representation that it was fully authorized to settle this commercial real estate case.  The second application was supported by the financial irregularities in the settlement transaction.

"Empire alleges that on or about November 2, 2004, unbeknownst to Plaintiff, Cook executed a Stipulation of Settlement (the "Stipulation") on behalf of Plaintiff which obligated Empire to pay $17,230.48 to settle the dispute. Complaint at ¶¶14, 15. Empire claims that Cook did not inform Empire of the terms of the Stipulation or obtain Empire’s consent prior to Cook’s execution of the Stipulation.2 Complaint at ¶29; Pinto Affidavit at ¶¶20, 29. The Stipulation was "so ordered" by the Court. Affirmation of David J. Fischman at ¶28. According to Plaintiff, Cook represented to Empire that "the judge ruled that we had lost the case and that the landlord had prevailed in its claim for additional rent and other monies" and that Empire "had to give him a bank check, the next day, payable to the landlord in the amount of $17,230.48." Pinto Affidavit at ¶19. Empire asserts that it "never agreed to settle the case, especially for an amount which far exceeded any imaginable amount that could possibly be owed to the landlord." Pinto Affidavit at ¶20. Nevertheless, Empire provided a bank check dated November 3, 2004 to Cook based on Cook’s representation that a judge had heard the case and ruled against Empire out of "fear of violating a court order." Pinto Affidavit at ¶21.

Empire alleges that the Stipulation "obligated the plaintiff to pay monies to the landlord in an inappropriate amount." Complaint at ¶29. Empire contends that the landlord was not entitled to receive the $17,230.48 payment from Empire as that payment included rent which was already paid, a payment for real estate taxes that were not due, and $3,000 for the landlord’s attorney’s fees when Empire was not required to pay the landlord’s legal fees. Pinto Affidavit at ¶¶35-37. Empire contends that it informed Cook that no rent was due for the period of December of 2003 to March of 2004 and that a credit was due to Empire for tax payments that were made to the landlord because of a tax abatement that the landlord had received. Pinto Affidavit at ¶17.

Empire further contends that the Stipulation improperly did not provide for the return of Empire’s security deposit. Complaint at ¶29; Pinto Affidavit at ¶38. Additionally, Plaintiff claims that Brief Justice waived Empire’s right to pursue a refund of real estate taxes which had been overpaid and waived Empire’s right to vacate any portion of the judgment. Pinto Affidavit at ¶39."
 

"With respect to the third cause of action, Defendants argue that Judiciary Law Sec. 487 is inapplicable because the alleged fraud was not committed during a legal proceeding. According to Defendants, this cause of action must be dismissed because Cook’s alleged conversion of payments made to Empire occurred after the landlord-tenant proceeding had ended. It is true that a Judiciary Law 487(1) claim must fail if the alleged "deceit or collusion" is not directed at a Court and did not take place during the course of a pending judicial proceeding. Costalas v. Amalfitano, 305 A.D.2d 202, 204 (1st Dept. 2003). However, Empire contends that Cook deceived the Court in a proceeding when he represented in paragraph 11 of the Stipulation that he was "fully authorized" to "draft, negotiate and execute" the Stipulation on behalf of Empire when he in fact was not.

Furthermore, Judiciary Law Sec. 487(2) applies where an attorney "willfully receives any money or allowance for or on account of any money which he has not laid out, or becomes answerable for." Empire alleges that Cook received monies sent by the landlord in connection with the landlord-tenant proceeding for Empire’s security deposit and converted and withheld them from Plaintiff. Based on the foregoing, Empire has stated a valid cause of action pursuant to Judiciary Law Sec. 487.

Defendants argue that Cook’s alleged conduct is not serious enough to trigger Judiciary Law Sec. 487 and cite Gonzalez v. Gordon, 233 A.D.2d 191 (1st Dept. 1996) in support of their argument. However, that case is distinguishable because, as the Court noted, there was "no evidence that defendant defrauded plaintiff or engaged in conduct intended to deceive." Id. at 191. This case involves allegations of fraud and deceit which must be taken as true on this motion. Contrary to Defendants’ argument, the allegations that Cook essentially settled a case without even informing his client, deceived the Court by representing that he had the requisite authorization, and then misappropriated monies that were paid to his client are serious enough to invoke Judiciary Law Sec. 487."
 

Because legal malpractice is always a "case within a case" it is a two step process.  The very nature of the two step process gives rise to defendant’s ability to brag over winning either of the two legs.  An example is Orick’s statement that they were vindicated, even after it was proven that the attorney violated his fiduciary duty.  It can be inferred that the jury determined that the attorney breached his fiduciary duty, but that the plaintiff would have lost control of her business anyway. Here, from the LA Legal Pad :

"The verdict on Tuesday came following a six-week trial and two days of deliberation in Benesch v. Tandler, No. 317187 (San Francisco Co., Calif., Super. Ct.). Plaintiff Fritzi Benesch, the founder of clothing company Fritzi California, claimed Hoisington didn’t make it clear she was giving up control of her company to her daughter and son-in-law.

Jurors did find that Hoisington failed his obligation to his client by breaching a fiduciary obligation, but that it was not a substantial factor in harm to the client. Hoisington spent more than 30 years as a trusts and estates attorney in the San Francisco office of Orrick prior to his retirement.

 

Note the difference in this report.  Here is a squib from theAmLaw Daily.:

"When a firm’s professional reputation is at stake, going to trial is a nerve-racking proposition. But Orrick Herrington & Sutcliffe’s insistence that it provided proper counsel to a multimillionaire businesswoman was vindicated on Tuesday: A San Francisco superior court jury found Orrick and retired trusts and estates partner William Hoisington not liable for legal malpractice and breach of fiduciary duty, according to a statement from the firm’s lawyers at Keker & Van Nest.
The case was brought in 2000 by Fritzi Benesch, the founder of a clothing company called Fritzi California. In the 1980s, through a series of estate planning transactions, Benesch passed control of her clothing business to her son-in-law and daughter, with whom she said she had "a perfect relationship." But when Benesch later discovered that her husband had been unfaithful, the family fell apart. In a malpractice suit filed in 2000, Benesch claimed that she had been duped by Orrick and Hoisington into signing away her company."
 

Two huge names in the celebrity Blogosphere, Perez Hilton and Samantha Ronson along with Lindsay Lohan join together with lesser known attorney Martin Garbus to again demonstrate the ubiquitous nature of legal malpractice.  We are betting that most readers will know the facts of this case.  Disputes break out in every sphere, lawyers are called in, and often, legal malpractice complaints follow.  Here is a celebrity legal malpractice story:

From the LA Times:

"At the bottom of the failed libel suit and the pending malpractice action is a one-car crash: Lohan’s Mercedes-Benz versus some shrubs in Beverly Hills on May 26, 2007. Police reported finding a small amount of cocaine in her car. The actress eventually entered rehab and pleaded guilty to driving under the influence.

About a week later, according to the libel suit, Hilton, whose real name is Mario Lavandeira, posted an item on his blog linking to a juicy story on an another blog called Celebrity Babylon. Citing unnamed sources, Celebrity Babylon reported the cocaine belonged to Ronson. Additionally, according to the suit, the story said Ronson "has accumulated a substantial side income taking her pal in front of paparazzi cameras for money."

"With friends like Samantha Ronson, Lindsay doesn’t need enemies," Hilton blogged. Two weeks later, he posted a picture of himself on perezhilton.com wearing a sweatshirt emblazoned with "Blame Samantha" and referred to her as a "lezbot dj", according to the libel suit.

Ronson was irate, and on the recommendation of a friend, turned to Garbus. Then 72, he had a vaunted reputation — Fortune called him "one of the country’s most able 1st Amendment lawyers" last year — and a practice that included high-profile clients. At the time he met Ronson, he was representing Don Imus in a suit against CBS.
 

Difficulties emerged early on. In court papers in the malpractice suit, Garbus alleged that Ronson often didn’t return his calls or answer e-mails. She forgot meetings and kept him waiting. Garbus had represented many people whose fame was based on unquestionable achievement — Andrei Sakharov, Samuel Beckett, Andy Warhol, Allen Ginsberg, Spike Lee — but Ronson, whose celebrity was rooted in titillation and limited largely to consumers of pop culture, often didn’t pick up the phone when he called, he alleged.

Regardless, the defamation suit progressed. Celebrity Babylon agreed to issue a retraction and an apology in exchange for Ronson dropping her claim, according to court filings in the malpractice suit. But that deal didn’t interest Hilton, no stranger to defamation suits."

An attorney must carefully and assiduously guard his client’s confidences, secrets and communications with the attorney.  This remains true until the attorney has to defend himself.  Must this defense be to criminal charges, or to ethical charges only?  The answer is set forth in a recently decided case in the First Department.Hélie v McDermott, Will & Emery ; 2008 NY Slip Op 09289 ; Decided on November 25, 2008 ; Appellate Division, First Department
 

"Code of Professional Responsibility DR 4-101(C) (22 NYCRR 1200.19[c]) provides: "A lawyer may reveal: . . . (4) Confidences or secrets necessary . . . to defend the lawyer . . . against an accusation of wrongful conduct." We decline to make defendants’ invocation of this rule dependent on plaintiff’s demonstration of a prima facie case of defendants’ liability (see Justice Stallman’s later ruling on a related matter in this case, 18 Misc 3d 673, 683 [December 17, 2007]). "

"Even if plaintiff were not defendants’ client, DR 4-101(C)(4) does not require the non-client’s allegation of wrongful conduct to involve criminal or regulatory charges rather than malpractice (see Restatement [Third] of Law Governing Lawyers § 64, Comment c)."
 

A tip of the blogging hat to Shareholder Oppression Blog which reports this Texas case in which business is looking for investors and plaintiff comes along.  His investment is somewhat complicated, and the company’s attorney suggests some changes. Here is the opinion.  While the attorney was not held in this case, we expect that the company will be his next opponent.

From the blog:

"Triumph Healthcare, LLP was a startup venture seeking investors, and was formed as a limited liability partnership. Triumph reached an agreement with Span to invest $500,000, of which $200,000 would be capital and $300,000 would be a loan. Triumph was represented by attorney Ivan Wood. Triumph consulted with Wood prior to reducing the agreement with Span to writing. Woods suggested that Triumph issue span "Series A preferred partnership units" instead of incurring $300,000 in debt. The idea was proposed to Span, which agreed on the understanding that the $300,000 would be paid back, the preferred units would be converted to common units, and Span would end up with a 10% ownership interest in Triumph. Triumph and Span signed a "Preliminary Agreement" which stated that Triumph would incorporate the terms of the preliminary agreement into the partnership documents. Ultimately, when Wood drew up the final documents, however, he changed the terms to provide that Span’s ownership would be diminished as the preferred units were paid off. The change was not disclosed to Span, which signed the final documents, apparently without reading or understanding the changes."

"The Court does not address the issue of fiduciary duties between Span and Triumph, but without question Triumph did owe its partner fiduciary duties under Texas law, and these duties would be violated by changing the terms of the partnership interests without disclosure and knowingly taking advantage of the partner’s ignorance of the change. The question was whether the partnership’s attorney could be held liable individually as the person who effected that change."
 

 

 

 

Typically, legal malpractice follows filing too late; here there may be legal malpractice in filing too early.  This situation is more common than one might imagine, and in the current economic circumstances, may re-occur needlessly.

The Southeast Texas Record reports the facts of a case similar to ones we have seen.  Plaintiff has a dischargable US tax debt and files a Chapter 7 Bankruptcy.  Problem is that the tax debt must have been in existence for a period certain, and too many attorneys calculate from April 15 of the tax year.  This may unfortunately not be the operative date, as the plaintiff may have filed for an extension, or in some other permitted way altered the onset of the tax obligation.

Result?  Tax debt not discharged.  Here is an example:

"Stacey R. Robinson Allison filed Chapter 7 bankruptcy on June 29, 2000, through attorney Frank J. Maida with the Maida Law Firm in order to discharge her 1996 federal income tax liability.

According to the suit filed Dec. 2 in Jefferson County District Court, the liability was created by Allison’s husband at the time, and the IRS determined she was a co-debtor.

Allison claims that Maida knew one of her main reasons for filing bankruptcy was to discharge the income tax liability, the suit states. Maida is board certified in consumer bankruptcy law by the Texas Board of Legal Specialization.

However, Maida improperly filed the Chapter 7 bankruptcy petition and failed to tell Robinson, she claims.

The bankruptcy was filed in federal court in the Beaumont Division of the Eastern District of Texas on June 29, 2000.

"On Oct. 24, 2000, the plaintiff’s Chapter 7 bankruptcy was finalized, and she was discharged by the Bankruptcy Court," the complaint states. "The defendants advised plaintiff that this discharge did in fact discharge her from the 1996 federal income tax liability, when in fact it did not."

After she began receiving letters from the IRS attempting to collect her 1996 federal income tax liability, Allison approached Maida who repeatedly told her she did not have to pay the bills, the suit states.

In 2006, Allison called another attorney to deal with the IRS, she claims.

Allison was told for the first time that her tax liability was not discharged because her Chapter 7 Bankruptcy Petition was filed too early, she claims.

It should have been filed after Oct. 15, 2000 — not as early as June 29, 2000 — for her tax liability to be discharged, according to the complaint.

"Even more incredible, the Plaintiff’s then husband had his 1996 federal income tax liability discharge in bankruptcy, because his Chapter 7 bankruptcy petition was timely filed," the suit states.

Because of Maida’s actions, Allison has sustained losses of at least $150,000, she claims.
 

Town buys property previously owned by bus company. They plan to remediate the property, and turn it into a park.  Town’s Attorney is Democratic.  Town board is Republican majority, soon to change after election.  Result?  Attorney is potentially a legal malpractice defendant, solely dependent on whether Republicans or Democrats have the majority.

The Story, found at MyCentralJersey.com, is as follows:

"Just weeks before the Borough Council’s political majority switches from Republican to Democrat, the Republicans next week are planning to hire a lawyer to sue former Borough Attorney Patrick J. Diegnan for malpractice.  The Republicans have placed a resolution on the agenda for the council’s Monday, Dec. 8 meeting that would hire Somerville attorney Peter A. Ouda to represent the borough in the potential lawsuit against Diegnan. Diegnan was borough attorney for 25 years before retiring that post in 2007. He also is a Democratic state assemblyman and chair of the borough’s Democratic organization.

Council President Robert Bengivenga Jr., a Republican, said the grounds for the malpractice suit are Diegnan’s handling of a 2006 borough land purchase. Environmental reports showed the land — last used as a bus depot — was contaminated and could cost up to $450,000 to clean up. The land was purchased for $750,000 using funds from the Middlesex County Open Space Trust Fund. Seventy-five thousand dollars of the purchase price was set aside for environmental remediation. The borough signed a hold-harmless agreement absolving the former owner of the land, Suburban Transit Corp., of any liability for the contamination.

Bengivenga said the borough overpaid for the property because he said the appraisal that valued the land at $700,000 was contingent upon the land being clean. He said the borough should not have signed the hold-harmless agreement, and violated state statute by purchasing the land without passing an ordinance.

Bengivenga and fellow Republican Matthew Anesh lost re-election campaigns in November. When their victorious Democratic challengers are sworn in next month, the Democrats will have a 4-2 majority on the council. Bengivenga said the Republicans are acting now to stop the Democrats."
 

Continuing in the turnabout tradition of legal malpractice defense, wherein the defendant attorney takes on the coloration of its previous adversary in order to defeat a "case within a case’ is this matter: Lederer de Paris Fifth Ave., Inc. v Jordan & Hamburg, LLP ; 2008 NY Slip Op 09462
Decided on December 2, 2008   Appellate Division, First Department .  Plaintiff apparently lost the case below, when its attorney failed to produce certain documents in discovery.  What is the defense to a preclusion order?
 

"The record supports the motion court’s conclusion that Lederer failed to establish that its failure to produce certain documents in the underlying action, resulting in the preclusion order, was the result of defendants’ negligence rather than the "intransigence" of plaintiff’s principal. In [*2]any event, Lederer fails to show that it suffered any actual damages as a result of defendants’ conduct (see Postel v Jaffe & Segal, 237 AD2d 127 [1997]"

One of the problems in figuring out a legal malpractice case by reading an appellate decision, is that even when the court gives a detailed set of facts, thee are many connections either not apparent or missing.  Here in Ito v. Suzuki, 2008 NY Slip Op 9437, Decided December 2, 2008, Appellate Division, 1st Department, the shenanigans of this real estate deal are dizzying.

"Plaintiff, who does not speak English, was induced to make an investment of $1 million to acquire a two-thirds interest in Keystone International LLC and to sign an operation agreement that gave defendant Sam Suzuki permanent managing control of its affairs. Keystone took title to a property consisting of 41 condominium units owned by an entity controlled by Hiroyoshi Hasegawa. The transaction was in derogation of "a clear and unequivocal court order" enjoining transfer of the property due to the pendency of divorce proceedings (Hasegawa v Hasegawa, 281 [*2]AD2d 594, 595 [2001]). The complaint adequately pleads a cause of action for fraud, alleging that Sam Suzuki used plaintiff’s funds to obtain property with a cloud on its title (because of the injunction against transfer and the filing of a lis pendens), for an inflated price and under financing terms onerous to plaintiff. It further asserts that Suzuki diverted funds from Keystone to satisfy personal obligations, which included payment of a $1.7 million settlement of a fraudulent conveyance claim brought by Hiroyoshi Hasegawa’s wife.

The complaint alleges that Suzuki, represented by Rich, defrauded plaintiff, who maintains that she was represented by Roshco during that period. A fair reading of the allegations against the attorney defendants is that they failed to disclose the extent to which the transaction was detrimental to plaintiff. Lacking, however, is the assertion of any misrepresentation by either Roshco or Rich that was calculated to induce plaintiff’s detrimental reliance so as to support a claim of fraud (cf. Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92, 100 [2003]) and, absent any underlying tort, the conspiracy claim is likewise without foundation

Given that the detailed facts concerning the extent of the attorney defendants’ involvement in the fraudulent scheme are peculiarly within the knowledge of other parties (see Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194 [1968]) and the substance of the alleged wrongdoing is set forth in the affidavits of plaintiff and her brother, the circumstances surrounding the proposed cause of action are sufficiently stated to support amendment of the complaint (Zaid Theatre Corp. v Sona Realty Co., 18 AD3d 352, 354-355 [2005]; cf. Non-Linear Trading Co. v Braddis Assoc., 243 AD2d 107, 116 [1998])."

 

 

During the campaign season, news reports ouline the amounts of money individuals donate to candidates, and there are websites which track donations by name.  Recently in West Virginia, a legal malpractice case involving the Massey Coal company there made news when the US Supreme Court decided to hear the question of whether campaign contributions required recusal of a State Supreme Court justice.

Here, different state, same issue. Debra Cassens Weiss reports in the ABA Journal. "A motion filed in a legal malpractice appeal contends that four of Illinois’ seven Supreme Court justices should recuse themselves because of campaign contributions by the defendant law firm, Corboy & Demetrio.

If the motion is granted, the court would not have enough votes to issue an official ruling, the Chicago Sun-Times reports. The Illinois Constitution has no provision for temporary judicial appointments.

The motion says Corboy & Demetrio has made donations ranging from $1,500 to $52,000 to campaigns of the four justices, according to the Sun-Times.""The underlying malpractice suit resulted in a $100,000 judgment against Corboy & Demetrio, the story says. The suit contends the well-known plaintiffs firm botched a suit filed on behalf of a Georgia woman killed in a 1995 car crash. The suit names former Corboy lawyer G. Grant Dixon III and managing partner Robert Bingle, the story says. The firm has admitted the suit was dismissed because it failed to follow a court order, but denies other allegations, according to the Sun-Times."