Yesterday we examined this case: Whalen v DeGraff, Foy, Conway, Holt-Harris & Mealey ,2008 NY Slip Op 06342 [53 AD3d 912] ,July 17, 2008 ,Appellate Division, Third Department  on the issue of when an expert is necessary.  Today, we look at how a referring attorney, [or a supervising attorney] may become responsible for the negligence of the referred attorney. 
 

In this case attorney 1 obtained a judgment, and retained attorney 2 to collect- protect- perfect the judgment against debtor’s estate in Florida.  Attorney 2 did not protect, and the judgment was noncollectable.  Was attorney 1 responsible for the shortcomings of attorney 2?

"Plaintiff commenced this action against defendant alleging, among other things, that defendant was vicariously liable for the negligence of Bailey and/or negligently failed to supervise Bailey in filing the notice of claim in Florida. Defendant then moved for summary judgment dismissing the complaint and plaintiff cross-moved for summary judgment. Supreme Court denied the respective motions in a July 2006 order. Plaintiff moved for leave to reargue and/or renew and defendant moved for reargument. Upon reargument, Supreme Court, in November 2007, adhered to its original determination. The parties now cross-appeal from both the 2006 and 2007 orders.[FN2]

Plaintiff contends that defendant is liable for damages resulting from Bailey’s failure to file the notice of claim either on the basis that defendant had a nondelegable duty to file such notice of claim or based upon defendant’s negligent supervision of Bailey. Defendant maintains that its duty to plaintiff was completely met when it retained Bailey to file the notice of claim and that it was entitled to rely on Bailey to perform that act.

The general rule is that "[a] firm is not ordinarily liable . . . for the acts or omissions of a lawyer outside the firm who is working with firm lawyers as co-counsel or in a similar arrangement" (Restatement [Third] of Law Governing Lawyers § 58, Comment e), as such a lawyer is usually an independent agent of the client. Here, however, defendant solicited Cagan and Bailey and obtained their assistance without plaintiff’s knowledge. Although plaintiff was later advised that Bailey had been retained by defendant, she had no contact with Bailey and did not enter into a retainer agreement with that firm. Defendant concedes that plaintiff completely [*3]relied on defendant to take the necessary steps to satisfy her judgment against Gerzof. Under these circumstances, defendant assumed responsibility to plaintiff for the filing of the Florida estate claim and Bailey became defendant’s subagent (see Restatement [Third] of Law Governing Lawyers § 58, Comment e). Therefore, defendant had a duty to supervise Bailey’s actions (see Restatement [Third] Agency § 3.15; Restatement [Second] Agency §§ 5, 406).[FN3] "

The short answer to the question of when an expert is necessary in legal malpractice is "most of the time."  Here in this case, Whalen v DeGraff, Foy, Conway, Holt-Harris & Mealey ,2008 NY Slip Op 06342 [53 AD3d 912] ,July 17, 2008 ,Appellate Division, Third Department  we see the slightly longer answer on a motion for summary judgment [same rule would obtain for trial]:
 

"While plaintiff would ordinarily be required to submit an affidavit of an expert setting forth the applicable standard of care in order to obtain summary judgment in her favor (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]), no such affidavit is necessary here because it is undisputed that defendant knew of the deadline for filing the notice of claim and took no steps whatsoever to even inquire as to the status of that filing between February 1996 and January 1998 (see Shapiro v Butler, 273 AD2d 657, 658 [2000]; S & D Petroleum Co. v Tamsett, 144 AD2d 849, 850 [1988]). Thus, plaintiff’s motion for summary judgment should have been granted to the extent of awarding her judgment as a matter of law with respect to defendant’s negligence in failing to supervise Bailey. In light of this determination, we find that Supreme Court properly denied defendant’s motion for summary judgment dismissing the complaint (see Zuckerman v City of New York, 49 NY2d at 562; Guiles v Simser, 35 AD3d 1054, 1055 [2006]). "

We are continuing to discuss the Gotay case, 2008 NY Slip Op 08432. 

Defendants remain in the case on the basis that it was unclear that they intended to, or actually had ended their representation.  CPLR 321 is the manner in which an attorney ends the relationship, absent a court order.  In this long-running medical malpractice case, which transcended the commencement by purchase of an index number period, nothing was clear:

"Defendants’ statute of limitations defense is premised upon the contention that their [*3]representation of plaintiff did not continue within the statutory period. "The continuous representation doctrine . . . recognizes that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered’" (Shumsky v Eisenstein, 96 NY2d 164, 167 [2001], quoting Greene v Greene, 56 NY2d 86, 94 [1982]). The statute of limitations is tolled while the attorney continues to represent the client on a particular matter, in part to protect the professional relationship (see Shumsky, 96 NY2d at 167-168). However, the representation must be related to the specific area that is the subject of the malpractice claim (id. at 168) and "there must be clear indicia of an ongoing continuous, developing, and dependent relationship between the client and the attorney’" (Aaron v Roemer, Wallens & Mineaux, 272 AD2d 752, 754 [2000], lv dismissed 96 NY2d 730 [2001], quoting Luk Lamellen U. Kupplungbau GmbH v Lerner, 166 AD2d 505, 506 [1990]).

The HHM defendants contend that the subject attorney-client relationship terminated in January 1998, or at the very latest on January 28, 1999. They urge that on the earlier occasion HHM partner Steve Marchelos met with plaintiff and her father and advised them that the medical malpractice action was dead and that they had the option to pursue a legal malpractice action against their former attorneys, Kaufman & Siegel. The record, however, is not in accord with this characterization of what transpired at the 1998 meeting. It is clear from Marchelos’s deposition testimony that, at the time of the 1998 meeting, he simply did not know the actual status of the medical malpractice action and, accordingly, could not have accurately represented that the action was certainly "dead." Indeed, Marchelos testified that, as of the date of the meeting, he was still attempting to retrieve the court file and that he fully intended "to continue in trying to follow through, maybe with a resurrection of the file." There is no indication in the record that Marchelos made any contrary representation to plaintiff; he nowhere claims to have told plaintiff that HHM’s efforts on her behalf had definitively concluded. Nor is there other evidence that that impression had been conveyed. There is no indication that the firm’s file on the case was either offered by Marchelos or requested by plaintiff or her father and, in fact, the file remained in the firm’s possession, where it evidently continued to be viewed as active, since it was among the files that defendant Handwerker took with him to Ross Suchoff in January 1999. "

"An attorney is required to provide reasonable notice to the client when withdrawing from representation (see CPLR 321[b][2]; Rules of App Div, 1st Dept [22 NYCRR] § 604.1[d][6]), and no definition of reasonable notice would require a client to infer, from ambiguous action or inaction on the part of her attorneys, much less on the part of an attorney with whom she had no relationship, that she is no longer represented. Particularly under the circumstances obtaining here, where the entire course of the litigation had been fraught with delay and a lack of communication between client and counsel, and where there had been a series of largely inactive yet persistent attorney-client relationships, more than equivocal behavior was required to sever the representational relationship. The elaborate inferential constructs which the dissent finds so irresistible are not appropriately utilized to impute knowledge of the status of an attorney-client relation. It would have been a simple matter for HHM to advise plaintiff that in its estimation the medical malpractice action was unsalvageable and, consequently, that their relationship had run its course. Inasmuch, however, as the HHM defendants failed to meet their burden as proponents of the summary judgment motion to show prima facie that such unequivocal notice had been afforded, the motion was properly denied."

Law.Com reports the Gotay v. Brietbart2008 NY Slip Op 08432
Decided on November 6, 2008
Appellate Division, First Department
Lippman, P.J., case.  This case addresses what may be the last reference to a change in New York law which roiled the waters for several years.  Once, long ago, an action was commenced by service of the summons, etc, upon the defendant.  No index number was necessary, and there was no oversight of these cases.  The legislature changed to the federal system, where an action was commenced by purchase of an index number.  Besides serving a revenue creation process, at least it was clear that an action was commenced on a date certain.  What of the cases already in progress? 

This Gotay legal malpractice case illustrates one of the problems.  "Although Supreme Court granted defendants’ motion to dismiss the action for failure to state a cause of action, this Court reversed (14 AD3d 452 [2005]), finding, inter alia, that the complaint adequately alleged that HHM had been negligent in failing to apply for an order of filing nunc pro tunc in the medical malpractice action (at 454). Defendants then moved for summary judgment, asserting that the action was time-barred and that there was no proof of damages attributable to the alleged negligence. Plaintiff cross-moved for summary judgment, arguing that the medical malpractice should be deemed admitted. Ultimately, upon reargument, Supreme Court denied the HHM defendants’ motions, finding that those defendants had failed to make a prima facie showing that the attorney-client relationship had ended more than three years before plaintiff commenced this action. "

Plaintiffs were aspiring Broadway Musical producers, and contracted for the rights to a Barry Manilow production, Harmony.  Alas, it was not to be.  Producing a play/musical for Broadway takes a lot of money, and it appears from the court decision that this production was "undercapitilized,"

Things went badly, and ended in the producers losing their rights to the script.  Legal malpractice litigation ensued, and last week plaintiffs lost the case.      In Snorkel Productions, Inc. v. Beckman, Lifeberman & Barandes LLP  Justice Lowe determined that the legal malpractice case must fail.  It all seemed to turn on the undercapitilization, in which about $ 5-8 million was necessary to produce a Broadway musical, and the producers had great difficulty raising the money.  Plaintiffs claimed that the attorneys did not give them the correct date upon which to make a payment.  For lack of the payment, the right to produce the musical ended.

Some time ago, the Court of Appeals decided Santulli v Englert, Reilly & McHugh, P.C., 78 N.Y.2d 700, [1992].  The upshot of that decision was that plaintiff could plead both negligence and breach of contract, and each had different statutes of limitation, 3 and 6 years.  This led to a plethora of claims against attorneys, in fraud, breach of contract, breach of fiduciary duty.  For the most part, these were inventive ways around a three year statute of limitations.  Then the legislature intervened, and as a result there is a single blanket three year statute of limitations.

Here in this case , Carl v Cohen ,2008 NY Slip Op 08252 ,Decided on October 30, 2008
Appellate Division, First Department  we see that while the legal malpractice claim continues, the balance of the claims have been dismissed. 
 

"The fraud claim was duplicative of the legal malpractice claim since it was "not based on an allegation of independent, intentionally tortious" conduct (Sabo v Alan B. Brill, P.C., 25 AD3d 420, 421 [2006]) and failed to allege "separate and distinct" damages (White of Lake George v Bell, 251 AD2d 777, 778 [1998], lv dismissed 92 NY2d 947 [1998]). The court did not improvidently exercise its discretion in denying leave to replead the fraud claim because the purportedly new evidence was insufficient to allege independent conduct not already included in the legal malpractice claim.

The tortious interference claim was insufficient because it failed to allege that defendant had directed his fraudulent conduct at a specific third party, that said party would have hired plaintiff but for defendant’s misconduct, and that defendant’s wrongful conduct was motivated solely by an intent to injure plaintiff (see Carvel Corp. v Noonan, 3 NY3d 182 (2004). "

We’ve been revisiting this theme over the past year. When one thinks legal malpractice, the most common image is that of the personal injury client whose statute of limitations was blown.  However, today we see a significant rise of legal malpractice in the financial field.  Trustees in bankruptcy, receivers and cases coming out of the Enron and REFCO cases are becoming much more common.  Here is an article from Law.Com by Susan Beck about Weil Gotshal, Refco
and Mayer Brown, with a senior partner facing criminal charges.
 

"Understandably, Mayer Brown partners were worried about their exposure. The firm had just paid a huge settlement because of another client caught in a fraud, Commercial Financial Services Inc. Several former Mayer Brown partners say the firm paid roughly $100 million in 2005, and not all was covered by insurance. At the firm’s annual partners meeting in April 2006, Mayer Brown’s then general counsel, James Holzhauer, told partners that if the firm was hit with another big claim, it risked being thrown out of the lawyer-owned mutual insurance company Attorneys’ Liability Assurance Society, according to three former partners. At the same time, Holzhauer and others in management tried to reassure partners about Refco. Recalls one: "They kept saying, don’t worry about Refco. It’s not like CSF." (Holzhauer became chairman in June 2007.)

But trouble was brewing. The bankruptcy court had appointed Joshua Hochberg as examiner to explore possible claims against Refco’s outside professionals, and he brought a prosecutor’s zeal to his task. The Washington, D.C., partner at McKenna Long & Aldridge had been chief of the fraud section at the U.S. Department of Justice and had supervised the Enron task force. For Refco, he amassed more than a million documents and interviewed 33 people. (So as not to interfere with the criminal investigation, he did not interview any Refco insiders.)

During the remainder of 2007, the bad news for Collins and Mayer Brown snowballed. Hochberg’s report was released that July and came down hard on Collins and Mayer Brown, stating that the firm could be sued for malpractice, aiding and abetting the breach of fiduciary duty, and, most alarmingly, aiding and abetting fraud. In late July 2007, on the heels of this report, Weil sued Mayer Brown for RICO fraud and other claims, seeking more than $735 million for THL. The next month, Refco’s trustee Kirschner sued Mayer Brown, seeking $2 billion. The following October, Mayer Brown was added as a defendant to the Refco shareholders’ complaint.

Mayer Brown wasn’t the only one targeted for civil liability. Bankruptcy trustee Kirschner also sued THL, Refco’s auditors, the underwriters for the IPO, and even some of the parties who had done round-trip loans with Refco. In fact, the only one connected to Refco who didn’t get sued was Weil. The firm may have escaped a lawsuit because of a friendly relationship with the trustee’s lawyers at Quinn Emanuel Urquhart Oliver and Hedges, who didn’t feel comfortable suing a firm that refers work to them. "We advised the trustee early on that, based on our working relationship with Weil, Quinn Emanuel would not undertake to investigate or bring claims against Weil," says one partner at Quinn. Kirschner hired another law firm, Milbank, Tweed, to bring claims against THL, and it’s not clear if Milbank reviewed possible claims against Weil. Kirschner and Milbank declined to discuss the matter.

On the morning of Dec. 18, 2007, Mayer Brown partners were summoned to a meeting. Speaking from New York, Chairman Holzhauer informed the lawyers that Collins had been indicted. "It was short and to the point," said one lawyer. "He said Joe and the firm had engaged in no wrongdoing." The partner adds, "It shook me. I was not expecting this news." Attorneys who gathered in New York openly asked if this might lead to an Arthur Andersen-type crisis that could bring down the firm."

Do politics play a part in justice?  Often clients believe that a judge is biased either for them or against them.  At times the client ascribes that bias to politics.

Attorneys make large contributions to judicial campaigns.  A recent article in the NYLJ described one upstate powerhouse law firm which routinely made contributions of $ 10,000 or more to judicial campaigns.

Here is a story from the Gale Group, by Henry Gottlieb  via the New Jersey Law Journal which outlines plaintiff’s suggestion that a defense firm obtained a defense personal injury case on the basis of politics, and then committed legal malpractice.

"In a rare malpractice complaint against a defense firm, an insurer charges that Cleary, Alfieri & Jones obtained a personal injury case against Monmouth County through political connections and botched it, causing a $250,000 loss.

North River Insurance Co. is suing the Matawan firm and PMA Management Group, the third-party administrator of Monmouth County’s self-insurance program. The county settled the underlying case for $450,000 and paid $200,000 of it, leaving excess carrier North River with a bill for the remainder.

Among the defendants is Caroline Casagrande, a former Cleary, Alfieri lawyer who is now a first-term Republican assemblywoman from Monmouth County.The case has been under way in Morris County for a year without publicity, but politically charged questions are now bubbling to the surface: Did the firm obtain the work through political connections? Was it incapable of doing the work or unwilling to do a good job because it was getting a flat rate? And if any of that is true, is it relevant to the malpractice claim?

The insurance company’s lawyer, William Voorhees, who has a firm in Morristown, subpoenaed name partner James Cleary for a Sept. 18 deposition and told him to bring documents about political contributions, county contracts and governmental appointments of lawyers in the firm.

Cleary has been an assistant county counsel and counsel to the Western Monmouth Utilities Authority. "