In this Case  Egnotovich v. Katten Muchin Zavis & Roseman LLP, 604101/06 , Decided January 23, 2008 ,Justice Bernard J. Fried
NEW YORK COUNTY ,Supreme Court     Plaintiffs joined a vacation club in which they each deposited $ 400,000, and the group was to purchase or lease apartments or houses in prime vacatiion spots.  These spots included Paris, Mexico, Teluride, and other hot spots.  More than $1.6 million was collected, and the Katten law firm drafted escrow agreements in which it was to hold 80% of the collections and pay them out when the club gave the law firm vouchers.  The money was collected and paid out.

For reasons unstated [bad locations? no houses actually available?] some of the members sue the law firm for fraud and escrow violations.  "Plaintiffs are former founding members of nonparty Havens, Inc. (Havens), a resort destination club in the business of acquiring vacation properties to be used by the club members. Funding for these property acquisitions was to be generated principally through the financial contributions of the founding members. To become founding members, plaintiffs were required to sign a membership agreement, and to pay $150,000 in membership dues. A portion of the membership dues was to be held as a deposit in escrow. Defendant Katten Muchin Rosenman LLP, sued here as Katten Muchin Zavis & Roseman LLP (Katten), acted as escrow agent for the escrow account. In 2006, Havens failed as a going concern, and is now apparently without funds to pay damages suffered by plaintiffs. Plaintiffs then brought this action against Katten seeking return of their deposits, and alleging wrongful release of escrowed funds and furtherance of fraud by the club’s sponsors. Katten now moves for summary judgment dismissing the amended complaint1 on the ground that it fails to state a cause of action, and is contradicted by clear and unambiguous documentary evidence.

For the reasons set forth below, Katten’s motion is granted. "

"absolutely secured were not collateral to the Membership Documents (see e.g. Martian Entertainment , LLC v. Harris, 12 Misc 3d 1190[A], * 5 [representations underlying fraudulent inducement claim must be "collateral to the contract"]). To the contrary, the degree of security backing the Deposits is expressly provided by the Certificates (see Certificate, ¶1 [the membership deposits are subject to refund 30 years from the date of the Certificate and "pursuant to and subject to the terms and conditions of the Membership Agreement and the Membership Plan]"; id., ¶2 [the refund right "is backed by and subject to the availability of the assets of (Havens)"]). Indeed, it is plaintiffs’ own position that each of the Membership Documents "discusses Deposits and their use and repayment . . . and thereby implicates use of an escrow" (Pls Facts, ¶¶2, 4, 6). An issue "central" to a contract cannot be construed as collateral to that contract (PSI Intl., Inc. v. Ottimo, 272 AD2d 279 [1st Dept 2000]).

Moreover, even fraudulent inducement requires "misrepresentations of present Facts (rather than merely of future intent)" (Martian Entertainment, LLC v. Harris, 12 Misc 3d 1190[A], * 5). Plaintiffs allege that Havens promised that "deposits would be handled in a specified way," that they "would be held in escrow . . . for the protection and benefit of the Founding Members," and that "[Founding Members] would be protected by the continuing existence of cash on deposit or real estate available to fund repayment if the venture failed" (Opp Br., at 24, 25 [emphasis added]; Egnotovich Aff., ¶6 [emphasis added]; see also Loeb Aff., ¶¶4-5). To the extent, if any, that these representations made by Havens are untrue, they are broken promises, and not fraudulent statements of fact (see e.g. Morgan, Lewis & Bockius LLP v. IBuyDigitial.com, Inc., 14 Misc 3d 1224[A], 2007 NY Slip Op 50149[U], *7 [Sup Ct, NY County 2007] [dismissing counterclaim that plaintiff "fraudulently induced (defendant) into entering the engagement letter by stating that (plaintiff) would be personally involved in handling the IPO, that the fees would be capped at $425,000, that the IPO would be consummated by March 2005 and that the legal fees charged would be limited to work on the IPO"] [emphasis added]; Ullmann v. Norma Kamali, Inc., 207 AD2d 691, 692-693 [1st Dept 1994] ["cause of action for fraud does not arise" based on "failure to perform promises of future acts"] [citation omitted]).

Consequently, the aiding and abetting fraud claim must be dismissed."

CELEBRITY CRUISES INC., and FANTASIA CRUISING INC., Plaintiffs, – against – ESSEF CORP., PAC-FAB, INC., and STRUCTURAL EUROPE N.V. (f/n/a SFC), Defendants.

96 Civ. 3135 (JCF)

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
2008 U.S. Dist. LEXIS 568
January 4, 2008, Decided

This is a cruise line injury action. “After passengers sued plaintiff cruise line for injuries from an illness suffered while on a trip, the cruise line sued defendant manufacturer, which had designed, manufactured, and distributed the water filter in the whirlpool spa where the illness originated. After two damages trials, which resulted in an award of $ 15 million lost profits award for the cruise line, the parties filed various motions regarding damages.”

“This case has been litigated in installments. Having agreed to proceed before me for all purposes pursuant to 28 U.S.C. § 636(c), the parties stipulated to determination of all liability issues–those arising out of Celebrity’s claims as well as those related to the passengers’ claims–in a single bellwether trial. That trial took place in May 2000. The jury returned a verdict in favor of the passenger plaintiffs and against both Celebrity and Essef. The jury also found in favor of Celebrity on its claims against Essef, and a damages trial based [*4] on that determination was conducted in the spring of 2006. When the jury in the 2006 damages trial returned a verdict in favor of Celebrity for approximately $ 190 million, Essef moved for judgment as a matter of law or, in the alternative, for a new trial. I granted that motion in part, awarding judgment to Essef on one category of damage claims and ordering the retrial of another. Celebrity Cruises Inc. v. Essef Corp., 478 F. Supp. 2d 440 (S.D.N.Y. 2007) ("Celebrity IV"). A second trial on damages was held in June 2007, and this time the jury found Essef liable to Celebrity for approximately $ 15 million in lost profits.

“Second, Celebrity points out that in a legal malpractice action brought by Essef against its former counsel, Squire, Sanders and Dempsey LLP, Essef has argued [*21] that it was injured by the firm’s failure to seek a jury determination of comparative fault with respect to Celebrity’s claims against Essef. This, according to Celebrity, estops Essef from contending that it did not waive the right to avail itself of principles of comparative negligence. (Celebrity Memo. at 10). But nothing prevents Essef from pleading in the alternative by, as in this instance, asserting a contingent or hypothetical claim: if Essef is found to have waived comparative negligence, only then does it have a malpractice claim arising out of that failure. See Lawser v. Poudre School District R-1, 171 F. Supp. 2d 1155, 1158 (D. Colo. 2001) (finding that HN3 contingent claim is permissible hypothetical pleading). The predicate pled for that contingent claim, however, does not operate as a binding admission. See Henry v. Daytop Village, Inc., 42 F.3d 89, 95-96 (2d Cir. 1994); Ascher v. Target Corp., No. 05-CV-4826, 522 F. Supp. 2d 452, 2007 U.S. Dist. LEXIS 84015, 2007 WL 3287441, at *5 (E.D.N.Y. Oct. 16, 2007).”

CITAK & CITAK et al., Plaintiffs, -against- THE ST. PAUL TRAVELERS COS., INC., Defendant.

07 Civ. 5459 (WHP)

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
2007 U.S. Dist. LEXIS 94040
December 26, 2007, Decided

This is a diversity jurisdiction case in which the law firm has asked for a declaratory judgment that it is covered by a subject legal malpractice insurance policy..

The Citak Firm “claims that St. Paul’s refused to provide counsel and indemnify them for a malpractice claim tiled against them on November 3, 2006 in New York State Supreme Court (New York County) by Stuart and Carina Marton (the "Marton Action"). The Martons allege that the Citaks’ legal malpractice damaged them in their pursuit of an arbitration award against a contractor. (Harwood Decl. Ex. C: Complaint, Marton v. Citak & Citak, No. 116472-06 (N.Y. Sup. Ct. Nov. 3, 2006.) The Martons seek "at least $ 60,000 in damages, with interest from November 29, 2000, together with plaintiffs’ costs and disbursements in [the] action." (Harwood Decl. Ex. C at 9.) After an arbitrator awarded the Martons $ 62,367.32 against their contractor, the Citaks moved [*3] to dismiss the Marton Action arguing that, having won the arbitration, the Martons could not demonstrate that the Citaks’ alleged malpractice had caused them any harm. On October 11, 2007, the New York State Supreme Court denied the Citaks’ motion to dismiss because (1) "but for defendants’ negligence, [the Martons] would have procured a judgment against [the contractor] while that entity had assets sufficient to satisfy the judgment;" and (2) the arbitrator denied the Martons’ request for $ 36,632.11 in pre-judgment interest, finding that the Citaks, and not the contractor, were responsible for the nearly seven year delay in bringing the arbitration. (Decision and Order, Marton v. Citak & Citak, No. 116472-06 (N.Y. Sup. Ct. Oct. 11, 2007) at 4.)”

Fred W. Nelson, etc., respondent, v Stanley Kalathara, defendant, Claude Simpson, appellant. (Index No. 3167/07)
2006-09551
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT
2008 NY Slip Op 1313
February 13, 2008, Decided

Here, plaintiff is the guardian of an incapacitated seller of real property, and defendants were the attorneys for purchaser. Purchase funds went astray, going to incapacitated sellers former guardian [and a relative.] Seller’s Guardian unsuccessfully sued purchaser’s attorneys with whom he had no privity, and was unable to convince the court that there was fraud, or independent malicious acts necessary to bring an action against purchaser’s attorneys.

Plaintiff may not sue opponent’s attorneys, or attorneys who were not acting for plaintiff in the absence of independent fraud or malicious acts.

Tsvi Dallal, respondent, v Kantrowitz, Goldhamer & Graifman, P.C., appellant. (Index No. 99/2003)
2007-06135
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND DEPARTMENT
2008 NY Slip Op 1295
February 13, 2008, Decided

Defendant attorney waited too long to bring a motion for summary judgment, which had to be brought within 60 days. Court cites two Court of Appeals cases on issue, Miceli and Brill.

Hinshaw reports a fairly complicated commercial liquidated damages case arising from a bank loan to individuals which led to a default, which led to a confession of judgment, which led to a settlement, with inadequate documentation of the settlement.  At least one judgment was not marked "satisfied."  After trips up and down to the Appellate Courts there, and after changes in the law of liquidated damages, it all boiled down to a question of when the bank became aware of its attorney’s mistake.

"In September 2005, Wachovia initiated a legal malpractice action in Leigh County against Ferretti, asserting claims of professional negligence and breach of contract. In February 2006, Ferretti filed an answer, asserting, inter alia, that Wachovia’s claims accrued no later than October 1994—that is, when Pisani commenced his action against Meridian—and were thus time-barred by the statute of limitations. The trial court found in favor of Ferretti and dismissed the complaint with prejudice. More specifically, the trial court found that the negligence cause of action, which carried a two-year statute of limitations, accrued in June 2003. The trial court likewise found that the breach of contract cause of action had accrued in October 1994. Thus, the statute of limitations for both claims had run prior to filing of the complaint.

Wachovia appealed, arguing that it had not in fact experienced an actual loss by that time and that a suit against Ferretti before that time would have been premature. The Pennsylvania appellate court disagreed and affirmed the dismissal. "

Clients claim that attorney forged their names on settlement documents, then stole money.  They sue attorney, get judgment, and then lost any ability to collect, when carrier successfully disclaims and wins a collection case brought by the cleints against the carrier. Wiley Rein, LLP reports:

The Supreme Court of Nebraska has held that misappropriation and dishonesty exclusions in a lawyers professional liability policy barred an attorney’s former clients from executing legal malpractice judgments against the insurer that issued the policy. Fokken v. Steichen, 2008 WL 62539 (Neb. Jan. 4, 2008).

Several of the attorney’s former clients accused him of settling their tort claims without their approval by signing their signatures on release agreements and settlement checks without their authorization. The former clients also asserted that they had not received any of the settlement proceeds from the attorney. Furthermore, the former clients alleged that the attorney (1) failed to communicate with them regarding the defendants’ settlement offers; (2) accepted the settlement offers on their behalf without obtaining their consent; (3) allowed their tort claims to be dismissed with prejudice after the statute of limitations had expired; and (4) breached fiduciary duties owed to them. The former clients won malpractice judgments against the attorney and then instituted garnishment proceedings against the attorney’s insurer, and the parties cross-moved for summary judgment.

In granting the insurer’s motion for summary judgment, the court first observed that the former clients’ garnishment claims against the policy proceeds depended on whether the insurer would have been obligated to indemnify the attorney for the malpractice judgments in the first place because "the claim of a judgment creditor garnishor against a garnishee can rise no higher than the claim of the garnishor’s judgment debtor against the garnishee." The court next considered the former clients’ argument that "where an insurance company is notified of a pending suit against an insured and has a full opportunity to defend the action, the judgment against the insured, if obtained without fraud or collusion, will be conclusive against the insurance company." The court rejected this contention, explaining that the insurer was not challenging the malpractice judgments but was instead contending that the judgments were not covered by the policy. "

One of the more ironic but interesting aspects of legal malpractice, like quantum mechanics, is that the very act of measurement [trial] can cause the observed object to change.  Similarly, in the prosecution of a legal malpractice case, there can be legal malpractice .  Here, from the Madison Record there is the potential for a further case:

"Madison County Circuit Judge Daniel Stack had to consider calling a mistrial Tuesday in a professional negligence case against the law firm Thompson Coburn.

Representing Magna Bank (now Regions), plaintiff’s attorney Rex Carr — whose trial skills are legendary — informed Stack that he had been giving daily transcripts to some of his witnesses.

Carr told Stack that he has supplied trial transcripts to his experts, including his star, and protege, Belleville attorney Tom Keefe.

He said the only other time he had to deal with daily trial transcripts was during the historic three-and-a-half year-long dioxin trial he pursued in St. Clair County.

Potential witnesses were allowed to review the transcripts in that case, he said, due to the sheer volume of evidence presented during the record setting civil trial against Monsanto.

After Carr’s surprise announcement that he let witnesses see that transcripts, Carrie Hogan of Jones Day in Chicago wanted Stack to call a mistrial.

Stack, who came in to work on a state holiday for judges (Lincoln’s birthday), called a recess and advised Carr and Hogan to discuss the possibility of a settlement, but those talks stalled after about an hour of discussions.

Afterwards, Carr said he would exclude any witness that saw the transcripts. "

A commonly quoted statistic is that 95% of all cases are resolved prior to trial;  they are resolved through motions to dismiss, motions for summary judgment and settlements.  The few cases that go on to trial generally, they calculate, go 50/50.  Here is a highly reported, big $ legal malpractice case which went to trial, and ended in a verdict for defendant.  Law.Com reports:

"A Philadelphia jury Wednesday cleared Duane Morris of a claim of legal malpractice for its representation of a former client in settlement negotiations, according to attorneys in the case.

The eight-member jury found the firm did not breach the standard of care or breach any fiduciary duty when its client signed a settlement agreement that provided no security, the attorneys said.

The case was held before Philadelphia Common Pleas Judge Howland W. Abramson in the Commerce Court Program.

The eight-member jury began deliberating at about 3 p.m. on Tuesday for 3 1/2 hours and came back to deliberate at 1 p.m. Wednesday, handing down a verdict at 3 p.m. The jury was selected on Feb. 4, and closing arguments were held on Tuesday. "

Legal malpractice is a wholly state cause of action, and might be brought in Federal District Court only if there is a basis for jurisdiction.  Diversity jurisdiction is the one most quickly thought of, but in certain circumstances federal question jurisdiction may also apply.  Questions of legal malpractice in a patent representation is one such example.  Here, the case of  Immunocept v. Fulbright & Jaworsky provides a discussion of why it may [and on removal, must] be brought in Federal District Court.  There they say:

"Because the claim scope determination involved in the malpractice claim presents a substantial question of patent law, we conclude that jurisdiction is proper under section 1338."

In Scher v. Mishkit  [NYLJ exerpt], Supreme Court, Suffolk County refused to allow this attorney to wifhdraw pursuant to CPLR 321.  This situation is more common than one might guess, especially in medical malpractice cases.  The case is brought, and prosecuted, with depositions, and medical record exchanges, and then placed on the calendar, without an expert in place. 

Not unexpectedly, time goes by, and the case starts to be near the top of the list for jury selection, and defendants have not offered to settle.  Plaintiff’s attorney still has no expert, and it starts to look like they may simply have worked this case up on the assumption [hope] that defendants would settle…and now they have a problem.

That’s what this case seems to be about. "PLAINTIFF’S lawyer moved to withdraw as the attorney of record asserting that the attorney-client relationship was at an "impasse." Counsel argued it was unable to find an expert willing to testify for plaintiff at trial in this medical malpractice action. Plaintiff opposed the motion, alleging she cooperated with counsel and through all the years of representation received "constant assurance that this was a valid case."

Result?  Attorney must stay in case.

 

It is an ethical  violation of 22 NYCRR 603.4[e][1][iv]  willfully to fail to satisfy a judgment arising out of one’s professional activities.  For the most part, these judgments arise from legal malpractice. Here  an attorney is suspended because of an unsatisfied judgment:

"Respondent’s failure to cooperate with the Committee’s investigation (22 NYCRR 603.4[e][1][i]) and her willful failure to pay money owed to a former client, which debt is demonstrated by a judgment (22 NYCRR 603.4[e][1][iv]), warrant her immediate suspension (see In re Zimmerman, 45 AD3d 212 [2007]; Matter of McClain-Sewer, 39 AD3d 35 [2007]; In re Singer, 301 AD2d 336 [2002]; In re Adelman, 263 AD2d 160 [1999]). Accordingly, the Committee’s motion should be granted and respondent suspended from the practice of law, effective immediately, until the proceedings pending before the Committee are concluded and until further order of this Court. "