Hutcher v Madison Sq. Garden Entertainment Corp. 2022 NY Slip Op 34417(U)
December 23, 2022 Supreme Court, New York County Docket Number: Index No. 653793/2022 Judge: Lyle E. Frank is already a famous case. Banned from MSG, these attorneys took to the courts.

The present action anses out of Defendant MADISON SQUARE GARDEN ENTERTAINMENT CORP.’s (“MSG”) policy related to denying entry to its premises to attorneys associated with lawsuits against it. Plaintiffs are all such attorneys, bringing the present action to seek an order to: (1) enjoin and restrain Defendants from taking any action that may adversely impact Hutcher’ s Season Tickets, and lifting MSG’ s ban on Plaintiffs from entering MSG Venues; (2) declare MSG’ s decision to revoke Hutcher’ s Season Tickets to be in violation of ACAL §25.30(2); (3) declare MSG’s decision to ban Plaintiffs from MSG Venues to be in violation of CRL §40-b plus damages; (4) declare MSG’s decision to revoke Hutcher’s Season Tickets to be in violation of ACAL §25.30(2) and Defendants’ decision to ban Plaintiffs to be in violation of CRL §40-b; (5) Damages arising out of alleged Prima Facie Tort Against MSG; (6) Damages arising out of alleged Violation of Judiciary Law §487 Against Weidenfeld; (7) Damages arising out of alleged Tortious Interference with Business Relations Against MSG; and (8) Damages arising out of alleged Aiding and Abetting in Violation of CRL §40-b Against Weidenfeld.
Defendants now move to dismiss Plaintiffs’ complaint in its entirety.”

“

Here, Plaintiffs fail to show both the first and the third prong of the CapLOC test, as the
allegations are vague and conclusory and fail to identify a specific business relationship that was allegedly adversely affected, nor do they show that defendants acted with the sole purpose of harming the plaintiff. This seventh cause of action is accordingly dismissed. It is therefore 0RDERED that the motion to dismiss is granted with regards to Plaintiffs’ causes of action one, two, five, six, and seven only, and denied as to the remaining counts.”

Plaintiff, Lil Wayne seeks to sue his “former representative” and lawyer of 13 years for practicing law in New York without a license. Carter v Sweeney, 2023 NY Slip Op 00150
Decided on January 12, 2023, Appellate Division, First Department , fails for a plethora of reasons.

“Plaintiff, a prominent rap artist and musician, alleges that defendant Sweeney, his former representative and lawyer of 13 years, fraudulently induced his retention by (1) representing that he was a lawyer authorized to provide legal services despite having been administratively suspended in California for brief periods around that time, and (2) by practicing law in New York without a license. To state a claim for fraudulent inducement, a plaintiff must show that the defendant’s misrepresentation or concealment induced the plaintiff to enter into the transaction and directly caused the plaintiff to suffer a loss (Meyercord v Curry, 38 AD3d 315, 316 [1st Dept 2007]). Here, however, plaintiff has not alleged that Sweeney was suspended from practice at the time he was retained, or that a misrepresentation regarding his status induced the retention. Nor has plaintiff pointed to any direct harm he suffered on account of not knowing Sweeney’s status at the time of his retention, more than a decade ago.

The legal malpractice claim, largely premised on the same allegations, also fails. Plaintiff clarifies on appeal that his malpractice claim is tethered to the contingency fee agreement that Sweeney drafted with a litigation firm in California on his behalf and Sweeney’s actions in a breach of settlement agreement action in New York that resulted in a default judgment entered against plaintiff. In a legal malpractice action, a plaintiff must also prove that, but for the defendant’s negligence, the plaintiff would have been successful in the underlying action or not sustained the alleged damages (Rudolph v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442-443 [2007]). In both instances, however, plaintiff has failed to sufficiently allege how any purported shortcoming by Sweeney was the direct cause of harm.”

“Plaintiff’s breach of fiduciary duty claim, based upon the same alleged misrepresentations and omissions regarding Sweeney’s status as a lawyer as those contained in the fraudulent inducement and legal malpractice claims, fails for the same reasons (see e.g. EBC I, Inc. v Goldman Sachs & Co, 5 NY3d 11, 19-20 [2005]). Plaintiff has failed to establish that damages were directly caused by defendant’s conduct other than the payment of his fees (Retirement Plan for Gen. Empls. of the City of N. Miami Beach v McGraw, 158 AD3d 494, 496 [1st Dept 2018]).”

Reem Contr. v Altschul & Altshcul 2022 NY Slip Op 34430(U) December 30, 2022 Supreme Court, New York County Docket Number: Index No. 104202/2011 Judge: Kelly A. O’Neill Levy discusses two interesting points: when an expert is needed in a summary judgment motion on a legal malpractice case (covered on 1/9/23) and whether an account stated claim can proceed in a legal malpractice counterclaim/defense setting. Today, the Account Stated claim is discussed.

This is a legal malpractice action brought by plaintiffs Reem Contracting Corp. (Reem
Contracting), Jona Szapiro (Szapiro ), Reem Plumbing and Heating Corp. (Reem Plumbing), and the Estate of Steven Stein (Stein) (collectively, plaintiffs) against defendants Altschul & Altschul, Mark Altschul, Esq. (Altschul), and Cory Dworken, Esq. (Dworken) (collectively, defendants). Defendants represented plaintiffs in a federal action seeking recovery under section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC§ 1145 (the underlying action). Defendants have asserted a counterclaim for account stated. Defendants move, pursuant to CPLR 3212, for summary judgment on their account stated counterclaim.”

“In 2004, plaintiffs were named as defendants in the underlying action, captioned Trustees of Plumbers Local Union No. 1 Welfare Fund v Reem Plumbing & Heating Corp., 04-CV-4698 (CBA) (ED NY) (id., ,-i 5). The trustees (the Trustees) alleged that Reem Plumbing and Reem Contracting were contractually obligated to contribute to certain union benefit funds (the Funds), as required by four collective bargaining agreements between the Association of Contracting Plumbers of the City of New York and Local Union No. 1 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada (id.). The Trustees conducted an audit for the period of January 1, 2002 through December 31, 2004, believing that there had been a significant shortfall in contributions (id., ,-i 6). The Trustees sought unpaid contributions, interest, liquidated damages, and attorney’s fees (id., ,-i 8). They also sought to hold Stein and Szapiro personally liable as fiduciaries of the Funds as defined under ERISA (id.). Altschul & Altschul represented plaintiffs in the underlying
action (id., ,-i 9). Altschul and Dworken were tasked with defending plaintiffs (id., ,-i 10).”

In the case below, ” By memorandum and order dated March 31, 2009, Judge Amon granted the Trustees’ motion for summary judgment, finding that Reem Plumbing was obligated to make contributions to the Funds during the audit period (2009 WL 10700668, *8, 2009 US Dist LEXIS 154698, *25). Judge Amon further held that, since plaintiffs admitted that Reem Plumbing and Reem Contracting were alter egos, Reem Contracting was bound to the same collective bargaining agreements as Reem Plumbing (id.). Judge Amon further held that Stein and Szapiro were fiduciaries of the Funds under ERISA, and that they were personally liable given their exclusive
control of the entities (2009 WL 10700668, * 10, 2009 US Dist LEXIS 154698, * 32). Finally, Judge Amon awarded damages against plaintiffs, jointly and severally, in the amount of $1,337,707.63 (2009 WL 10700668, *15, 2009 US Dist LEXIS 154698, *44). In doing so, Judge Amon determined the amount of unpaid contributions based solely on a Marshall & Moss audit of Reem Plumbing and Reem Contracting (2009 WL 10700668, * 13, 2009 US Dist LEXIS 154698, * 40-41 ).”

Account Stated Claim

An “account stated” is “an agreement between the parties to an account based upon prior transactions between them with respect to the correctness of the separate items composing the account and the balance due, if any, in favor of one party or the other” (Shea & Gould v Burr, 194 AD2d 369, 370 [1st Dept 1993] [internal quotation marks and citation omitted]). The agreement is an acceptance of an amount due on an account that has been rendered (Jnterman Indus. Prods. v R. S. M Electron Power, 37 NY2d 151, 153-154 [1975]; M & A Constr. Corp. v McTague, 21 AD3d 610, 611 [3d Dept 2005]). To establish an account stated, there must be a mutual examination of the claims of the respective parties, a balance struck, an agreement either express or implied that the balance is correct, and that the party against whom it is found will pay it (Bank of New York-Del. v Santarelli, 128 Misc 2d 1003, 1004 [County Ct, Greene County 1985]).
A client has “an absolute right, at any time, with or without cause, to terminate the
attorney-client relationship by discharging the attorney” (Campagnola v Mulholland, Minion Roe, 76 NY2d 38, 43 [1990]). An attorney discharged without cause may seek recovery in quantum meruit for the reasonable value of his or her services (Butler, Fitzgerald & Potter v Gelmin, 235 AD2d 218,219 [1st Dept 1997]). However, “[a]n attorney who is discharged for cause is not entitled to compensation or a lien” (Maher v Quality Bus Serv., LLC, 144 AD3d 990, 992 [2d Dept 2016]). In this regard, cases hold that “[a]n attorney who violates a disciplinary rule may be discharged for cause … ” (Doviak v Finkelstein & Partners, LLP, 90 AD3d 696, 699 [2d Dept 2011 ]). Moreover, “[ m ]isconduct that occurs before an attorney’s discharge but is not discovered until after the discharge may serve as a basis for a fee forfeiture” ( Orendick v Chiodo,
272 AD2d 901, 902 [ 4th Dept 2000]). “Th[is] rule * * * is well calculated to promote public confidence in the members of an honorable profession whose relation to their clients is personal and confidential” (Campagna/a, 76 NY2d at 44 [internal quotation marks and citation omitted]).

Generally, “a hearing is required to determine whether discharge was for cause” ( Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 13 [1st Dept 2008]).
Defendants are not entitled to summary judgment on their account stated counterclaim, as their claim for legal fees is intertwined with plaintiffs’ legal malpractice claim. Indeed, the alleged conduct which forms the basis for the malpractice occurred during the billing period atissue2 (see Glassman v Weinberg, 154 AD3d 407,409 [1st Dept 2017] [attorney not entitled to summary judgment on account stated claim since he “has not demonstrated entitlement to dismissal of defendant’s legal malpractice counterclaims, which are sufficiently intertwined with the account stated claim so as to provide a bona fide defense”]; Emery Celli Brinckerhoff & Abady, LLP v Rose, 111 AD3d 453,454 [1st Dept 2013], Iv denied 23 NY3d 904 [2014] [same]; cf Morrison Cohen Singer & Weinsten v Ackerman, 280 AD2d 355, 356-357 [1st Dept 2001] [ noting that legal malpractice claim was not “so intertwined” with a claim for fees where “the
vast majority, if not all, of the alleged conduct on plaintiffs part, which forms the basis of the malpractice claim, occurred prior to the billing period covered by the invoices in question”]). Altschul only states that “[t]he legal services were reasonably required to defend the Plaintiffs herein against claims for breach of a union collective bargaining agreement the Plaintiffs were a party to at the specific request of the Plaintiffs” (NYSCEF Doc No. 245, Altschul aff, ~ 5).

Additionally, there are issues of fact as to whether defendants were discharged for cause (see Brill & Meisel v Brown, 113 AD3d 435,436 [1st Dept 2014]). Contrary to plaintiffs’ contention, defendants’ failure to comply with the rules concerning retainer agreements (22 NYCRR 1215.1) does not preclude them from recovering in quantum meruit (Frechtman v Gutterman, 140 AD3d 538,538 [1st Dept 2016]; Seth Rubenstein, P.C. v Ganea, 41 AD3d 54, 60-63 [2d Dept 2007]).”

Reem Contr. v Altschul & Altshcul 2022 NY Slip Op 34430(U) December 30, 2022 Supreme Court, New York County Docket Number: Index No. 104202/2011 Judge: Kelly A. O’Neill Levy discusses two interesting points: when an expert is needed in a summary judgment motion on a legal malpractice case and whether an account stated claim can proceed in a legal malpractice counterclaim/defense setting. Today, the expert is discussed.

This is a legal malpractice action brought by plaintiffs Reem Contracting Corp. (Reem
Contracting), Jona Szapiro (Szapiro ), Reem Plumbing and Heating Corp. (Reem Plumbing), and the Estate of Steven Stein (Stein) (collectively, plaintiffs) against defendants Altschul & Altschul, Mark Altschul, Esq. (Altschul), and Cory Dworken, Esq. (Dworken) (collectively, defendants). Defendants represented plaintiffs in a federal action seeking recovery under section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC§ 1145 (the underlying action). Defendants have asserted a counterclaim for account stated. Defendants move, pursuant to CPLR 3212, for summary judgment on their account stated counterclaim.”

“

In 2004, plaintiffs were named as defendants in the underlying action, captioned Trustees of Plumbers Local Union No. 1 Welfare Fund v Reem Plumbing & Heating Corp., 04-CV-4698 (CBA) (ED NY) (id., ,-i 5). The trustees (the Trustees) alleged that Reem Plumbing and Reem Contracting were contractually obligated to contribute to certain union benefit funds (the Funds), as required by four collective bargaining agreements between the Association of Contracting Plumbers of the City of New York and Local Union No. 1 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada (id.). The Trustees conducted an audit for the period of January 1, 2002 through December 31, 2004, believing that there had been a significant shortfall in contributions (id., ,-i 6). The Trustees sought unpaid contributions, interest, liquidated damages, and attorney’s fees (id., ,-i 8). They also sought to hold Stein and Szapiro personally liable as fiduciaries of the Funds as defined under ERISA (id.). Altschul & Altschul represented plaintiffs in the underlying
action (id., ,-i 9). Altschul and Dworken were tasked with defending plaintiffs (id., ,-i 10).”

In the case below, ” By memorandum and order dated March 31, 2009, Judge Amon granted the Trustees’ motion for summary judgment, finding that Reem Plumbing was obligated to make contributions to the Funds during the audit period (2009 WL 10700668, *8, 2009 US Dist LEXIS 154698, *25). Judge Amon further held that, since plaintiffs admitted that Reem Plumbing and Reem Contracting were alter egos, Reem Contracting was bound to the same collective bargaining agreements as Reem Plumbing (id.). Judge Amon further held that Stein and Szapiro were fiduciaries of the Funds under ERISA, and that they were personally liable given their exclusive
control of the entities (2009 WL 10700668, * 10, 2009 US Dist LEXIS 154698, * 32). Finally, Judge Amon awarded damages against plaintiffs, jointly and severally, in the amount of $1,337,707.63 (2009 WL 10700668, *15, 2009 US Dist LEXIS 154698, *44). In doing so, Judge Amon determined the amount of unpaid contributions based solely on a Marshall & Moss audit of Reem Plumbing and Reem Contracting (2009 WL 10700668, * 13, 2009 US Dist LEXIS 154698, * 40-41 ).”

Expert testimony

“On a plaintiff’s motion for summary judgment in a legal malpractice case, the plaintiff
“will be entitled to summary judgment in a case where there is no conflict at all in the evidence, the defendant’s conduct fell below any permissible standard of due care, and the plaintiff’s conduct was not really involved” (Selletti v Liotti, 22 AD3d 739, 740 [2d Dept 2005]; see also Logalbo v Plishkin, Rubano & Baum, 163 AD2d 511, 514 [2d Dept 1990], appeal dismissed 77 NY2d 940 [ 1991 ]). On the other hand, “[i]n order for a defendant to succeed on a motion for summary judgment, evidence must be presented in admissible form establishing that the plaintiff is unable to prove at least one of the three essential elements of legal malpractice” (Walker v Glotzer, 79 AD3d 737, 738 [2d Dept 2010]).

‘”[U]nless the ordinary experience of the fact-finder provides sufficient basis for judging
the adequacy of the professional service, or the attorney’s conduct falls below any standard of due care, expert testimony will be necessary to establish that the attorney breached a standard of professional care and skill”‘ (Estate ofGinor v Landsberg, 960 F Supp 661, 672 [SD NY 1996], affd 159 F3d 1346 [2d Cir 1998], quoting Greene v Payne, Wood & Littlejohn, 197 AD2d 664, 666 [2d Dept 1993]; accord Estate ofNevelson v Carro, Spanbock, Kaster & Cuijfo, 259 AD2d 282,283 [1st Dept 1999]).

Here, plaintiffs have failed to meet their burden on summary judgment as to their legal
malpractice claim. The court finds that expert testimony is necessary to establish that the adequacy of defendants’ legal services fell below the standard of care, as acknowledged by plaintiffs. It is not within the ordinary jurors’ experience to evaluate whether defendants failed to develop appropriate evidence, failed to secure a proper expert report in a timely fashion, failed to properly oppose the Trustees’ motion for summary judgment, and failed to advise their clients of the nature of the claims made against them. However, as argued by defendants, plaintiffs submit an unsworn expert report from Bennett J. Wasserman, Esq., which opines that defendants’ conduct fell below the standard of care in the underlying action (NYSCEF Doc No. 286, Wasserman report at 21-34). An unsworn report from an expert does not constitute competent evidence to support a motion for summary judgment (see Grasso v Angerami, 79
NY2d 813, 814-815 [1991]). Plaintiffs did not attempt to cure this defect in their reply. While plaintiffs argue that defendants did not submit their own expert affidavit or report outlining the standard of care, this does not eliminate the requirement that plaintiffs make a prima facie showing on their legal malpractice claim by tendering evidence in admissible form (see Zuckerman v City of New York, 49 NY2d 557,562 [1980] [movant on summary judgment “must establish his cause of action … sufficiently to warrant the court as a matter of law in directing judgment in his favor … and he must do so by tender of evidentiary proof in admissible form”] [internal quotation marks and citation omitted]).”

Last post, we discussed Gad v Kramer Levin Naftalis & Frankel, LLP 2022 NY Slip Op 34357(U) December 20, 2022 Supreme Court, New York County Docket Number: Index No. 156841/2021 Judge: Margaret A. Chan where siblings fight long and hard over a very lucrative business, resulting in years of litigation, costly attorney fees, and the ultimate try at selling a portion of the business at a vast profit. For one of the siblings, it goes very wrong. He turns to legal malpractice after the loss of the sale.

Two grounds were advanced to dismiss: lack of standing and speculative damages. We discuss speculative damages in this article.

Albert is a 45% shareholder of Almod Diamonds Ltd. (Almod), a closely held New York corporation that is family owned and operated (NYSCEF #13 – amended complaint, ,r 8). Albert’s siblings, Morris Gad (Morris) and Donna Gad Hecht (Donna), own the remaining 45% and 10% of the shares, respectively (id.). The Gad siblings have been in conflict for years over the control and operations of Almod, and Donna brought a lawsuit in 2014 against Albert, Morris, and Almod in connection with those conflicts (the Donna Litigation) (id., ,r,r 9, 16).

In April or May 2016, Albert retained defendants for legal advice concerning the business disputes involving his family members, including the Donna Litigation (id., ,r,r 9-15). The parties agreed that defendants would charge a flat fee of $10,000 per month, which was subsequently increased to $15,000 per month starting from May 2018 (id.).

While defendants did not represent Albert in the Donna Litigation, they
represented Albert in negotiating and reaching a settlement with Donna (id., ,r,r 16-
19). Albert asked defendants to protect his financial interests and made clear that
any settlement documents must include certain key points, including that (1) any
“true-up” payments to Donna shall be calculated in consideration of her previous
sale of low-quality jewelry inventory to Almod, which was allegedly improper and
unauthorized, (2) a mechanism shall be included by which either Albert or Morris is
immediately elected as the CEO of Almod, (3) all shareholder distributions, salaries,
and expenses, including legal expenses, must continue to be allocated 45/45/10
according to each shareholder’s respective interest in Almod, and (4) if Almod was to
form an independent board of directors, defendants were to vet any potential
Albert-nominated directors who should represent Albert’s interests and be highly
experienced in running retail businesses (amended complaint, ,19-20).

On June 12, 2018, defendants presented Albert with finalized settlement documents, advising Albert to sign them and assuring him that the settlement agreement and the shareholder and voting agreement supplement contained all key provisions Albert wanted (id., ,r 23). Albert alleges that he reminded defendants that he was busy operating the company and was relying on defendants’ assurances when he executed the documents (id., ,r,r 22-24). After Donna and Morris executed the settlement documents, the documents became binding and the Donna Litigation was discontinued (id.).

Albert alleges that the settlement documents did not include the key provisions defendants assured to be included, causing ascertainable damages to him
(id., ,r,r 26-39, 44).”

“Causation and Damages

Although Albert has standing to bring the legal malpractice claim, for the reasons stated below, the claim must be dismissed for failure to adequately allege causation and damages.

· “[A]n action for legal malpractice requires proof of three elements: the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and proof of actual damages” (Schwartz v Olshan Grundman Frame & Rosenzweig, 302 AD2d 193, 198 [1st Dept 2003]). To satisfy the pleading requirement for causation, a plaintiff must allege that “‘but for’ the attorney’s conduct [or nonfeasance], the client would have prevailed in the underlying action or would not have sustained any ascertainable damages” ( Weil, Gotshal & Manges, LLP v Fashion Boutique of Short Hills, Inc., 10 AD3d 267, 272 [1st Dept 2004]; Cosmetics Plus Group, Ltd. v Traub, 105 AD3d 134, 140-141 [1st Dept 2013]). Regarding damages, “to survive a … pre·answer dismissal motion, a pleading need only state allegations from which damages attributable to the defendant’s conduct [or nonfeasance] may be reasonably inferred” (Lappin v Greenberg, 34 AD3d 277, 279 [1st Dept 2006] [internal citations omitted]). However, conclusory allegations of damages predicated on speculation cannot suffice for a legal malpractice action (Bua v Purcell & Jngrao, P.C., 99 AD3d 843, 847·848 [2d Dept 2012]).

Under these standards, the court finds that the amended complaint fails to adequately plead causation. Notably, even if Albert had been informed by defendants of the content and risks of the settlement terms and had refused to sign the documents, the settlement agreement would still have become effective. Under Section 1 of the settlement agreement, the settlement stipulation shall become effective upon the approval of Almod board of directors and shall be binding on Albert regardless of whether he executes it or not, so long as Donna and Morris both execute the agreement (NYSCEF # 21- settlement agreement,§§ 1.a, 1.b).2 In fact, Donna and Morris executed the agreement and the board of directors approved it. Thus, the amended complaint does not sufficiently allege that “but for” defendants’ alleged negligence related to their failure to inform Albert of the terms and risks of the settlement documents, the settlement agreement would not have become effective and he would not have been damaged by it (Silverstein v Pillersdorf, 199 AD3d 539, 540 [1st Dept 2021]).
Moreover, the amended complaint fails to allege that but for defendants’ negligence, the outcome of the settlement would have been more favorable with respect to the “true-up” payment to Donna, Donna’s salary and benefits, and the legal fee provisions. In this regard, the parties in the Donna Litigation have complete discretion as to how they chose to arrange the terms of the settlement. For instance, the “true-up” payment was the subject of the Donna Litigation that Donna sued Albert personally to pay for. Under the settlement, the “true-up” would instead be paid to Donna by Almod, not Albert, while Albert forfeited the right to claw back any funds Donna profited from her allegedly improper sale of inventory to Almod. Essentially, to find the “but-for” causation, plaintiff is inviting the court to review the settlement terms and speculate how the Donna Litigation would proceed and what other alternative settlement terms would be like if Albert had objected to the settlement agreement. Thus, the alleged causation and damages are too speculative to support the legal malpractice claim (Perkins v Norwick, 275 AD2d 48, 51-52 [1st Dept 1999] [finding that plaintiffs suggestion that he might have later renegotiated different terms but for defendant’s negligence is simply “gross speculation on future events”]).

Further, the damages which allegedly flowed from naming an unsatisfactory independent director, delay in the election of a CEO, and the loss of the CVC

acquisition caused by the delay and COVID· 19 pandemic are speculative as well,
and the causal relationship between those events and defendants’ negligence is even
more remote. When a plaintiffs claim “requires speculation about future events,” it
“does not sufficiently establish that defendants proximately caused him ascertainable damages” (Ferguson v Hauser, 156 AD3d 425, 425·426 [1st Dept 2017]; Sherwood Group v Dornbush, Mensch, Mandelstam & Silverman, 191 AD2d 292, 294 [1st Dept 1993] [hypothetical course of events on which any determination of damages would have to be based constitutes a chain of “gross speculations on future events”]).”

In Gad v Kramer Levin Naftalis & Frankel, LLP 2022 NY Slip Op 34357(U) December 20, 2022 Supreme Court, New York County Docket Number: Index No. 156841/2021
Judge: Margaret A. Chan Siblings fight long and hard over a very lucrative business, resulting in years of litigation, costly attorney fees, and the ultimate try at selling a portion of the business at a vast profit. For one of the siblings, it goes very wrong. He turns to legal malpractice after the loss of the sale.

Two grounds were advanced to dismiss: lack of standing and speculative damages. We discuss standing in this article.

Albert is a 45% shareholder of Almod Diamonds Ltd. (Almod), a closely held New York corporation that is family owned and operated (NYSCEF #13 – amended complaint, ,r 8). Albert’s siblings, Morris Gad (Morris) and Donna Gad Hecht (Donna), own the remaining 45% and 10% of the shares, respectively (id.). The Gad siblings have been in conflict for years over the control and operations of Almod, and Donna brought a lawsuit in 2014 against Albert, Morris, and Almod in connection with those conflicts (the Donna Litigation) (id., ,r,r 9, 16).

In April or May 2016, Albert retained defendants for legal advice concerning the business disputes involving his family members, including the Donna Litigation (id., ,r,r 9-15). The parties agreed that defendants would charge a flat fee of $10,000 per month, which was subsequently increased to $15,000 per month starting from May 2018 (id.).

While defendants did not represent Albert in the Donna Litigation, they
represented Albert in negotiating and reaching a settlement with Donna (id., ,r,r 16-
19). Albert asked defendants to protect his financial interests and made clear that
any settlement documents must include certain key points, including that (1) any
“true-up” payments to Donna shall be calculated in consideration of her previous
sale of low-quality jewelry inventory to Almod, which was allegedly improper and
unauthorized, (2) a mechanism shall be included by which either Albert or Morris is
immediately elected as the CEO of Almod, (3) all shareholder distributions, salaries,
and expenses, including legal expenses, must continue to be allocated 45/45/10
according to each shareholder’s respective interest in Almod, and (4) if Almod was to
form an independent board of directors, defendants were to vet any potential
Albert-nominated directors who should represent Albert’s interests and be highly
experienced in running retail businesses (amended complaint, ,19-20).

On June 12, 2018, defendants presented Albert with finalized settlement documents, advising Albert to sign them and assuring him that the settlement agreement and the shareholder and voting agreement supplement contained all key provisions Albert wanted (id., ,r 23). Albert alleges that he reminded defendants that he was busy operating the company and was relying on defendants’ assurances when he executed the documents (id., ,r,r 22-24). After Donna and Morris executed the settlement documents, the documents became binding and the Donna Litigation was discontinued (id.).

Albert alleges that the settlement documents did not include the key
provisions defendants assured to be included, causing ascertainable damages to him
(id., ,r,r 26-39, 44).”

Standing

As a threshold matter, defendants move to dismiss the legal malpractice claim for lack of standing, arguing that as a shareholder of Almod, Albert has no individual cause of action for the injury to Almod. Defendants argue that since the harm Albert allegedly suffered is essentially the lost value of his investment in Almod, the claim is derivative but not direct.

Defendants’ arguments overlook the nature of this action. Although Albert is a shareholder of Almod and the at-issue settlement has impacts on the company, this action centers around defendants’ attorney-client relationship with Albert in their representation of Albert’s interest in settling the Donna Litigation. In the hearing held on July 19, 2022, defendants also made clear that they represented only Albert, not the company Almod, in the settlement (NYSCEF # 29-Tr 4:15-21). Also, the amended complaint alleges harm to Albert individually as opposed to Almod. As the settlement concerns the Donna Litigation in which Albert was personally named as a defendant, the settlement agreement directly impacts on Albert’s personal legal and financial interests. Therefore, Albert has standing to bring the legal malpractice claim with respect to defendants’ representation of him in the settlement (Delos Ins. Co. v Smith & Laquercia, LLP, 84 AD3d 668, 669 [1st Dept 2011] [“[plaintiff] has standing to pursue its claims against defendant since it is undisputed that defendant represented [plaintiff]” in the underlying litigation]; The Exeter Law Group LLP v Immortalana Inc., 2016 WL 7188559, *3 [Sup Ct, NY County, Dec. 9, 2016] [individual owners of a corporation have standing in a legal malpractice claim against their attorneys for negligently structuring their business ventures]).”

Strict privity of contract requirements make legal malpractice different from all other types of litigation. Even in products liability, which once rested completely and solely upon privity of contract as a prerequisite, things have loosened. Betz v Blatt, 2022 NY Slip Op 07430 Decided on December 28, 2022 Appellate Division, Second Department, which has a very rich appellate history, and is already widely cited for its previous decisions, defines the “fraud, collusion, malicious acts or other special circumstances” exception to privity.

“After a nonjury trial, the Supreme Court found that the defendant committed legal malpractice with respect to the decedent’s estate, but that the plaintiff did not establish a violation of Judiciary Law § 487. The court awarded the plaintiff damages as against the defendant in the principal sum of $1,856,699.36. The defendant appeals.

Although an attorney representing the executor of an estate, generally, is not liable to the beneficiaries of the estate (see Kramer v Belfi, 106 AD2d 615, 616), as the attorney does not represent the estate itself (see Betz v Blatt, 116 AD3d at 816; Matter of Hof, 102 AD2d 591, 593), when fraud, collusion, malicious acts, or other special circumstances exist, an attorney may be liable to those third parties, even though not in privity with them, for harm caused by professional negligence (see Davis v Farrell Fritz, P.C., 201 AD3d 869, 871; Betz v Blatt, 160 AD3d at 698).

Here, although the defendant was not in privity with the estate, the evidence nevertheless established the existence of special circumstances subjecting him to liability (see Betz v Blatt, 160 AD3d at 698; Betz v Blatt, 116 AD3d at 816). At trial, the defendant admitted that, even though he was “not competent to do accountings,” he did not arrange or direct the former executor to arrange for a professional accounting. Further, despite his admitted unfamiliarity with probate law, it was apparent to the defendant that the proposed accounting he circulated on behalf of the [*2]former executor was “terrible.” Nevertheless, the defendant neither alerted the Surrogate’s Court nor opposing counsel to the accounting problem.

Significantly, the defendant admitted that he was aware that the payment of estate funds by the former executor to the former executor and the former executor’s children amounted to self-dealing, but that the defendant took no action other than providing advice to the former executor—which the defendant further admitted he knew would be ignored. Moreover, although the defendant testified that the former executor’s conduct was “shocking,” he nonetheless continued to disburse estate funds to the former executor—including funds from the sale of a parcel of real property which formed the estate’s primary asset. The defendant’s failure to notify the Surrogate’s Court or withdraw as counsel upon discovering the self-dealing and misconduct of the former executor, together with the fact that the defendant fostered the former executor’s self-dealing and misconduct by continuing to disburse estate assets to the former executor despite his knowledge that the former executor was engaging in self-dealing and looting, constitutes the type of “fraud, collusion, malicious acts or other special circumstances” for which an attorney may be held liable to third parties not in privity (Betz v Blatt, 160 AD3d at 698).

“Damages in a legal malpractice action are designed ‘to make the injured client whole'” (Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d 714, 716, quoting Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 42). “‘The plaintiff is required to plead actual, ascertainable damages that resulted from the attorneys’ negligence'” (Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d at 716, quoting Bua v Purcell & Ingrao, P.C., 99 AD3d 843, 847). Here, the plaintiff presented ample evidence establishing both her damages and the defendant’s contribution to them.”

In Richmond Hospitality, LLC v Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrera, Wolf & Carone, LLP 2022 NY Slip Op 51310(U) Decided on December 20, 2022
Supreme Court, Richmond County Castorina Jr., J. we see a situation unique to legal malpractice cases. Early on the Court will dismiss, determining that the complaint cannot state a cause of action. This almost never happens in medical malpractice or personal injury cases.

“This is an action for legal malpractice, arising out of an underlying mortgage foreclosure [*2]proceeding, entitled Shaughnessy Capital, LLC v Richmond Hospitality, LLC, et al., bearing Richmond County Supreme Court Index No.: 152641/2019. In September 2019 Richmond Hospitality, LLC [hereinafter “Richmond Hospitality”] retained Defendants [hereinafter “Abrams Fensterman”] to represent them in the underlying foreclosure action brought by Shaughnessy Capital, LLC.

Abrams Fensterman filed an Answer on Defendant’s behalf in the underlying foreclosure action. Shaughnessy Capital then filed a motion for summary judgment. Abrams Fensterman failed to oppose the motion and to appear in Court on the return date causing the motion to go before the Court unopposed, and in May 2021, the motion was granted and an approximately $7.8 million judgment was entered against Defendants. In July 2021, Abrams Fensterman moved to vacate the May 2021 order granting Shaughnessy Capital’s motion for summary judgment. In October 2021, the motion to vacate was denied by Justice Wayne Ozzi.

Defendants allege that Abrams Fensterman failed to exercise care and skill by failing to oppose the summary judgment motion, and that the failure to do so, was the proximate cause for the judgment against them. Defendants further allege that had Abrams Fensterman opposed the motion, they would have prevailed in the underlying foreclosure action by advancing the defense that money was not accounted for properly by the lender, and that money was released without Defenndant’s prior knowledge or approval. Abrams Fensterman alleges that the First Amended Verified Complaint in the within action, fails to state a cause of action, and/or is barred by documentary evidence.”

“Here, the First Amended Verified Complaint alleges that Abrams Fensterman failed to oppose the motion for summary judgment in the underlying foreclosure action, and that, but for that failure, Defendants would have successfully defended and prevailed in the action. In doing so, however, the First Amended Verified Complaint makes only a single vague allegation to support the claim that Defendants would have prevailed in the underlying foreclosure action, to wit:

“That but for the professional negligence of the Defendant in not appearing or opposing the motion for summary judgment that was brought against the within Plaintiffs in the underlying case of Shaughnessy Capital LLC v Richmond Hospitality, LLC the within Plaintiff “would have been successful in defeating said motion for summary judgment, as well as, the underlying action by advancing the defense that they had to the position taken by the lender, Shaughnessy Capital, LLC, to wit, that the money not accounted for properly and money was released without the within Plaintiff’s prior knowledge or approval.”[Emphasis added].

There are no other allegations in the First Amended Complaint bearing on the claim that Richmond Hospitality would have successfully defended against, and prevailed in, the underlying foreclosure action. This lone allegation is insufficient to plead the “but for” element of a cause of action for legal malpractice because it is too conclusory and impermissibly speculative. The First Amended Complaint [1] does not allege that Richmond Hospitality did not default under the Loan Documents, [2] does not allege that liens were never filed against the subject property, [3] does not allege that Richmond Hospitality had no obligation to remove liens filed against the subject property under the Loan Documents, [4] does not allege that Richmond Hospitality otherwise fulfilled its obligations under the Loan Documents, [5] does not allege that Richmond Hospitality did not receive notice of a default from Shaughnessy Capital, LLC, and [6] does not allege that Richmond Hospitality cured the defaults.

The First Amended Verified Complaint makes only the foregoing disjointed allegation that can be fairly characterized as vague, conclusory, and impermissibly speculative. There is no way to discern from this allegation how or on what factual basis, Richmond Hospitality would have prevailed in the underlying foreclosure action. Even given the First Amended Verified Complaint’s allegations the benefit of every favorable inference, there is still no way to know how Defendants claim they would have successfully defended the underlying foreclosure action, and the allegations of their default under the Loan Documents. The allegations that Richmond Hospitality had a meritorious defense to the underlying foreclosure action because “Shaughnessy Capital did not ‘account’ or released money without Richmond Hospitality’s “prior knowledge and approval” are too conclusory and speculative to state a cause of action for legal malpractice.”