One rarely finds an article about the business side of law firms, and almost never about legal malpractice.  We reported this bankruptcy and legal malpractice problem for Coudert Brothers a while back.  Today Ellen Rosen of  the New York Times reports:

"At one time, the breakup of a big, prestigious law firm was rare. But since the technology boom and bust, implosions of once highflying firms like Brobeck, Phleger & Harrison and Testa, Hurwitz & Thibeault have occurred with more frequency. 

Creditors and at least one former partner have filed lawsuits against Coudert Brothers.
Yet the bankruptcy of Coudert Brothers still stands out. Eighteen months after the firm voted to dissolve, its unwinding continues to be a complicated, messy affair.

Creditors and at least one former partner have filed lawsuits against the firm. Malpractice claims have accrued as well. There are allegations in court filings that three overseas lawyers sequestered money from the firm as it tried to pay off its creditors.

And the committee for unsecured creditors contends that payments to partners were done improperly at a time when the firm should have known it was insolvent, an assertion that lawyers for Coudert deny. Although it is difficult to determine just how much is at stake, the lawyer for the creditors’ committee, David Adler of the New York office of McCarter & English, said the amount could exceed $25 million.

Coudert, experts say, may be an example of what happens when lawyers do not run their firm on sound business principles.

This case from Kings county is puzzling because the court found it was permitted to treat a 3211[a][7] motion as a 3212 Motion for Summary Judgment, without notice to the parties, based upon  use of extrinsic materials.  Read the decision:

"Defendants, Lindenbaum & Young and Alan Young, Esq. (the Young defendants), in this legal malpractice action, move, pursuant to CPLR Rule 3211 (a) (7), for dismissal of the cross-claim against them by defendants, Pollack & Associates, PLLC and Ira B. Pollack, Esq. (the Pollack defendants). The instant case and the earlier cases that led to this case have meandered through the courts and Part 27. My March 27, 2006 decision and order, Richardson v. Lindenbaum & Young, 11 Misc 3d 1070 (A), 2006 NY Slip Op 50453 (U), granted the Young defendants, pursuant to CPLR Rule 3211 (a) (7), dismissal from the action due to plaintiffs’ failure to state a cause of action against them. I observed, at 2, in paraphrasing Paul McCartney, that "the instant action is part of a ‘long and winding road’ of litigation." However, the legal "road" traveled in this litigation has yet to reach its final destination. Last week, in Richardson v. Lindenbaum & Young, 2007 NY Slip Op 50130 (U), I denied plaintiffs’ motion and the cross-motions of the Pollack defendants and plaintiffs, pursuant to CPLR Rule 2221, for leave to renew and reargue the March 27, 2006 decision and order. I held, at 1, that:

t]his Court did not overlook or misapprehend matters of fact in making its March 26, 2006 decision and order. Plaintiffs and the Pollack defendants failed to introduce new facts not offered in the prior determination or demonstrate that there has been a change in the law. Further, this Court did not have to give notice that it intended to treat the Young defendants’ prior motion for dismissal as a summary judgment motion, because the parties deliberately charted a summary judgment course, by laying bare their proof in submitting extensive extrinsic documentary evidence and affidavits, which set forth the convoluted chronology that led to this action.

The underlying actions which led to the instant legal malpractice case involved an alleged fraudulent conveyance of real property and collection on a judgment. The Pollack defendants were relieved as counsel for plaintiffs and replaced by the Young defendants. Subsequently, the now retired Justice Lewis Douglass, in a September 19, 2002 order, held plaintiffs in contempt for their wilful failure to comply with a subpoena duces tecum and deposition in connection with a judgment entered on December 12, 2001 for $727,847.27 [my March 27, 2006 decision and order, p. 2]. Thereafter, Justice Douglass refused to vacate the default and contempt of plaintiffs in the instant action. He found "no excusable grounds for default nor do I find [a] meritorious defense [my March 27, 2006 decision and order, p. 3]." In my March 27, 2006 decision, at 3, I held that:

[P]laintiffs have failed to allege that the Young defendants were the proximate cause of their loss, that they sustained actual damages, and "but for" the malpractice of the Young defendants, plaintiffs would not have sustained some actual and ascertainable damages. Further, subsequent to the substitution of the Pollack defendants as new counsel there was ample opportunity to vacate plaintiffs’ default and present a meritorious defense, if plaintiffs had one. When Justice Douglass issued his September 19, 2002 and January 9, 2003 orders, plaintiffs were then represented by the Pollack defendants, not the Young defendants.

To establish legal malpractice, as instructed in Iannarone v. Gramer, 256 AD2d 443, 444 (2d Dept 1998), a plaintiff must establish, "(1) that the defendant attorney failed to exercise that degree of care, skill, and diligence commonly possessed by a member of the legal community, (2) proximate cause, (3) damages, and (4) that the plaintiff would have been successful in the underlying action had the attorney exercised due care." See Tortura v. Sullivan Papain Block McGrath & Cannavo, P.C., 21 AD3d 1082, 1083 (2d Dept 2005); Volpe v. Canfield, 237 AD2d 282 (2d Dept 1997). In the underlying decision, at 4, I found that plaintiffs failed to allege that they would have prevailed but for the malpractice of the Young defendants. I held, at 4 – 5, that:

plaintiffs’ theory of liability is based upon Justice Douglass’ September 19, 2002 and January 9, 2003 orders for contempt and refusal to vacate plaintiffs’ default, finding that plaintiffs lacked an excusable default or a meritorious defense. Plaintiffs’ claims were viable when the Pollack defendants became plaintiffs’ counsel on August 7, 2002. According to plaintiffs’ complaint, it was the failure of the Pollack defendants to comply with various Court instructions to submit proof of a meritorious defense that caused Justice Douglass to deny the motion to vacate the default judgment. Justice Douglass, in his January 9, 2003 Order, discussed Mr. Pollack’s "continuing pattern of default followed by motion to vacate, followed by default," and "how this litigation is regularly delayed." In cases where a successor counsel had sufficient time to protect a party’s rights, as in the instant case, the outgoing counsel could not be liable for malpractice. Any alleged negligence by an outgoing attorney cannot be the proximate cause of any of plaintiffs’ alleged damages. Kozmel v. Law Firm of Allen L.Rothenberg, 241 AD2d 484 (2d Dept 1997); Golden v. Cascione, Chechanover & Purcigliotti, 286 AD2d 281 (2d Dept 2001); Albin v. Pearson, 289 AD2d 272 (2d Dept 2001); Perks v. Lauto & Garabedian, 306 AD2d 261 (2d Dept 2003); Ramcharan v Pariser, 20 AD3d 556 (2d Dept 2005).

In viewing plaintiffs’ evidence in opposition to summary judgment and dismissal, I found that plaintiffs failed to demonstrate the existence of any triable issues of fact. Therefore, I granted the motion of the Young defendants, pursuant to CPLR 3211 (a) (7), to dismiss plaintiffs’ verified complaint against them, for failure to state a cause of action.

However, this Court’s March 27, 2006 decision and order was silent as to the status of the cross-claim brought by the Pollack defendants for contribution and/or indemnification [exhibit B of affirmation in opposition – verified answer with cross-claim of the Young defendants]. The Young defendants, to put this issue to rest, argue that the Pollack defendants’ cross-claim against them is baseless because it is derived from the plaintiffs’ dismissed complaint for legal malpractice against the Young defendants. In opposition, the Pollack defendants assert that their cross-claim is an independent pleading. It is not dependent upon the survival of plaintiffs’ complaint. The Pollack argument is correct as far as it goes. However, in the instant case, the Pollack defendants’ cross-claim against the Young defendants is impossible to separate from plaintiffs’ claims in the complaint. Therefore, it follows logically, that upon the dismissal of the complaint against the Young defendants the cross-claim of the Pollack defendants, derived from plaintiffs’ complaint, is dismissed.

Discussion

CPLR §3019 (b) states:

A cross-claim may be any cause of action in favor of one or more defendants or a person whom a defendant represents against one or more defendants, a person whom a defendant represents or a defendant and other persons alleged to be liable. A cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.

While a cross-claim "may be any cause of action in favor of one or more defendants" [Emphasis added], it is clear that the Pollack defendants’ cross-claim is derived from and related to plaintiffs’ claims against both the Young defendants and the Pollack defendants. It cannot survive the dismissal of the complaint against the Young defendants. The cross-claim [exhibit B of affirmation in opposition] states:

[t]hat if it is determined that the answering defendants are liable to any degree to the plaintiff [sic], whether because of negligence, by operation of law or any other reason, the answering defendants are entitled to have the liability apportioned among and between the co- defendants by way of contribution and/or is entitled to be indemnified by said co-defendants.

In this case the cross-claim arises directly and solely from plaintiffs’ claims. The Young defendants successfully demonstrated that plaintiffs failed to properly plead the necessary elements for legal malpractice against them. In my March 27, 2006 decision and order, at 3, I concluded that "plaintiffs have failed to allege that the Young defendants were the proximate cause of their loss, that they sustained actual damages, and ‘but for’ the malpractice of the Young defendants, plaintiffs would not have sustained some actual and ascertainable damages." Given these findings, and the undisputed fact that no judgments were entered against plaintiffs until well after the Young defendants were relieved as counsel, the Young defendants have no liability in the instant action as to the Pollack defendants.

The Pollack defendants rely upon Brooks v. Chemical Leamon Tank Lines, Inc., 71 AD2d 405 [1st Dept 1979] for the proposition that a cross-claim is not required to be dependent upon the claim of a plaintiff. While this is true, in the case at bar the Pollack defendants’ cross-claim is dependent upon plaintiffs’ claims. The Pollack cross-claim does not arise out of a separate transaction with the Young defendants, apart from plaintiffs’ malpractice claims. As a result, the Pollack defendants’ cross-claim for contribution and/or indemnification is no longer viable and must be dismissed.

Further, the Pollack defendants’ reliance on La France Carpets, Inc. v. U. S. Rubber Co., 19 AD2d 812 [1st Dept 1963] is similarly misplaced. While the La France Carpets Court correctly states that CPLR §3019 (b) "allows a cross claim for any cause of action and does not require it to be dependent on the claim of the plaintiff," this is not the situation before the Court. Plaintiffs’ claims and those of the Pollack defendants are inextricably intertwined. Therefore, the Pollack defendant’s cross-claim is subsumed within the plaintiffs’ complaint. Thus, the dismissal of plaintiffs’ claims against the Young defendants renders the cross-claim of the Pollack defendants against the Young defendants meritless.

Conclusion

Accordingly, it is

ORDERED that the motion by defendants Lindenbaum & Young and Alan Young, Esq., pursuant to CPLR Rule 3211 (a) (7), for dismissal of the cross-claim against them by defendants Pollack & Associates, PLLC and Ira B. Pollack, Esq., because of the failure of defendants Pollack & Associates, PLLC and Ira B. Pollack, Esq. to state a cause of action against them, is granted. "

This constitutes the Decision and Order of the Court

We cover attorney fee disputes in and out of legal malpractice.  This outcome [temporary] is quite unusual.  Jail is rarely a contemplated outcome in an attorney fee dispute.  The details.

"A murder defendant’s attorneys wrangling over fee cuts from the agency that governs public defenders has led them to be held in contempt, ordered to spend 24 hours in jail and pay a $500 fine.

Gwinnett County Superior Court Judge William M. Ray levied the punishment Tuesday when the lawyers for accused murderer Donald Steve Sanders refused to proceed with motions because of an alleged conflict of interest with the Georgia Public Defender Standards Council and its Capital Defender Office. Ray freed lawyer Walt Britt and co-counsel Douglas A. Ramseur, a Capital Defender staff attorney, on recognizance bonds.

Here is a PLI web seminar on how to pick the right legal malpractice insurance.  The Seminar is a year or so old, but the faculty is stellar. Take a look.

Divorce and legal malpractice often intertwine.  Issues that regularly come up are insufficient discovery of the husband’s business or accounts, failure to ensure correct tax treatment of the marital estate. inequitable distribution based upon ill-considered stipulations, and faiures to present experts.  One site writing about divorce and litigation is Daniel Clement’s  New York Divorce Report, which today writes about a divorce/legal malpractice issue.

This field never sees publicity or bikini photos.  Right now, there is a confluence of presidential politics, scandal, presidential gambling sites, bikini photos, Hillary Clinton and legal malpractice.  Here is a second day of gossip.

"Call it a well orchestrated smear campaign or a case with its own merit, we’ll call it an important political betting strategy. Hillary Clinton currently sits as the favorite to be elected next US President in 2008. With even odds at Sportsbook.com (see website here), she’d probably be a bigger favorite if not for the fact that there is stiff competition breathing down her throat (specifically, Barrack Obama and a few dark horses that could gain steam down the road.

But those opposed to Clinton cite a possible wrench thrown in her campaign hopes.

"There is an unprecedented situation of a Presidential candidate’s campaign being placed in the hands of a three judge panel reviewing evidence of ******* conduct," claim those opposed to Clinton’s Presidential run.

The opposition is strong and – regardless of what transpires – could dramatically affect odds of Mrs. Clinton becoming the next US President.

Peter Paul – who in 2000, became central to a campaign fund-raising scandal involving Senator Hillary Clinton – has filed suit against his former legal counsel Judicial Watch, and its current president Tom Fitton, and directors Paul Orfanedes and Chris Farrell, over fundraising abuses, legal malpractice, and professional ethics, false advertising, as well as copyright infringement.

Legal Malpractice is family to its cousin, Medical Malpractice.  In either situation, a person has put faith in a professional, asking that a threatening problem be solved.  It matters little to the client/patient whether the situation is an operation or a trial.  in either, the problem is overwhelming and threatening.  What happens when something goes wrong.

There are financial considerations, but equally as important is the anger which comes from believing that you’ve been let down.  Here, at the crux, is where an apology might help.  Dr. Emily Senay, of CBS reports on medical malpractice.  It is equally applicable to legal malpractice:

"It’s not greed that drives most people to file medical malpractice lawsuits," Wojcieszak said. "It’s anger. They get — people get angry when they think there’s a cover-up."

Wojcieszak’s anger turned into action. He created the Sorry Works Coalition with a simple idea: Reduce malpractice lawsuits by telling patients the truth followed by an apology.

"Basically, what it is is we’re advocating good customer service. Without apology and disclosure, there can be no patients’ safety because as long as you’re coving up and denying, you’re never gonna learn," Wojcieszak said.

According to healthcare litigation attorney Jim Saxton even lawyers say empathy works.

"That ‘I’m sorry’ done the right way with the right process can, number one, derail a lawsuit," Saxton said.

It could also reduce costs. After the University of Michigan health system changed its medical error policy on malpractice cases, legal fees per case were more than cut in half. The legal climate is slowly changing. Twenty-nine states now have laws that protect doctors from lawsuits when they say they’re sorry.

It was the apology that opened the door for Kenney the patient and Van Pelt the doctor. "

Anthony Lin of the NYLJ reports today that the Weil Gotshal Legal Malpractice case has ended.

"A Texas bankruptcy judge has thrown out a suit against Weil, Gotshal & Manges by a former client who had accused the New York law firm of steering it into a "disastrous" Chapter 11 filing.

The National Benevolent Association, the social services arm of the Christian Church (Disciples of Christ), filed for bankruptcy in 2004, becoming one of the largest non-profit organizations to have ever done so. The St. Louis, Mo.-based group shrank dramatically as a result of the bankruptcy, and it claimed in its September 2005 suit against Weil Gotshal that the firm should have explored less disruptive alternatives. The group had sought $40 million in damages.

But in granting summary judgment to the law firm in a decision issued Tuesday, Chief Judge Ronald B. King of the U.S. Bankruptcy Court for the Western District of Texas said that the association’s contentions constituted a collateral attack on previous court orders and were barred by the doctrine of res judicata.

The judge noted in particular that the court had previously issued orders confirming the association’s reorganization plan and authorizing the sale of many of the group’s properties. There had already been ample opportunity to litigate the issues raised in the suit against Weil Gotshal, he ruled.

The NYLJ article.