Legal malpractice has a three-year statute of limitations.  While that seems like a long time, litigation can take forever, and often clients try to fix the problem before suing their attorney.  Sometimes they are required to try to fix things, sometimes not.  Ray-Roseman v Lippes Mathias Wexler Friedman, LLP  2021 NY Slip Op 04841 Decided on August 26, 2021 Appellate Division, Fourth Department shows how one can demonstrate continuing representation.

“Ronald L. Roseman, who resided in Florida prior to his death, was advised by his Florida attorney about a business opportunity that involved him investing in a struggling power plant in Niagara Falls, New York. Defendants were engaged as New York counsel in June 2014 to prepare loan documents between the Ronald L. Roseman Revocable Trust (Roseman Trust) and the borrowers, who were owners and officers of the power plant. In July 2015, the borrowers defaulted on the loan. In August 2015, defendants commenced a foreclosure action on behalf of the Roseman Trust in Supreme Court, Niagara County, and represented the Roseman Trust until sometime in August 2016.

The statute of limitations for a legal malpractice claim is three years (see CPLR 214 [6]; McCoy v Feinman, 99 NY2d 295, 301 [2002]). Here, plaintiffs correctly concede that defendants [*2]met their initial burden of establishing that the malpractice claim insofar as it related to the 2014 loan transaction was commenced beyond the three-year statute of limitations (see generally Rider v Rainbow Mobile Home Park, LLP, 192 AD3d 1561, 1561-1562 [4th Dept 2021]; U.S. Bank N.A. v Brown, 186 AD3d 1038, 1039 [4th Dept 2020]). Thus, the burden shifted to plaintiffs to raise a triable issue of fact whether “the statute of limitations was tolled or otherwise inapplicable, or whether . . . plaintiff[s] actually commenced the action within the applicable limitations period” (U.S. Bank N.A., 186 AD3d at 1039 [internal quotation marks omitted]; see generally Rider, 192 AD3d at 1562).

We conclude that plaintiffs, in opposition, raised a triable issue of fact whether the continuous representation doctrine applied to toll the statute of limitations with respect to the malpractice claim insofar as it related to the 2014 loan transaction (see generally Carbone v Brenizer, 148 AD3d 1806, 1807 [4th Dept 2017]). The continuous representation doctrine tolls the limitations period “where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim” (McCoy, 99 NY2d at 306), and ” ‘where the continuing representation pertains specifically to [that] matter’ ” (International Electron Devices [USA] LLC v Menter, Rudin & Trivelpiece, P.C., 71 AD3d 1512, 1513 [4th Dept 2010], quoting Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]). Here, plaintiffs submitted communication between the Florida attorney and defendants in which the Florida attorney indicated that defendants’ role as New York counsel included “enforcement” of the 2014 loan transaction documents. Moreover, the 2014 loan transaction and the foreclosure proceedings were close in time, as evidenced by plaintiffs’ submission of defendants’ supplemental billing invoices for legal services, which demonstrated a representation from the loan transaction to the foreclosure proceeding without a break. Thus, we conclude that questions of fact exist regarding the extent of defendants’ representation of plaintiffs and, more specifically, whether “enforcement” of the loan documents contemplated a continued representation until the loan was paid in full and the transaction completed.”

We sometimes wonder how people agree to unusual methods of accomplishing very ordinary tasks.  How many apartments have been purchased and sold using the traditional contract, price, payment and transfer?  Why monkey with it?

Alskom Realty, LLC v Baranik  2020 NY Slip Op 07153 [189 AD3d 745]
December 2, 2020 Appellate Division, Second Department is the story of trying to re-invent the wheel.  It want asunder.  A lawsuit against the accountant did not progress very well, either.

“The plaintiffs allege accounting malpractice in connection with the defendants’ preparation of a federal income tax return for the year 2007. They claim that the tax return included incorrect information relating to the sale of a condominium apartment to nonparty David Segal, on the ground that they never received the balance of the purchase price at the closing.

The plaintiffs claimed that they transferred title at the closing because Segal promised that he would immediately resell the apartment to another buyer for a profit and that he would then pay the remainder of the purchase price. Thereafter, Segal claimed he paid the purchase price with pieces of artwork from his company. The question of whether the purchase price was in fact paid became the subject of a separate action in the Supreme Court, New York County (hereinafter the New York County action), which was dismissed based upon the statute of frauds, because the plaintiffs did not produce the contract of sale (see Komolov v Segal, 40 Misc 3d 1228[A], 2013 NY Slip Op 51339[U] [Sup Ct, NY County 2013], affd 117 AD3d 557 [2014]).

In preparing the 2007 tax return for the plaintiff Alksom Realty, LLC, the defendants listed a sales price of $4,100,000 for the apartment, a cost basis of $3,564,946, and a capital gain of $535,054. The defendants claim that after the individual plaintiff, Alexander Komolov, and Segal informed the defendants of the transaction, Segal provided a handwritten statement, which stated a [*2]purchase price of $4,100,000 and certain costs.

In 2013, the accountants filed an amended 2007 federal income tax return, but the amended return was rejected as untimely.”

“In order to succeed on a claim for accounting malpractice, a plaintiff must demonstrate a departure from accepted standards of practice and that the departure was a proximate cause of injury (see KBL, LLP v Community Counseling & Mediation Servs., 123 AD3d 488 [2014]; Kristina Denise Enters., Inc. v Arnold, 41 AD3d 788 [2007]; D.D. Hamilton Textiles v Estate of Mate, 269 AD2d 214 [2000]; Estate of Burke v Repetti & Co., 255 AD2d 483 [1998]). Injury is an element of the cause of action (see KBL, LLP v Community Counseling & Mediation Servs., 123 AD3d at 488). No injury was established here. The 2007 tax return was not the basis for the dismissal of the New York County action, which sought recovery of the allegedly unpaid purchase price; rather, that action was dismissed for failure to produce the contract of sale. The plaintiffs did not demonstrate on their motion that the purchase price was never in fact paid with artwork. Further, there is no evidence in this record of increased tax liability.

The capital gain reported in the 2007 return in the amount of $535,054 indicated that the defendants used a cost basis for the calculation. Komolov informed the defendants of the transaction, and did not indicate that the purchase price had not been paid. The record does not indicate whether Segal provided the information in issue without the plaintiffs’ consent.

Further, the affirmation of the plaintiffs’ attorney did not provide evidence in admissible form of whether the defendants complied with acceptable accounting standards. The attorney did not purport to be an expert in standards of accounting practice.

Therefore, the plaintiffs failed to establish their entitlement to judgment as a matter of law on the issue of liability. Accordingly, their motion for summary judgment on the issue of liability on the causes of action to recover damages for accounting malpractice should have been denied. We remit the matter to the Supreme Court, Kings County, for further proceedings on the motions that were denied as academic in light of the court’s determination granting the plaintiff’s motion for summary judgment.”

 

Proximate cause is a complicated way of describing the probability that x leads to y.  If it is more likely than not (preponderance of the evidence) that if x, then y, then proximate cause has been made out.  However, lawyers are less mathematicians than storytellers.  Hence, supposition is a frequent bar to proximate cause,  even if the likelihood slightly preponderates on the plaintiff’s side.  Leading Ins. Group Ins. Co., Ltd. (U.S. Branch), Inc. v Friedman LLP  2021 NY Slip Op 03411 [195 AD3d 418]
June 1, 2021 Appellate Division, First Department illustrates how the Courts recognize preponderance, but really require a much higher level of probability.

“Defendant established prima facie that its alleged accounting malpractice did not cause plaintiffs lost-time damages (see generally KBL, LLP v Community Counseling & Mediation Servs., 123 AD3d 488, 488 [1st Dept 2014]). The complaint alleges that defendant failed to detect deficiencies in plaintiffs’ loss reserves during its May 2013 audit of the financial statements they submitted to the Department of Financial Services (DFS) for the 2012 calendar year and that, had the audit been done properly, plaintiffs would have made adjustments and taken corrective measures to avoid the regulatory action. However, plaintiffs’ own regulatory expert opined that DFS would have taken the same action against them regardless of whether defendant had noted their deficient reserves in its audit.

In opposition, plaintiffs failed to raise an issue of fact by way of their claim for lost-time damages. Plaintiffs submitted a report by their expert accountant, who concluded that, had the audit been done properly, DFS would have taken the same actions against plaintiffs that it took nine months later, but plaintiffs would have taken their remedial measures nine months earlier and would not have lost nine months in improving their business.

As a preliminary matter, the motion court properly considered plaintiffs’ theory of lost-time damages because, although the theory was not pleaded in the complaint, it was the subject of discovery, and defendant cannot reasonably claim that it did not have notice of or was surprised by it (see Mitchell v 423 W. 55th St., 187 AD3d 661, 662 [1st Dept 2020]; Penner v Hoffberg Oberfest Burger & Berger, 44 AD3d 554, 555 [1st Dept 2007]).

There is no evidence in the record to support plaintiffs’ expert accountant’s assumption that if DFS had taken the same actions against plaintiffs nine months earlier, plaintiffs would have undertaken the same remedial measures nine months earlier (see Brooks v Lewin, 21 AD3d 731, 734-735 [1st Dept 2005], lv denied 6 NY3d 713 [2006]). None of plaintiffs’ witnesses addressed that issue in their testimony, and plaintiffs failed to submit an affidavit addressing the issue. Moreover, plaintiffs’ regulatory expert testified that it was unclear how plaintiffs would have responded if DFS’s action had been taken earlier.”

 

Lest we forget the snow and ice of winter, here on a lovely August morning, Bianco v Law Offs. of Yuri Prakhin  2020 NY Slip Op 07849 [189 AD3d 1326] December 23, 2020 Appellate Division, Second Department brings back the slippery chilly days of January.

“The plaintiff allegedly slipped and fell on ice on a subway staircase in Brooklyn on January 21, 2014. Shortly thereafter, she retained the defendants Law Office of Yuriy Prahkin and Yuriy Prahkin (hereinafter together the Prahkin defendants) to represent her in a personal injury action relating to the fall. The Prahkin defendants served a timely notice of claim on the City of New York, but failed to do so with respect to the New York City Transit Authority (hereinafter NYCTA). In July 2014, the plaintiff retained the defendants Schneider Law Group and William Z. Schneider (hereinafter together the Schneider defendants) as successor counsel to the Prahkin defendants. The Schneider defendants, in turn, retained the defendants Steven C. Kletzkin, PLLC, and Steven C. Kletzkin (hereinafter together the Kletzkin defendants) as trial counsel representing the plaintiff in an action against the NYCTA.

[*2] In February 2015, the Schneider defendants served an untimely notice of claim upon NYCTA. In March 2015, the Kletzkin defendants commenced an action on the plaintiff’s behalf against the NYCTA to recover damages for the personal injuries she allegedly sustained as a result of the slip and fall. In an order dated April 15, 2016, the Supreme Court granted the NYCTA’s motion to dismiss the complaint in the personal injury action against the NYCTA “with prejudice, and no opposition submitted thereto.”

The plaintiff then commenced this action against the Prahkin defendants, the Schneider defendants, and the Kletzkin defendants, seeking to recover damages for legal malpractice and violations of Judiciary Law § 487. After issue was joined, the Kletzkin defendants and the Schneider defendants separately moved pursuant to CPLR 3211 (a) (1) and (7) to dismiss the complaint insofar as asserted against each of them. In an order dated March 31, 2017, the Supreme Court, inter alia, granted the Kletzkin defendants’ motion and denied the Schneider defendants’ motion. The plaintiff appeals, and the Schneider defendants cross-appeal.”

“Here, the plaintiff adequately pleaded the cause of action alleging legal malpractice against the Kletzkin defendants and the Schneider defendants. Contrary to the contentions of those defendants, neither conclusively established that an application for leave to serve a late notice of [*3]claim or to deem the late notice of claim timely served upon the NYCTA nunc pro tunc would have been futile (see generally Matter of Newcomb v Middle Country Cent. Sch. Dist., 28 NY3d 455, 465 [2016]; Davis v Isaacson, Robustelli, Fox, Fine, Greco & Fogelgaren, 284 AD2d 104, 105 [2001]).

Contrary to the Kletzkin defendants’ contention, the complaint adequately states a cause of action to recover damages for violation of Judiciary Law § 487. Contrary to the Schneider defendants’ contention, the cause of action alleging violation of Judiciary Law § 487 is not duplicative of the cause of action alleging legal malpractice. “A violation of Judiciary Law § 487 requires an intent to deceive (see Judiciary Law § 487), whereas a legal malpractice claim is based on negligent conduct” (Moormann v Perini & Hoerger, 65 AD3d 1106, 1108 [2009]; see Bill Birds, Inc. v Stein Law Firm, P.C., 164 AD3d 635, 637 [2018], affd 35 NY3d 173 [2020]).”

Sometimes a little explanation goes a long way in guidance to the bar. Aqua-Trol Corp. v Wilentz, Goldman & Spitzer, P.A.  2021 NY Slip Op 04652  Decided on August 11, 2021 Appellate Division, Second Department reverses a grant of summary judgment, but gives only the blackletter description of what was missing in defendant’s motion.

“In an action to recover damages for legal malpractice, the plaintiff appeals from a judgment of the Supreme Court, Nassau County (Stephen A. Bucaria, J.), dated July 16, 2019. The judgment, upon an order of the same court dated July 11, 2019, granting the defendant’s motion for summary judgment dismissing the complaint and denying the plaintiff’s cross motion for summary judgment on the issue of liability, is in favor of the defendant and against the plaintiff dismissing the complaint.

ORDERED that the judgment is reversed, on the law, with costs, the defendant’s motion for summary judgment dismissing the complaint is denied, the complaint is reinstated, and the order dated July 11, 2019, is modified accordingly.”

“Here, the judgment must be reversed, as the Supreme Court should have denied Wilentz’s motion for summary judgment dismissing the complaint. Wilentz failed to submit evidence establishing, prima facie, the absence of at least one essential element of the legal malpractice cause of action (see Bells v Foster, 83 AD3d at 877; see also Biberaj v Acocella, 120 AD3d 1285, 1287). Since Wilentz failed to make its prima facie showing, we do not need to consider the sufficiency of Aqua-Trol’s opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).”

Rubin v EFP Rotenberg, LLP  2020 NY Slip Op 32714(U)  August 19, 2020
Supreme Court, New York County  Docket Number: 651825/2015
Judge: Barbara Jaffe discusses what disciplinary or governmental investigation materials may be relevant to a claim of professional malpractice.

“Pursuant to CPLR 3 IOI(a), “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action … ” What is “material and necessary” is generally left to the court’s sound discretion and may include “any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity.” (Andon ex rel. Andon v 302-304 Mott St. Assocs., 94 NY2d 740, 746 [2000], quoting Allen v Crowell-Collier Pub. Co., 21 NY2d 403, 406 [1968]). A party may seek an order compelling compliance or a response to any request, notice, interrogatory, demand, question, or
order under CPLR article 31. (CPLR 3124).

Plaintiffs claim of accountant malpractice requires a showing that “there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury.” (KBL, LLP v Cmty. Counseling & Mediation Servs., 123 AD3d 488, 488 [1st Dept
2014]). Thus, any documents, communications, findings, and remedial actions made in the course of administrative or disciplinary proceedings concerning defendant’s work for the companies, such as that conducted by the SEC and sought in interrogatory 11, are material and necessary to plaintiffs claim. That the information sought may be inadmissible is of no moment, as the interrogatories are “reasonably likely to yield relevant evidence.” (Forman v Henkin, 30 NY3d 656, 666 [2018]). “

CPLR 214(6) governs the statute of limitations in both legal malpractice and accounting malpractice.  The onset is similar, but slightly different.  Missing in accounting malpractice is the concept of continuing representation.  Darby Scott, Ltd. v Michael S. Libock & Co. LLC
CPAs  2020 NY Slip Op 34343(U) Supreme Court, New York County
Docket Number: 653044/2013 Judge: Robert D. Kalish discusses the difference.

“As a threshold matter, it is clear that all of plaintiff’s claims for damages are time-barred. The statute of limitations for nonmedical malpractice, including accounting malpractice, is three years, which applies “regardless of whether the underlying theory is based in contract or tort” (CPLR 214(6); see RGH Liquidating Trust v Deloitte & Touche LLP, 47 AD3d 516, 517 [1st 2008]; Maya NY, LLC v Hagler, 106 AD3d 583, 586 [2013]). The “claim accrues when the malpractice is committed, not when the client discovers it” (Williamson ex rel. Lipper Convertibles, L.P. v PricewaterhouseCoopers LLP, 9 NY3d 1, 7–8 [2007]). More specifically, the cause of action “accrues upon the client’s receipt of the accountant’s work product since this is the point that a client reasonably relies on the accountant’s skill and advice” (id. at 8, quoting Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]).

This action was commenced on August 30, 2013, a date which would render time-barred claims for any act of malpractice committed prior to August 30, 2010. Plaintiff has not identified, and the record does not reflect, any work product produced by defendants after that cut-off date. To the contrary, with respect to the missing handbags and jewelry, Mayo expressly relies on the QuickBooks records maintained by defendants which, at the latest, would have been updated by
Gil on the date of her departure on August 26, 2010. The last invoices analyzed by Alix are even older, dating back to October 2009. Older still is the work product evidencing the alleged overpayments to Finesse, produced between 2004 and 2006. To the extent plaintiff’s claims are based on the accountants’ breach of their professional duty to supervise Gil, the malpractice statute of limitations would extinguish them, and in any event, the limitations for negligent hiring
and supervision is also three years (Kerzhner v G4S Gov’t Sols., Inc., 138 AD3d 564, 565 [1st Dept 2016]). Defendants’ alleged failure to institute internal inventory controls would likewise be encompassed by the malpractice limitations period.”

 

Professional negligence is different in different professions.  Attorneys are held to a standard of practice which requires them to to engage in greater background investigation than do the rules for accountants.  Deane v Brodman  2021 NY Slip Op 01842 [192 AD3d 577] March 25, 2021
Appellate Division, First Department discusses whether an accountant may rely on his clients information,’

“Defendants are entitled to summary judgment dismissing the professional negligence claims asserted against them as plaintiff has not offered evidence of a departure from a recognized and accepted professional standard for accountants. “A party alleging a claim of accountant malpractice must show that there was a departure from the accepted standards of practice” (KBL, LLP v Community Counseling & Mediation Servs., 123 AD3d 488, 488 [1st Dept 2014]). Plaintiff does not identify any applicable professional standard which would have required defendants to inquire whether the transactions at issue were approved in accordance with the procedures contained in the operating agreement. To the contrary, the standards proffered by plaintiff’s expert permit an accountant engaged for tax preparation services to rely on information furnished by the taxpayer unless it appears to be incorrect, incomplete or inconsistent. There is no allegation here that the information provided to defendants was incorrect, incomplete or inconsistent.”

Bankruptcy and legal malpractice are often paired in real estate and in general corporate situations.  The legal malpractice claim is often accompanied by severe financial loss, and bankruptcy can play a role is bringing a standstill to collection or take-over situations.  There is a complex set of rules concerning who has the standing to bring a legal malpractice action in a bankruptcy setting:  trustee or debtor?

Golden Jubilee Realty, LLC v Castro  2021 NY Slip Op 04541 Decided on July 28, 2021 Appellate Division, Second Department gives some guidance.

“The Supreme Court erred in granting that branch of Pacht’s motion which was pursuant to CPLR 3211(a)(3) to dismiss the amended complaint insofar as asserted against him based on Golden Jubilee’s alleged lack of standing. “On a defendant’s motion to dismiss the complaint based upon the plaintiff’s alleged lack of standing, the burden is on the moving defendant to establish, prima facie, the plaintiff’s lack of standing” (BAC Home Loans Servicing, LP v Rychik, 161 AD3d 924, 925; see CPLR 3211[a][3]; Gobindram v Ruskin Moscou Faltischek, P.C., 175 AD3d 586, 591). “To defeat a defendant’s motion, the plaintiff has no burden of establishing its standing as a matter of law; rather, the motion will be defeated if the plaintiff’s submissions raise a question of fact as to its standing” (Deutsche Bank Trust Co. Ams. v Vitellas, 131 AD3d 52, 60). As relevant to this appeal, in actions where a plaintiff voluntarily commenced a bankruptcy proceeding prior to the instant action, “[t]he failure of a party to disclose a cause of action as an asset in a prior bankruptcy proceeding, which the party knew or should have known existed at the time of that proceeding, deprives him or her of ‘the legal capacity to sue subsequently on that cause of action'” (Potruch & Daab, LLC v Abraham, 97 AD3d 646, 647, quoting Whelan v Longo, 23 AD3d 459, 460, affd 7 NY3d 821; see Nicke v Schwartzapfel Partners, P.C., 148 AD3d 1168, 1170).

Here, Pacht’s submissions in support of his motion established that Golden Jubilee filed a bankruptcy petition in March 2016 which did not list the claim against Pacht as an asset, and that Golden Jubilee knew or should have known of the existence of its claim against Pacht prior to the filing of the bankruptcy petition (see Keegan v Moriarty-Morris, 153 AD3d 683, 684; Positive Influence Fashion v City of New York, 2 AD3d 606, 606-607). Accordingly, Pacht met his burden of establishing, prima facie, that Golden Jubilee lacked standing to bring this action against him (see Potruch & Daab, LLC v Abraham, 97 AD3d at 647). In opposition, however, the plaintiffs raised a question of fact as to Golden Jubilee’s standing, thus warranting denial of that branch of Pacht’s motion which was pursuant to CPLR 3211(a)(3) to dismiss the amended complaint insofar as asserted against him based on Golden Jubilee’s alleged lack of standing (see Arch Bay Holdings, LLC-Series 2010B v Smith, 136 AD3d 719, 720). The plaintiffs’ submissions established that Golden Jubilee’s bankruptcy petition was dismissed in January 2017. Thus, all property owned by Golden Jubilee, including the present claim against Pacht, revested with Golden Jubilee upon dismissal of the bankruptcy petition (see 11 USC §§ 349, 541[a][1]; Crawford v Franklin Credit Mgt. Corp., 758 F3d 473, 485 [2d Cir]).

For the same reasons, the Supreme Court erred in granting that branch of the Castro defendants’ motion which was pursuant to CPLR 3211(a)(3) to dismiss the amended complaint insofar as asserted against them based on Golden Jubilee’s lack of standing due to its failure to list the claims against the Castro defendants in its bankruptcy petition (see Crawford v Franklin Credit Mgt. Corp., 758 F3d at 485).”

“”An action to recover damages for legal malpractice must be commenced within three years after the accrual of the cause of action” (Bullfrog, LLC v Nolan, 102 AD3d 719, 719-720; see CPLR 214[6]).”  Thus starts and ends most legal malpractice case discussions of the onset of the statute of limitations.  That date might be extended by continuous representation.  However, in Golden Jubilee Realty, LLC v Castro, 2021 NY Slip Op 04541,Decided on July 28, 2021, Appellate Division, Second Department the Court applied a very rare exception.

“”In moving [*2]to dismiss a cause of action pursuant to CPLR 3211(a)(5) as barred by the applicable statute of limitations, the moving defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the cause of action has expired. The burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations is tolled or is otherwise inapplicable” (Stein Indus., Inc. v Certilman Balin Adler & Hyman, LLP, 149 AD3d 788, 789 [citations omitted]). “An action to recover damages for legal malpractice must be commenced within three years after the accrual of the cause of action” (Bullfrog, LLC v Nolan, 102 AD3d 719, 719-720; see CPLR 214[6]). “A legal malpractice claim accrues ‘when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court'” (McCoy v Feinman, 99 NY2d 295, 301, quoting Ackerman v Price Waterhouse, 84 NY2d 535, 541). Under the circumstances of this case, the statute of limitations did not begin to run until specific performance was awarded in the Karpen action, on April 2, 2015 (see Frederick v Meighan, 75 AD3d 528, 531-532). The instant action was commenced on December 29, 2017. Thus, Pacht failed to meet his initial burden of establishing that the plaintiffs’ cause of action to recover damages for legal malpractice was time-barred.”