Could there be anything more ironic than a defendant attorney (accused of malpractice) losing the case because the defendant attorney failed to answer the complaint?

Rene v Abrams  2021 NY Slip Op 02431 Decided on April 21, 2021 Appellate Division, Second Department provides the short answer.

“In an action to recover damages for legal malpractice, the defendants appeal from an order of the Supreme Court, Nassau County (Anna R. Anzalone, J.), entered March 27, 2019. The order, upon an amended order of the same court entered November 18, 2016, inter alia, granting the plaintiffs’ motion for leave to enter a default judgment against the defendants on the issue of liability upon their failure to appear or answer the complaint, and after an inquest on the issue of damages, directed payment of the sum of $9,000 in damages to the plaintiff Emmanuel Rene and payment of the sum of $1,000 in damages to the plaintiff Danica Drakes.

ORDERED that the appeal is dismissed, with costs.

An order which does not decide a motion made on notice is not appealable as of right (see CPLR 5701[a][2]; Sholes v Meagher, 100 NY2d 333, 335; Deutsche Bank Natl. Trust Co. v Brown, 186 AD3d 1195), and we decline to grant leave to appeal. While the defendants seek appellate review of the Supreme Court’s determination of damages after an inquest, they failed to include the relevant papers and transcripts to enable meaningful appellate review of that issue (see CPLR 5526; Rubio-Modica v Modica, 100 AD3d 979; Keita v United Parcel Serv., 65 AD3d 571, 572).”

We look to the Courts for legal guidance, and practitioners look to Appellate decisions in order to understand guiding principles.  In a legal malpractice setting, one question might be whether the standard of practice requires attorneys to ensure that a purchaser of real property gets everything that is promised in the contract of sale?

This question arises in Mah v 40-44 W. 120th St. Assoc., LLC  2021 NY Slip Op 02365 Decided on April 20, 2021 Appellate Division, First Department and there is an answer but with little guidance.  Plaintiffs bought an apartment which was to have a private roof deck.  They did not get it.

“In this breach of contract and legal malpractice action, defendant attorney Sheryl D. Jassen represented plaintiffs Timothy Lloyd Mah and James M. Carter III in connection with their purchase of a penthouse residential condominium unit. The condo unit was sold by defendant 40-44 West 120th Street Associates LLC (the sponsor), which agreed to construct a private roof deck in compliance with all appropriate laws and regulations of governmental agencies. The roof deck was included in the square footage assigned to the unit for purposes of dividing common charges. At the time of closing, construction on the roof deck was not complete and the certificate of occupancy did not address the roof.

Plaintiffs allege that the deck delivered by the sponsor after closing was not legal because it did not have a corresponding amended certificate of occupancy, and the sponsor could not have obtained an amended certificate because the building’s floor area already exceeded what was permitted under applicable zoning regulations. Plaintiffs allege that prior to closing, defendant Jassen failed to inform them that the certificate of occupancy had not yet been amended to allow for or permit the deck. They claim that but for defendant Jassen’s malpractice they would not have purchased the unit, they would not have been assigned increased common charges based on the deck’s square footage, and they would not have renovated the roof deck, attempted to “legalize” it, or removed it.

Plaintiffs’ theories of proximate cause are interrupted by an intervening act and are impermissibly speculative (see Lisi v Lowenstein Sandler LLP, 170 AD3d 461, 462 [1st Dept 2019]; Excelsior Capitol LLC v K&L Gates LLP, 138 AD3d 492 [1st Dept 2016], lv denied 28 NY3d 906 [2016]). The sponsor’s failure to deliver a legal deck is at the core of plainitiffs’ alleged damages. The sponsor’s alleged breach of contract was “independent of or far removed from [defendant Jassen’s] conduct,” and thus, severed any proximate cause flowing from her representation (Kriz v Schum, 75 NY2d 25, 36 [1989] [internal quotation marks omitted]). Plaintiffs’ assertion that but for defendant Jassen’s negligence they would not have purchased the condo unit relies on gross speculation of future events.”

People often ask attorneys whether they have any celebrity clients?  Here, in Carter v Sweeney  2021 NY Slip Op 31261(U) April 16, 2021
Supreme Court, New York County Docket Number: 151067/2019
Judge: James E. d’Auguste Lil Wayne asks for 13 years of legal fees to be returned to him.  He is generally unsuccessful.

“This action arises after the end of a 13-year relationship, in which defendant Ronald Sweeney (Sweeney, or Defendant) acted as the transactional attorney for plaintiff Dwayne Michael Carter, Jr., p/k/a Lil Wayne (Carter). The relationship ended when Carter fired Sweeney
on September 18, 2018. Now, Carter brings this action, seeking to recoup the legal fees that he paid Sweeney throughout those 13 years.  Defendants move to dismiss the first amended complaint (Complaint).”

The Complaint, which seeks, among other, nonmonetary, relief, the recovery of all the  legal fees that Carter payed Sweeney in the course of 13 years, alleges the following 10 causes of action: (1) fraudulent inducement, (2) legal malpractice, (3) breach of fiduciary duty, (4) unjust enrichment, against both defendants, (5) violation of California Business and Professional Code § 6147, (6) violation of California  Business and Professional Code § 6148, (7) violation of California Business and Professional Code §§17200-17219, (8) violation of N.Y. General Business Law (GBL) §349, against both defendants, (9) violation of N.Y. Judiciary Law § 487, against both defendants, and (10) a request for a declaratory judgment.”

“It is established that a plaintiff alleging legal malpractice must show that such malpractice “proximately caused actual and ascertainable damages.” Rudolph v Shayne, Dachs, Stanisci, Corker &Sauer, 8 NY3d 438, 443 (2007). The Complaint, instead, alleges the same $20,000,000 in damages that it alleges with regard to multiple other causes of action. It is also established that, in order to make a prima facie case of legal malpractice, the plaintiff must show that he or she would have prevailed in underlying litigation, but for the attorney’s negligence.
Davis v Klein, 88 NY2d 1008, 1009-1010 (1996); Schorsch v Moses & Singer, L.L.P., 60 AD3d 557, 557 (1st Dept 2009). The Complaint alleges that, when Carter and one of his companies were sued by their New York litigation counsel over their nonpayment of legal fees, Sweeney
negotiated a settlement for Carter, but, after Carter failed to pay the negotiated sum, and a second action was commenced to recover the fees, Sweeney, although notified of that action, negligently failed to act, thereby allowing the New York firm to obtain a default judgment “for hundreds of thousands of dollars.” These allegations fail to specify “ascertainable damages,” Rudolph at 443, and it is no more than “an insufficient speculation” (Rodriguez v Lipsig, Shapey, Manus & Moverman, P,C., 81 AD3d 551, 557 [1st Dept 2011]) that Carter, who had failed to pay his New York counsel, and then failed to pay a settlement of that counsel’s claim, would have prevailed in that counsel’s subsequent suit.

For the rest, this claim repeats many of the allegations raised in the first cause of action and, inexplicably, faults Sweeney for “breaching his duty of care by his advice concerning the California litigation firm’s written contingency fee agreement.” NYSCEF Doc, No. 5, ¶94. The
Complaint discloses that “[i]n March 2018, the California litigation firm negotiated a settlement of [two matters] . . . which required certain payments to Carter and [his record label]. NYSCEF Doc. No. 5, ¶ 60. If Carter was dissatisfied with that settlement, he fails to explain either why he was dissatisfied, or how Sweeney might have been at fault, in connection with the matter. “

Client agrees to arbitrate attorney fee issues.  Is Client required to arbitrate a legal malpractice claim as well?  In Protostorm, Inc. v Foley & Lardner LLP  2021 NY Slip Op 02227 Decided on April 08, 2021
Appellate Division, First Department the answer is yes.

“Plaintiff retained defendant Foley & Lardner LLP to maintain a malpractice action against plaintiff’s prior counsel. Thereafter, plaintiff commenced a malpractice action against defendants and other attorneys in the United States District Court, Eastern District of New York. Defendants moved to dismiss the federal action based on lack of subject matter jurisdiction. They also commenced an arbitration proceeding against plaintiff for unpaid legal fees based on the parties’ retainer agreement, which provides that “[a]ny dispute over fees and/or costs. . .will be submitted to and settled exclusively by binding arbitration.” The federal action was ultimately dismissed for lack of subject matter jurisdiction. As a result, the court did not rule on whether the arbitration should be stayed. Plaintiff then brought the instant action alleging the same claim of legal malpractice and moved to stay the arbitration pending resolution of this action. Defendants cross moved to stay the action and compel arbitration.

“Where there is no substantial question whether a valid agreement [to arbitrate] was made or complied with, . . .the court shall direct the parties to arbitrate” and its order “shall operate to stay a pending. . .action” (CPLR 7503[a] [emphasis added]). Once a valid arbitration agreement is identified, an arbitration should only be stayed “when the sole matter sought to be submitted to arbitration is clearly beyond the arbitrator’s power” (Silverman v Benmor Coats, 61 NY2d 299, 309 [1984] [emphasis added]). Further, where “arbitrable and nonarbitrable claims are inextricably interwoven, the proper course is to stay judicial proceedings pending completion of the arbitration, particularly where. . .the determination of issues in arbitration may well dispose of nonarbitrable matters” (Cohen v Ark Asset Holdings, 268 AD2d 285, 286 [1st Dept 2000]; see also Lake Harbor Advisors, LLC v Settlement Servs. Arbitration and Mediation, Inc., 175 AD3d 479 [2d Dept 2019]; Monotube Pile Corp. v Pile Foundation Constr. Corp., 269 AD2d 531 [2d Dept 2000]).

There is no dispute that there is a valid agreement between the parties to arbitrate any dispute regarding unpaid fees. Thus, the court must compel arbitration of defendants’ claim for unpaid fees and stay this action pending completion of the arbitration (CPLR 7503[a]). Moreover, because plaintiff’s nonarbitrable malpractice claim is inextricably intertwined with the arbitrable claim for unpaid fees, the proper course is to stay the action pending completion of the arbitration (see Cohen, 268 AD2d at 286[*2]; Lake Harbor Advisors, LLC, 175 AD3d at 479; Monotube Pile Corp., 269 AD2d at 531).

To the extent plaintiff argues that it cannot be forced to arbitrate its malpractice claim because it did not explicitly agree to do so, both the First and Second Departments have clearly found that a nonarbitrable issue can be decided in an arbitration when it is inextricably intertwined with an arbitrable issue, particularly where, as here, the determination of the arbitrable unpaid fees claim may dispose of the nonarbitrable malpractice claim (see Cohen, 268 AD2d at 286; Lake Harbor Advisors, LLC, 175 AD3d at 480; Monotube Pile Corp., 269 AD2d at 531-532).”

Scarola Malone & Zubatov LLP v Ellner  2021 NY Slip Op 31199(U) April 8, 2021 Supreme Court, New York County Docket Number: 651324/2017 Judge: Anthony Cannataro pits a “sophisticated businessman, with degrees from Wharton and the University of Chicago” against the attorneys in a legal malpractice counterclaim.  Sophisticated businessman loses.

“Where a sophisticated client imposes a strategic decision on counsel, the client’s action absolves the attorney from liability for malpractice (Town of North Hempstead v Winston & Strawn, LLP, 28 AD3d 746 [2006]; Stolmeier v Fields, 280 AD2d 342 [2001]). Additionally, with regard to strategic decisions “the selection of one among several
reasonable courses of action does not constitute malpractice” (Rosner v Paley, 65 NY2d 736, 738 [1985]). “Attorneys may select among reasonable courses of action in prosecuting their clients’ cases without thereby committing malpractice … so that a purported malpractice claim that amounts only to a client’s criticism of counsel’s strategy may be dismissed” (Dweck Law Firm, LLP v Mann, 283 AD2d 292, 293 [2001 ]). Hindsight arguments concerning selection of one of several reasonable courses of action do not state a viable cause of action for malpractice (Brookwood Cos., Inc. v Alston & Bird LLP, 146 AD3d 662, 667 [2017]).

In this case, the Lightbox defendants’ counterclaims stem from the Scarola firm’s representation of them in a business dispute and litigation related to a joint venture agreement between the Lightbox defendants and a nonparty entity named 3rd Home Limited. The counterclaims allege that the Scarola firm made several mistakes during the course of its representation of the Lightbox defendants, specifically: failing to advise the Lightbox defendants to accept a potential buyout from 3rd Home Limited; recommending that the Lightbox defendants litigate in an “uber aggressive” manner rather than advising them to settle, causing the Lightbox defendants to “waste” money Lightbox’ s allegations relate primarily to strategic decisions made during the course of the Scarola firm’s representation. Regarding the allegations that the Scarola firm took an overly aggressive approach, the documentary evidence shows that the
Lightbox defendants consistently rejected attempts to settle, for reasons having nothing to do with any advice received from the Scarola firm. While Mr. Ellner occasionally expressed interest in settling with 3rd Home Limited, when he did so, it was his settlement demands that could best be characterized as aggressive, and he rejected actual offers of settlement. Additionally, it is clear from the pleadings that when the Lightbox defendants retained the Scarola firm, they wanted to “preserve and grow” the joint venture business and were not interested in a buyout.”

It is a bedrock principle of litigation that the vast majority of cases have to settle if they are to be resolved in any fashion.  Courts are not able to try all cases.  If settlements were not the norm, then litigants would routinely go broke trying to finalize cases which sat for years and years awaiting an open lot for trial. (see: Dickens)  Because of that reality, courts (especially matrimonial courts) lean on the litigants to settle.

Givens v De Moya
2021 NY Slip Op 02136  Appellate Division, Second Department is an example of a spouse trying to undo a matrimonial settlement to no avail.  The standard is that a legal malpractice case is viable despite settlement if the settlement was effectively compelled.

“In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages” (Glenwayne Dev. Corp. v James J. Corbett, [*2]P.C., 175 AD3d 473, 473-474 [internal quotation marks omitted]; see Katsoris v Bodnar & Milone, LLP, 186 AD3d 1504, 1505; Betz v Blatt, 160 AD3d 696, 697). “‘A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel'” (Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1505, quoting Bernstein v Oppenheim & Co., 160 AD2d 428, 430; see Gad v Sherman, 160 AD3d 622, 623). Nevertheless, “‘[t]he fact that the plaintiff subsequently was unhappy with the settlement [he or she] obtained . . . does not rise to the level of legal malpractice'” (Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1505, quoting Holschauer v Fisher, 5 AD3d 553, 554). “A defendant seeking summary judgment dismissing a legal malpractice cause of action has the burden of establishing prima facie that he or she did not fail to exercise such skill and knowledge, or that the claimed departure did not proximately cause the plaintiff to sustain damages” (Bakcheva v Law Offs. of Stein & Assoc., 169 AD3d 624, 625; see Iannucci v Kucker & Bruh, LLP, 161 AD3d 959, 960; Betz v Blatt, 160 AD3d 696, 698).

Here, the defendant met her prima facie burden of establishing her entitlement to judgment as a matter of law dismissing the plaintiff’s remaining claims. The defendant’s submissions demonstrated that, in representing the plaintiff in the divorce action, she exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the stipulations of settlement entered into by the plaintiff in open court in the underlying action were not the product of any mistakes by the defendant (see Holtzman v Griffith, 162 AD3d 874, 876; Schiff v Sallah Law Firm, P.C., 128 AD3d 668, 669). In addition, with respect to the in-court stipulation of settlement of the combined equitable distribution and maintenance award, the transcript of the plaintiff’s allocution in the divorce action demonstrated that he understood the stipulation settling the combined equitable distribution and maintenance award and that it would be final, that he had discussed it with the defendant and was satisfied with her representation, that no one had made him promises or coerced him to enter into the settlement, and that he was not under the influence of any substance which would affect his ability to understand the significance of the settlement (see Holtzman v Griffith, 162 AD3d at 876; Schiff v Sallah Law Firm, P.C., 128 AD3d at 669; see also Chamberlain, D’Amanda, Oppenheimer & Greenfield, LLP v Wilson, 136 AD3d 1326, 1328).

In opposition, the plaintiff failed to raise a triable issue of fact (see Holtzman v Griffith, 162 AD3d at 876). The plaintiff submitted no evidence to demonstrate a triable issue of fact as to whether he did not agree to the settlements, whether the settlements were not supported by the financial information or evidence before the divorce court, or whether he agreed to those settlements as a result any alleged mistake on the part of the defendant.”

The lesson of Shaofeng Yang v Lao Ma Spicy Inc.  2021 NY Slip Op 31150(U)   April 6, 2021  Supreme Court, New York County Docket Number: 156063/2019 Judge: Verna Saunders is that a broad release, even in a commercial franchise setting, may eclipse a later legal malpractice suit.

“Plaintiffs assert, in their amended complaint, that this action is for declaratory relief in connection with a restaurant franchise transaction with defendants. Plaintiffs seek a declaratory judgment that Huadong Liu, Yaoyu Liu, Hui Chen & Associates, PLLC and Law Offices of Hui
Chen and Associates, P.C. were plaintiffs’ attorneys during the franchise agreement process.
The remaining causes of action in the amended complaint include violation of the New Jersey Franchise Practice Act, N.J.S.A. § 56: 10-1, et seq.; breach of contract; unjust enrichment; conversion; legal malpractice; fraud; and civil conspiracy.

Defendants, Lao Ma Spicy Inc., Lao Ma Inc., Laoma Spicy Elmhurst, Inc., Lao Ma Ma La Tang Incorporated, Tuo Liu (sued herein as Liu Tuo), Huadong Liu and Yaoyu Liu (collectively “Spicy defendants”) move the court pursuant to CPLR 321l(a)(l), (3), (5), and (7) seeking dismissal of the amended complaint. (Motion Sequence 003).
Co-defendants Hui Chen & Associates, PLLC and Law Offices of Hui Chen and Associates, P.C. (attorney defendants) likewise move the court pursuant to CPLR 321 l(a)(l), (3), (5), and (7) seeking dismissal of the amended complaint. (Motion Sequence 004). ”

“Pursuant to the fully executed Termination Agreement and Mutual Release, the parties terminated the Franchise Agreement “for mutual convenience”, releasing all parties, inclusive of employees, agents, successors, assigns, legal representatives, affiliates et cetera, from and against any and all actions claims, suits, demands, payment obligations, or other obligations or liabilities of any nature whether known or unknown. (NYSCEF Doc No 92). The Agreement indicates
that the applicable law will be that of the· State of New York. Based upon the foregoing, the amended complaint is dismissed in its entirety as its causes of action are based upon a Franchise
Agreement which was mutually terminated less than thirty days after the parties entering into same. The fact that the agreement was reduced to writing and executed s.everal months later (in June of2018) is of no moment as the terms of the Termination Agreement and Mutual Release are clear, and thus, claims proffered by plaintiffs that the agreement is unenforceable are unavailing. All remaining arguments not addressed herein are either without merit or need not
be addressed given the findings above.”

Generally speaking, there has been a stark split between the First and Second Departments over the standard for a Judiciary Law § 487 claim.  In the First Department there was a requirement of a “chronic and extreme pattern of legal delinquency” and in the Second Department a single egregious incident of deceit was sufficient.  Amtrust N. Am., Inc. v Pavloff  2021 NY Slip Op 31062(U) April 2, 2021 Supreme Court, New York County Docket Number: 156855/2019 Judge: Shawn T. Kelly seems to upset that distinction.

“Defendants further allege that Am Trust’s failure to establish a pattern of collusion of deceit renders the cause of action deficient. In opposition, Am Trust contends that one instance of intentional misrepresentation is sufficient to maintain a cause of action under Judiciary Law § 487.
Defendants rely upon Solow Mgmt. Corp. v Seltzer, in which the First Department stated that because the complaint “set forth but one arguable misrepresentation by defendant and accordingly does not allege a cognizable claim under Judiciary Law§ 487, which provides
recourse only where there is a chronic and extreme pattern of legal delinquency (see Jaroslawicz v Cohen, 12 AD3d 160 [2004]; Havel! v Islam, 292 AD2d 210 [2002]).” (Solow Mgmt. Corp. v Seltzer, 18 AD3d 399, 399-400, 795 NYS2d448 [2005]).

However, the Second Circuit specifically declined to follow the Solow line of cases, stating that the requirement that the plaintiff in a section 487 action show “a chronic and extreme pattern” of legal delinqulency by the defendant “appears nowhere in the text of the statute,
however, and other courts have found attorneys liable under the statute for a single intentionally deceitful or collusive act.” (Amalfitano v Rosenberg, 533 F.3d 117, 123~24 (2d Cir.), certified question accepted, 11 NY3d 728, 894 NE2d 643 (2008), and certified question answered, 12 NY3d 8, 903 NE2d 265 [2009]). The statute’s plain language does not establish that a pattern of deceit. is required to maintain a cause of action under section 487.

The deceit required to establish a section 487 claim requires the making of an affirmative false statement with knowledge of falsity and with an affirmative intent to deceive. (see Bill Birds v Stein Law Firm, P.C., 126 NYS3d .50, 53 (2020]). Defendants have not established
Am Trust’s failure to state a cause of action, on the contrary, the factual allegations are sufficient to demonstrate that Pavloff s alleged, misrepresentation, though limited in context to the question
of whether she had reviewed or received the Conservation Order, was not a one-off statement, but rather included conversations she had with the court as well as further representations made under oath while being deposed. Accordingly, Defendants’ motion to dismiss the Judiciary Law § 487 claim is denied.”