It is not a big surprise that Ortiz v Joel J. Turney, LLC  2019 NY Slip Op 03917 [172 AD3d 553] May 21, 2019 Appellate Division, First Department is defended pro-se.  It is surprising that this case went to an appeal.  Here is the short and sweet decision:

“Defendants’ letter to plaintiff, in which they admit that plaintiff’s underlying property damage action was not timely commenced and state that they will “willingly compensate [him] for all actual damages subject to proof and interest since the time of the loss,” constitutes an admission of defendants’ negligence and that it was the proximate cause of plaintiff’s loss (see Marchi Jaffe Cohen Crystal Rosner & Katz v All-Star Video Corp., 107 AD2d 597 [1st Dept 1985]; see generally Leder v Spiegel, 31 AD3d 266, 267-268 [1st Dept 2006], affd 9 NY3d 836 [2007], cert denied 552 US 1257 [2008]). Contrary to defendants’ contentions, the language of the letter cannot be interpreted in any other manner.”

Leak v RBI Assoc., Ltd  2020 NY Slip Op 50072(U) Decided on January 14, 2020 Supreme Court, Kings County Fisher, J. is the story of cupidity, stupidity and criminality.  The attorneys, however, are not held liable.

“In this action plaintiff Ernest Leak alleges causes of action primarily premised on negligence arising out of defendants’ actions regarding a loan fraudulently obtained by nonparty Salvatore Lauria in plaintiff’s name. According to plaintiff’s deposition testimony and the amended verified complaint, plaintiff, who was the owner of neighboring houses located at 212 and 214 Skillman Street in Brooklyn, contacted defendant Consumer Management Services, Inc., (Consumer) in the fall of 2010 about obtaining a reverse mortgage, but, upon learning how a reverse mortgage worked, decided he did not wish to obtain such a mortgage. Plaintiff alleged that, based on information obtained from Consumer, Lauria, who worked as a cold caller in an office operated by defendant RBI Associates, LTD, (RBI),^[FN1] a mortgage broker, appeared at plaintiff’s property and tried to interest plaintiff in obtaining a reverse mortgage. Plaintiff, however, declined to proceed with a reverse mortgage, but, after meeting Lauria several times, expressed an interest in refinancing the mortgage encumbering 212 Skillman Street. Believing that Lauria would assist him in such a refinancing, plaintiff gave Lauria his driver’s license and Social Security card.

Rather than applying for a loan refinancing the mortgage on 212 Skillman Street, Lauria, through RBI, proceeded to use plaintiff’s information to apply for a reverse mortgage loan from nonparty Live Well Financial, Inc., (Live Well) that would encumber 214 Skillman Street. Plaintiff specifically denied giving Lauria permission to apply for a reverse mortgage loan, and added that he had no interest in obtaining any loan with respect to 214 Skillman Street, which had no encumbrances on it other than liens relating to unpaid taxes and unpaid parking tickets. Live Well ultimately approved the reverse mortgage loan, and defendant Rhodora Pacis, who processed loans for RBI, and who handled the processing of the reverse mortgage loan at issue with Live Well, arranged for Grover & Fensterstock to act as Live Well’s attorney and settlement agent for the loan closing.

The closing was scheduled for January 24, 2011, at RBI’s offices, but was set at a time David Fensterstock, one of Grover & Fensterstock’s partners, could not be present. Fensterstock, who asserted that he did not always attend closings for reverse mortgages because no funds are to be disbursed at closings for such loans, arranged for Rhodora Pacis, who was a notary, to witness the signatures at the closing. Plaintiff denied being present at the closing, but someone appeared at the closing with Lauria, and presented an original driver’s license and an original Social Security card in plaintiff’s name to Pacis and signed the reverse mortgage and note using plaintiff’s name.^[FN2] Based on the testimony of plaintiff, Pacis, and Fensterstock, Fensterstock had no actual contact with plaintiff, whether by telephone or personal contact. Although Pacis, at her deposition, was never specifically asked if she knew about Lauria’s scheme, the entire tenor of Pacis’ testimony makes clear that she did not know about Lauria’s scheme, and was unaware that the person purporting to be Ernest Leak, with whom she spoke with by telephone during the loan application process and at the closing, was not the plaintiff.

Among other things, the loan closing instructions provided to Fensterstock by Live Well required that “[s]ettlement proceeds may not be wired to the borrower if the borrower’s bank account includes the name of any individuals who are not borrowers. In these situations, the proceeds must be mailed in the form of a check.” In his deposition testimony, Fensterstock asserted that, at or around the time of the closing, Pacis or another RBI employee provided him with a void check from Amalgamated in the name of “No Leak Plumbing.” Given the closing instructions, Fensterstock informed Pacis or another RBI employee, that the borrower was required to provide a void check that was solely in his name. Fensterstock thereafter received an Amalgamated check from Pacis, or the other RBI employee, that had no account name on it along with a letter purportedly signed by Ralph Scherillo, an Amalgamated assistant vice-president, indicating that Ernest Leak had a personal account with Amalgamated and was an [*2]authorized signatory on the account. Upon receiving this check and letter, Fensterstock asserted that he called Amalgamated and spoke with Ralph Scherillo, who told him that Ernest Leak was the sole signatory on the account. Based on these representations, Fensterstock, after paying the closing fees and costs paying off the liens relating to the parking tickets and unpaid taxes, wired the remainder of the loan proceeds into the account that purportedly belonged to Ernest Leak. Lauria, however, was also a signatory on the account, and he ended up transferring the loan proceeds out of the account for his own use.”

“With respect to the portion of Grover & Fensterstock’s motion addressed to the amended complaint, Grover & Fensterstock alleges that it did not owe a duty to plaintiff under the circumstances of this case. Grover & Fensterstock, which was acting as Live Well’s attorney, did not owe plaintiff a duty in that role, since, “[i]n New York, a third party, without privity, cannot maintain a claim against an attorney in professional negligence, ‘absent fraud, collusion, malicious acts or other special circumstances'” (Estate of Schneider v Finmann, 15 NY3d 306, 308-309 [2010], quoting Estate of Spivey v Pulley, 138 AD2d 563, 564 [2d Dept 1988]; Breen v Law Off. of Bruce A. Barket, P.C., 52 AD3d 635, 636 [2d Dept 2008]). As there is no evidence suggesting that Grover & Fensterstock was aware of or part of Lauria’s fraudulent scheme, none of the exceptions to the privity requirement are applicable here (see Mauro v Countrywide Home Loans, Inc., 116 AD3d 930, 933 [2d Dept 2014]; Chemical Bank v Bowers, 228 AD2d 407, 408 [2d Dept 1996]; see also Hinnant v Carrington Mtge. Servs., LLC, 172 AD3d 827, 829 [2d Dept 2019]). Moreover, in view of the general rule that a lender, absent a special relationship with a borrower, does not owe a duty to verify the identity of an imposter who obtains a loan in a plaintiff’s name (see Landino v Bank of Am., 52 AD3d 571, 574-575 [2d Dept 2008]; Beckford v Northeastern Mtge. Inv. Corp., 262 AD2d 436, 436 [2d Dept 1999]; Polzer v TRW, Inc., 256 AD2d 248, 248 [1st Dept 1998]; Banque Nationale de Paris v 1567 Broadway Ownership Assocs., 214 AD2d 359, 360 [1st Dept 1995]; see also Sullivan v MERS, Inc., 139 AD3d 419, 420 [1st Dept 2016]; Burger v Singh, 28 AD3d 695, 697-698 [2d Dept 2006]), there is no basis for imposing such a duty on Grover & Fensterstock based on its acting as Live Well’s attorney (Chemical Bank v Bowers, 228 AD2d at 408).

Grover & Fensterstock, however, also acted as the settlement agent for Live Well. With respect to the disbursement of loan proceeds placed in its hands, a settlement agent acts as an escrow agent (see Mauro, 116 AD3d at 933; Cash v Titan Fin. Servs., Inc., 58 AD3d 785, 789 [2d Dept 2009]). “An escrow agent . . . becomes a trustee of anyone with a beneficial interest in the trust with the duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed. Thus, an escrow agent can be held liable for . . . breach of fiduciary duty as escrowee” (Takayama v Schaefer, 240 AD2d 21, 25 [1998] [internal quotation marks and [*4]citations omitted]).^{[FN4] “}

“Without any connection to plaintiff, Grover & Fensterstock had no special relationship with plaintiff that would impose a duty on it to exercise due care with respect to protecting plaintiff from an imposter. Indeed, it would be anomalous to find that Grover & Fensterstock owed such a duty in the face of the above noted case law finding that a lender itself owes no such duty under like circumstances (Iglesias, 206 Md App at 660, 51 A3d at 72; see Landino, 52 AD3d at 574-575; Beckford, 262 AD2d at 436; Polzer, 256 AD2d at 248; Banque Nationale de [*5]Paris, 214 AD2d at 360; see also Sullivan, 139 AD3d at 420; Burger, 28 AD3d at 697-698).^[FN6] As Grover & Fensterstock has submitted evidentiary proof showing that it did not owe a duty to plaintiff arising out of plaintiff being the beneficiary of the funds being disbursed or owe a duty to plaintiff based on a special relationship, Grover & Fensterstock has demonstrated its prima facie entitlement to dismissal of any claim based on negligence or the violation of a fiduciary duty arising out of its role as settlement agent (see M.E.W.N., Inc., 78 AD2d at 637; Iglesias, 206 Md App at 659-660, 51 A3d at 71-72; see also Saul v Cahan, 153 AD3d 947, 949 [2d Dept 2017]; Palmetto Partners, L.P. v AJW Qualified Partners, LLC, 83 AD3d 804, 807 [2d Dept 2011])”

Aside from the normal, every-day problem of attorney fees in litigation and how they tend to stack up, in Quadracci v Klein  2019 NY Slip Op 33837(U) December 24, 2019 Supreme Court, New York County Docket Number: 650913/2016 Judge: Nancy M. Bannon there was a multiplication effect as attorney fees upon attorney fees had to be considered.

Starting off, this was a discovery dispute in which defendants were required to pay attorney fees to plaintiffs.  However, defendants’ attorneys had some other issues on their mind.

“In this action to recover a security deposit paid pursuant to a lease agreement, the court,by order dated December 11, 2017, struck the defendants’ answer and counterclaims due to their repeated failure to comply with court-ordered discovery, found the defendants in default,
awarded the plaintiffs judgment in the sum of $82,500.00, plus statutory interest, and referred the issue of the amount due to the plaintiffs for attorneys’ fees and costs to a referee to hear and report. The referee conducted a hearing on April 11, 2018, and thereafter issued a report on December 24, 2018. Based on the documents and presentations at the hearing, the referee recommended that the plaintiff be awarded $143,836.65 in attorneys’ fees, and $9,266.29 in disbursements. The plaintiffs now move to confirm the referee’s report, and the defendants cross-move to reject the referee’s report (MOT SEQ 008). Non-parties Green & Cohen, P.C. and Michael Cohen move pursuant to CPLR 1012 and 1013 to intervene for the purpose of objecting to the confirmation of the referee’s report, and pursuant to CPLR 4403 to reject the referee’s report (MOT SEQ 009). The non-parties’ motion is denied. The referee’s report is confirmed. ”

“Non-parties claim that because of an ongoing legal malpractice action between the defendants in this case and the non-parties, seeking to hold the non-parties liable for the damages and fees incurred in the instant action, they should be allowed to intervene. Nonparties do not dispute the outcome of the underlying action to recover the security deposit or seek to assert any claims or affirmative defenses of their own in the instant action, they only object to the reasonableness of the attorneys’ fees recommended in the referee’s report, as they may be found responsible for said fees depending upon the outcome of the malpractice litigation. Indeed, non-parties recognize in their motion to intervene that it is “perhaps more appropriate to view [their] motion as one to proceed as amicus curiae since [the non-parties] do not really assert any claims or defenses against any party, and vice versa.””

“Inasmuch as the non-parties do not have a claim or defense they wish to assert with a common question of law or fact in the main action (see CPLR 1013) and the defendants and the non-parties share an interest in persuading the court to reject the referee’s report (see CPLR 1012) intervention is not proper. Nor is amicus curiae relief proper. Such a motion would require a showing that: 1) the parties are not capable of a full and adequate presentation and that movants could remedy that deficiency; 2) that movants would invite the court’s attention to law
or arguments that might otherwise escape its consideration; or 3) that movants would otherwise be of special assistance to the court. See 22 NYCRR 500.23.”

In the distant past, there were no litigation funding companies.  Slowly, they came into existence and even more slowly started to displace the strongly held belief that personal injury lawyers were required to bank the litigation costs of their clients.  As some of the largest PI firms in NYS started to engage in litigation lending/funding they became embroiled in issues of who bears the cost of debt service.

These questions can devolve into legal malpractice cases.   Gorunkati v Baker Sanders, LLC  2020 NY Slip Op 00406 Decided on January 22, 2020
Appellate Division, Second Department is today’s example.l

“The plaintiff commenced this action against, among others, the defendant Baker Sanders, LLC (hereinafter Baker Sanders), alleging that he retained Baker Sanders to engage in litigation to collect no-fault insurance proceeds he was owed on behalf of Richmond Medical Diagnostic, P.C. (hereinafter Richmond), and instructed Baker Sanders to remit those proceeds to him. The plaintiff alleged that Baker Sanders commenced various actions to collect the outstanding no-fault insurance proceeds and, after collecting those proceeds, remitted them to three different companies that had agreed to advance Richmond money in anticipation of reimbursement from the no-fault proceeds. The plaintiff asserted causes of action against Baker Sanders, inter alia, alleging legal malpractice and breach of contract, and for an accounting. Baker Sanders moved, among other things, pursuant to CPLR 3211(a)(1) and (5) to dismiss the complaint insofar as asserted against it. Alternatively, Baker Sanders moved pursuant to CPLR 3211(a)(7), inter alia, to dismiss the breach of contract cause of action as duplicative of the legal malpractice cause of action. The Supreme Court granted that branch of the motion which was to dismiss the legal malpractice cause of action and denied that branch of the motion which was to dismiss the cause of action for an accounting. [*2]The plaintiff appeals from the portion of the order which granted dismissal of the legal malpractice cause of action, and Baker Sanders cross-appeals from the portion of the order which denied dismissal of the accounting cause of action.

While we agree with the Supreme Court’s determination denying that branch of the motion which was to dismiss the cause of action for an accounting, we disagree with its determination granting that branch of the motion which was to dismiss the legal malpractice cause of action.”

“Similarly, the legal malpractice and accounting causes of action were not subject to dismissal pursuant to CPLR 3211(a)(5) on the basis of release. Specifically, Baker Sanders contends that within several documents entitled “No-Fault Payment Directive & Authorized Agent Appointment” (hereinafter Agent Appointment) and “Remittance Directive & Notice of Lien on Receivables” (hereinafter Remittance Directive) signed by the plaintiff was language in which he agreed to hold Baker Sanders harmless from and waive any claims related to the payment of funds to the appointed agents and any harm caused by Baker Sanders’s recognition of said agents. Generally, “a valid release constitutes a complete bar to an action on a claim which is the subject of the release” (Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269, 276 [internal quotation marks omitted]). However, ” [t]he meaning and coverage of a general release depends on the controversy being settled and upon the purpose for which the release was actually given . . . . A release may not be read to cover matters which the parties did not desire or intend to dispose of'” (Wechsler v Diamond Sugar Co., Inc., 29 AD3d 681, 682, quoting Lefrak SBN Assoc. v Kennedy Galleries, 203 AD2d 256, 257; see Demaria v Brenhouse, 277 AD2d 344). A defendant bears the initial burden of establishing that it has been released from any claims (see Burgos v New York Presbyt. Hosp., 155 AD3d 598, 600). Here, although Baker Sanders established the existence of various releases related to the payment of funds to agents, it did not establish that the releases, which were contained within the Agent Appointments and Remittance Directives, unambiguously encompassed the legal malpractice and accounting causes of action (see DeMaria v Brenhouse, 277 AD2d 344). As such, Baker Sanders was not entitled to dismissal of the legal malpractice cause of action or the cause of action for an accounting pursuant to CPLR 3211(a)(5).”

It’s rare to convince a judge that an earlier decision was simply wrong.  Here, in Tutor Perini Bldg. Corp. v Port Auth. of N.Y. & N.J. 2020 NY Slip Op 30045(U) January 6, 2020 Supreme Court, New York County Docket Number: 156211/2018 Judge Andrea Masley took a second look at the law and changed her mind.

“STV, the architect engaged by a third-party to generate construction designs three years before plaintiff was engaged as the general contractor for the project, argues that the court mistakenly applied controlling law in finding that plaintiff adequately alleges that, despite having no contract or other privity with STV, plaintiff’s tort claims may survive a CPLR 3211 motion as there exists a relationship between it and STV that is so close as to constitute the functional equivalent of privity (see Pile Found. Constr. Co. v Berger, Lehman Assoc., 253 A.D2d 484 [2d Dept 1998 [“The Supreme Court properly declined to dismiss the plaintiff’s first cause of action alleging negligent misrepresentation, as the record reveals that the relationship between the plaintiff and the defendants was so close as to be the functional equivalent of privity.”], citing Ossining Union Free School Dist. v Anderson LaRocca Anderson, 73 NY2d 417, 424 [1989]).

In Ossining, the Court of Appeals discussed its decision in Credit Alliance Corp. v Arthur Andersen & Co. (65 NY2d 536, 551 [1985], amended 66 NY2d 812 [1985]), and clarified that the three-part Credit Alliance test for negligent misrepresentation claims against non privy parties (id. at 551 [holding that the near-privity requirements include that non privy party (1) was aware the work was to be used for a particular purpose, (2) the work was prepared “in the furtherance of which a known party … was intended to rely,” and (3) engaged in some conduct “linking them to that party” or their “understanding of that party or parties’ reliance”]) applies to more than only accountants (see Ossining, 73 NY2d at 424).

As STY correctly argues, however, the applicability of the Credit Alliance test has been further clarified by the First Department as well as the Court of Appeals in the intervening period between the Second Department’s issuance of Pile Foundation and the Prior Decision.”

“Accordingly, reargument is granted and, upon reargument, plaintiff’s complaint is dismissed as against STV. Here, the architectural plans were created years before plaintiff’s involvement in the project and it is of no moment that the plans were created with the knowledge that, at some future date, an unknown contractor would use the plans in the course of completing the project. Contrary to plaintiff’s arguments in opposition to this motion, the rule of law set forth in Bri-Den does not foreclose all actions against an architect that creates plans for any construction project where the contractor bidding process has not yet begun. Rather, it relegates claims for negative misrepresentation and
professional malpractice to those in privity with, or those that meet the Ossining/Credit Alliance test to raise those claims against the architectural firms, which, in an instance such as this, could have been
raised as direct or third-party claims at the appropriate time by an entity other than plaintiff, which lacks standing to pursue its negligent misrepresentation and professional malpractice claims under BriDen and Sykes. ”

The question of identity and partnership lead to a question of deceit.  If an attorney is a partner may he release a client.  If he is not a partner is it a violation of Judiciary Law § 487 to give the release?  For now, the question remains in limbo.

Michael J. Devereaux & Assoc., P.C. v Tufo  2020 NY Slip Op 30020(U)  January 6, 2020 Supreme Court, New York County Docket Number: 150497/14 Judge: Tanya R. Kennedy denies summary judgment to plaintiff.  Litigation continues and will answer these questions.

“In Motion Sequence Number 007, plaintiff, Michael J. Devereaux & Associates, P.C. (“plaintiff law firm”), moves for an order: ( 1) granting a charging lien against a settlement amount of $6,598,453.20, pursuant to Judiciary Law §475; (2) directing defendants John Tufo (“John”) and Janice Tufo (“Janice”), (collectively, the “Tufos”), to escrow unpaid attorneys’ fees and expenses of $813,561.63, by paying that amount into Supreme Court or depositing such amount into an independent separate interest bearing account with the bank sending monthly statements to plaintiff law firm; and (3) imposing a lis pendens against properties the Tufos own to enforce the charging lien.

In Motion Sequence Number 008, plaintiff law firm moves, pursuant to CPLR 3212, for summary judgment on its first, second, third, and fifth causes of action for failing to pay invoices for attorneys’ fees and expenses in the sum of $557,412.59, and on its sixth cause of action for
quantum meruit; summary judgment declaring null and void a General Release, dated September 9, 2013; summary judgment on its causes of action for violation of Judiciary Law §487 and to recover attorneys’ fees, costs, and disbursements; as well as for summary judgment dismissing the counterclaims which defendant Sidney Baumgarten (“Baumgarten”) interposed to recover attorneys’ fees for services rendered while associated with plaintiff law firm.

In addition, plaintiff law firm seeks to strike the pleadings of defendants, the Tufos, John Russell (“Russell”), as notary and attorney, and Baumgarten, individually and as attorney, (collectively, the “Defendants”), or to preclude Defendants from introducing certain evidence; and to impose sanctions against Defendants.”

From July 30, 2009 to October 15, 2014, plaintiff iaw firm assumed the name Devereaux, Baumgarten (see Certificates, NYSCEF Doc. Nos. 421-422, 452-453). Plaintiff law firm also assumed the name Devereaux Law Group, effective March 7, 2014 (see Certificates, NYSCEF Doc. Nos. 423, 454). Michael Devereaux (“Devereaux”) is the sole owner and principal of plaintiff law firm (see Devereaux Affidavit, ~l, NYSCEF Doc. No. 450).

The parties disagree as to the business relationship between Devereaux and Baumgarten. Devereaux claims that Baumgarten was a tep.ant in plaintiff law firm’s office and that Baumgarten vacated the office after their professional relationship deteriorated (id., ~2; see Email, NYSCEF Doc. No. 426).”

“However, Baumgarten maintains that he joined plaintiff law firm as a non-equity partner, agreeing to share the fees he received from his practice with Devereaux (see Baumgarten Affidavit, if5, NYSCEF Doc. No. 562). Baumgarten maintains that the letterhead of plaintiffs law firm listed him as a partner in May 2010 (id), and that Devereaux testified at his EBT that he may have represented that Baumgarten was a non-equity partner in plaintiff law firm (see Devereaux EBT,
P. 76, L. 23-25 – P. 77, L. 4, NYSCEF Doc. No. 602). ”

“On September 9, 2013, Baumgarten, as Partner of Devereaux, Baumgarten, executed a General Release, in consideration of the sum of $285,260.00 received from the Tufos, discharging the Tufos from all debts, “specifically [including] all legal services, any and all bills, statements . and invoices pertaining to the litigation between John and Westchester Automobile Co, Inc. (Acura of Westchester) et al, and all related litigation in the Supreme Court, New York County under
index numbers 110604/11, 650247/12, 650471/12 and 651100/12″ (see NYSCEF Doc. No. 23). Russell notarized the General Release, acknowledging Baumgarten’s signature (id). ”

“After reviewing the evidence presented, the Court concludes that the existence of two retainer agreements for the same legal services raises an issue of fact with respect to the parties’ intent, barring summary judgment on the claim for breach of the retainer agreement. Thus, the
branch of the motion for summary judgment on the breach of contract claim is denied. ”

“The triable issues of fact regarding Baumgarten’s authority to execute the General Release precludes summary judgment as to the validity of the General Release, or a claim for violation of Judiciary Law §487. ”