Hinnant v Carrington Mtge. Servs., LLC  2019 NY Slip Op 03575 [172 AD3d 827]  May 8, 2019
Appellate Division, Second Department is an example of overeaching by plaintiff, seeking to bring in the opponent’s attorney.  There is no privity with the opponent’s attorney absent some very small exceptions.  Privity is a requirement for a good legal malpractice case.

“Absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties not in privity, or near-privity, for harm caused by professional negligence (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 595 [2005]; Fredriksen v Fredriksen, 30 AD3d 370, 372 [2006]; Rovello v Klein, 304 AD2d 638 [2003]; Conti v Polizzotto, 243 AD2d 672 [1997]). Here, even accepting the facts alleged in the complaint as true, the complaint fails to allege the existence of an attorney-client relationship, privity, or a relationship that otherwise closely resembles privity between the plaintiffs and Leavitt (see DeMartino v Golden, 150 AD3d 1200, 1201 [2017]; Fredriksen v Fredriksen, 30 AD3d at 371-372; Goldfarb v Schwartz, 26 AD3d 462, 463 [2006]; Rovello v Klein, 304 AD2d at 638-639). Furthermore, the complaint does not contain specific allegations that would place the plaintiffs within an exception to the privity requirement (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d at 595; Fredriksen v Fredriksen, 30 AD3d at 372). The complaint fails to set forth evidentiary facts demonstrating that Leavitt was a participant with Carrington in a common scheme or plan to defraud the plaintiffs, or otherwise aided and abetted Carrington in the commission of fraud (see Fredriksen v Fredriksen, 30 AD3d at 372; Goldfarb v Schwartz, 26 AD3d at 463-464).

Furthermore, the documentary evidence submitted by Leavitt in support his motion utterly refuted the plaintiffs’ factual allegations, and conclusively established a defense as a matter of law (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d at 326). Specifically, Leavitt submitted an acknowledgment dated March 14, 2015, signed by the plaintiffs in connection with the consolidated mortgage transaction, which stated: “The undersigned further acknowledge that Jeffrey H. Leavitt, Esq., P.C. represents the Lender in this transaction, that the parties have not been given nor are relying on any legal advice given by Jeffrey Leavitt, Esq. and that no attorney/client relationship exists between the Borrowers and Jeffrey H. Leavitt, Esq., P.C.” Additionally, Leavitt submitted, among other things, the consolidated note and consolidated mortgage, which both stated that the monthly payment of principal and interest, in the amount of $3,364.70, would be just part of a larger monthly payment required by the security instrument, which would include taxes, insurance, and other charges.”

Architects, similar to attorneys, can be liable for general torts as well as breach of contract.  For the most part, it’s one or the other.  In Junger v John V. Dinan Assoc., Inc.  2018 NY Slip Op 06232 [164 AD3d 1428]  September 26, 2018  Appellate Division, Second Department we see how the claims are evaluated.

” The plaintiffs commenced this action alleging breach of contract, breach of duty,  rofessional negligence, and fraud against the architects who prepared plans in connection with the  construction of the plaintiff Mark Junger’s personal residence located in Monsey. The defendants John V. Dinan Associates, Inc. (hereinafter Dinan), and Stephen C. Leventis Architect (hereinafter [*2]Leventis; hereinafter together the Dinan defendants), moved, and the defendants Jada Construction & Development, Inc., and Jada Construction, Inc. hereinafter together the Jada defendants), separately moved, inter alia, for summary judgment dismissing the complaint insofar as asserted against them.

A party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Failure to make that initial showing requires denial of the motion, regardless of the sufficiency of the opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]; St. Luke’s-Roosevelt Hosp. v American Tr. Ins. Co., 274 AD2d 511 [2000]; Greenberg v Manlon Realty, 43 AD2d 968 [1974]).

We disagree with the Supreme Court’s determination granting that branch of the Dinan defendants’ motion which was for summary judgment dismissing the cause of action alleging professional negligence insofar as asserted against them. The Dinan defendants failed to demonstrate their prima facie entitlement to judgment as a matter of law because they did not submit evidence that the architectural plans and designs were proper, conformed to applicable professional standards, and did not deviate from the design as intended (see Kung v Zheng, 73 AD3d 862, 863 [2010]). The Dinan defendants also failed to offer evidence demonstrating that their plans and designs were not used to construct the residence. Since the Dinan defendants failed to meet their prima facie burden, we need not consider the sufficiency of the plaintiffs’ papers in opposition to this branch of their motion (see Winegrad v New York Univ. Med. Ctr., 64 NY2d at 853).

However, we agree with the Supreme Court’s determination granting those branches of the Dinan defendants’ motion which were for summary judgment dismissing the causes of action alleging breach of duty and fraud insofar as asserted against them. The cause of action alleging breach of duty was duplicative of the cause of action alleging professional negligence. Moreover, the plaintiffs’ allegations supporting the cause of action to recover damages for fraud lacked the requisite specificity (see Orchid Constr. Corp. v Gonzalez, 89 AD3d 705, 707-708 [2011]; Morales v AMS Mtge. Servs., Inc., 69 AD3d 691, 692 [2010]). “Generally, a cause of action alleging breach of contract may not be converted to one for fraud merely with an allegation that the contracting party did not intend to meet its contractual obligations” (Refreshment Mgt. Servs., Corp. v Complete Off. Supply Warehouse Corp., 89 AD3d 913, 914 [2011]; see New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]).”

In Jonns v Fischbarg  2019 NY Slip Op 31919(U) July 3, 2019 Supreme Court, New York County
Docket Number: 150729/2017 Judge Kathryn Freed gives a nice cogent explanation of two recurring legal malpractice principles.  One is how the statute of limitations is calculated and the other is whether multiple causes of action.  We’ll look at the statute of limitations today.

“In August of 2010, Jonns, together with a group of investors, sought to purchase the Charles Restaurant from Dorsia 8:30 LLC (“Dorsia”). (Id. at 2.) Jonns retained Fischbarg as the attorney on behalf of the investors to facilitate the transaction. (Id.) In doing so, Jonns sought to ensure that a limited liability company (“LLC”) would be formed absolving him and the investors of personal liability from their operation of the Charles Restaurant once the transaction was completed. (Id. at 2-3.) They also wanted Fischbarg to apply for sale-of-liquor licenses from the New York State Liquor Authority (“the SLA”). (Id. at 3.)
Unbeknownst to Jonns, Fischbarg also acted as the attorney for Dorsia. 1 (Id.) Nor did Fischbarg inform him that he should purchase Dorsia through an LLC if he wanted to shield his personal liability in maintaining the Charles Restaurant. (Id.) Thus, on August I l, 20 l 0, Jonns signed a purchase agreement for the Charles Restaurant in his personal capacity. (Id.) As a result, Jonns assumed up to $200,000 worth of Dorsia’s debt that existed on the date of the  signing, responsibility for Dorsia’s obligations under the lease, and the obligation to indemnify and hold Dorsia harmless for any claims arising from the Charles Restaurant’s operation. (Id.) Fischbarg
reassured Jonns that those obligations and liabilities would subsequently be assigned to an LLC
that would be owned by the investors. (Id.)”

“Once again, this Court sets forth the following analytical framework for when a legal malpractice action must be commenced: A legal malpractice action must be commenced within the three-year statute of limitations. (See McCoy v Feinman, 99 NY2d 295, 301 [2002).) In determining when the statute of limitations begins to run, courts have held that the “accrual time is measured from the day an actionable injury occurs … . “(McCoy, 99 NY2d at 301.) “What is important is when the malpractice was committed, not when the client discovered it.” (Id. (quotations omitted).) The limitations period, however, may be tolled where there is a continuing attorney-client relationship pertaining specifically to the matter in which the attorney committed the alleged malpractice (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001 ]), and where there was “a mutual understanding of need for further services in connection with that same subject matter” (Davis v Cohen & Gresser, LLP, 160 AD3d 484, 486 [1st Dept 2018)). ”

“Here, Jonns alleges in his complaint that there were inadequacies with how the transaction
was handled. Specifically, Jonns alleged that there were inadequacies relating to both his personal
liabilities as well as those of the other investors (Doc. 41 at 6-9), and he further alleged that
Fischbarg assured him, subsequent to the closing, that he would take necessary steps to transfer Jonns’ liabilities to Crazy Asylum3 (id. at 6-7.) Thus, this is a situation where the client was
“acutely aware of [the] need for further representati~:m on the specific subject matter underlying
the malpractice claim.” (Johnson, 129 AD3d at 69.) Further, Fischbarg’s continued representation
to transfer Jonns’ personal liabilities to an LLC was not merely a general continuing relationship
between lawyer and client, but rather pertained “specifically to the matter in which [he] committed
the alleged malpractice,” (Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]), i.e., the handling of
the 201 O transaction. Since the complaint alleged4 that Fischbarg continued in his efforts to transfer
Jonns’ liabilities to Crazy Asylum until at least July of 2016 (Doc. 41 at 7), and since the instant
action was commenced in March of2017 (Doc. 46 at 5), this Court therefore adheres to its original
determination that Jonns’ claim for legal malpractice is timely. “

Client hires attorney to do Surrogate’s Court case.  Attorney hires CPA to do Estate tax returns.  CPA fails to file the returns timely and loses a six-figure refund on the statute of limitations.  CPA is sued and motion practice follows.  In Mazur Carp & Rubin, P.C. v Cohen & Schaeffer, C.P.A., P.C.  2019 NY Slip Op 31735(U)  June 18, 2019  Supreme Court, New York County    Docket Number: 153583/2014  Judge: Kathryn E. Freed mostly finds for Plaintiff.

“Plaintiffs Mazur Carp & Rubin, P.C. (“Mazur CarP”), Karen Cashman (“Cashman”), and David Gallagher (“Gallagher”) move, pursuant to CPLR 3212, for summary judgment on their causes of action for accounting malpractice and breach of1:contract. They further move to dismiss the counterclaims of defendant Cohen & Schaeffer, C.P.A., P.C. (“Cohen & Schaeffer”). Cohen & Schaeffer opposes the motion and cross-moves, pursuant to CPLR 3212, for summary judgment
on its counterclaims. Plaintiffs oppose the cross-motion. After oral argument, and after reviewing
the parties’ papers and the relevant statutes and caselaw, it is ordered that the motion and cross
motion are decided as follows.”

“The first issue before this Court is whether plaintiffs have established a prima facie case of
accounting malpractice against Cohen & Schaeffer. This Court finds that plaintiffs have done so.
“A claim of professional negligence requires proof that there was a departure from accepted
standards of practice and that the departure was a proximate cause of [plaintiff’s] injury.” (D.D .
Hamilton Textiles, Inc. v Estate of Mate, 269 AD2d 2 I 4, 215 [1st Dept 2000].) Plaintiffs’ expert
witness, Basile, identifies several provisions of Title 31 of the Code of Federal Regulations from
which Cohen & Schaeffer may have departed. (Doc. 22.) Specifically, Basile cites § 10.36 of the
statute, which provides that accounting firms shall have “adequate procedures” to ensure
compliance with regulations governing accounting standards and practices. (Id. at 7-8.) Plaintiffs
have further shown that there was a substantial lapse in comunication between them and Cohen
& Schaeffer (Doc. 16 at 25), and that Cohen & Schaeffer produced the prepared tax return in April
of 2012 (Doc. 8 at 9), over one year after the statute of limitations for a federal tax refund had run. Because the estate would have received a refund but for Cohen & Schaeffer’s late preparation of
Grant’s individual taxes, plaintiffs have established their prima facie case on their first cause of
action for accounting malpractice. ”

“The last issue before this Court is whether Cohen & Schaeffer’s counterclaims for breach
of contract and negligence should be dismissed. (Doc. 8 at 18-20.) As previously discussed, the
breach of contract claim is dismissed pursuant to CPLR 3211 (a)( 1 ). Thus, the only remaining issue
is whether Cohen & Schaeffer’s counterclaim for negligence must be dismissed. “To prevail on a negligence cause of action, a [party] must establish the existence of a legal duty, a breach of that duty, proximate causation, and damages.” (MVB Collision, Inc. v Allstate Ins. Co., 129 AD3d I 041, 1042 [2d Dept 2015].) This Court cannot ascertain, based on the papers, what, if any, damages Cohen & Schaeffer has suffered; if any party has suffered damages in this litigation, it is the estate. Moreover, in asserting its counterclaims in its answer, Cohen & Schaeffer did not allege that it sustained damages. (Doc. 11 at 5-6.) Rather, defendant pleaded as follows:
“Consequently, plaintiff … is obligated to pay any damages, including but not limited to any ‘lost’
refunds that might, otherwise, have inured to the benefit: of, inter alia, the Estate of LUCIE
MACKEY GRANT.” (Id. at 6.) Thus, Cohen & Schaeffer’s own pleading suggests that it is the estate which has sustained damages. Thus, the branch of Mazur Carp’s motion seeking to dismiss the counterclaim for negligence is granted pursuant to CPLR 321 l(a)(l). “

Departure, Proximate Cause and Ascertainable Damages are the holy triumvirate of legal malpractice.  Miami Capital, LLC v Hurwitz  2019 NY Slip Op 05332  Decided on July 2, 2019
Appellate Division, First Department illustrates what happens when one or more of these elements are missing, or at best, speculative.

“Defendant’s motion was properly granted because while plaintiff anticipates that it could be subject to a rescission claim at some point in the future, such alleged damages are purely speculative and not yet ripe. Since damages in a legal malpractice case are designed “to make the injured client whole” (Campagnola v Mulholland, Minion & Roe, 76 NY2d 38, 42 [1990]), having failed to plead actual damages, plaintiff’s complaint fails to state a claim (see Heritage Partners, LLC v Stroock & Stroock & Lavan LLP, 133 AD3d 428 [1st Dept 2015], lv denied 27 NY3d 904 [2016]; Lavanant v General Acc. Ins. Co. of Am., 212 AD2d 450 [1st Dept 1995]).

Plaintiff has also failed to establish defendant’s negligence by alleging that he did not exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession (see O’Callaghan v Brunelle, 84 AD3d 581 [1st Dept 2011], lv denied 18 NY3d 804 [2012]). The contract of sale placed the burden on the seller to obtain any necessary court approval for the sale of its property. As seller’s counsel advised defendant that the seller did not need court approval because the property was not “substantially all” of its assets (see N-PCL 510), plaintiff has not adequately pled that defendant breached his duty of care as its lawyer by not obtaining court approval for the sale.”

Kislev Partners, LLP v Sidley LLP  2019 NY Slip Op 31850(U)  June 27, 2019 Supreme Court, New York County Docket Number: 152739/2018 Judge: Saliann Scarpulla is an example of a multi-million dollar tax shelter fraud case in which Plaintiffs waited too long to sue.

“Plaintiffs claim that, in late 2002, they identified a potential real estate project in Lower  Manhattan. They anticipated earning substantial profits on the project, which ultimately resulted in a “16-story residential tower designed by the renowned architect Richard Meier.” To shield themselves from tax liability on those profits, plaintiffs decided to acquire the project property through an entity that possessed embedded tax losses (complaint, ~~ 2, 5).

Plaintiffs were allegedly introduced to the idea of using a tax shelter to acquire the property by Lance Valdez (“Valdez”). Valdez convinced plaintiffs that, rather than acquire the property directly, they should instead assign the right to purchase the property to Valdez and ultimately close through Valdez’s entity, Kislev. “In convincing Plaintiffs that the tax aspects of purchasing Kislev worked, Valdez relied heavily on a pre-prepared Sidley Opinion addressed to Kislev, which exhaustively detailed purported facts surrounding Kislev’s formation and operation” (complaint,~ 5).

With respect to the Sidley opinion letter (the “Opinion Letter”), plaintiffs allege: “In or around July 2001, Valdez and Sidley developed a “Reliance Opinion” addressed to Valdez and entities controlled by Valdez, which opined on the ‘tax bases’ allegedly held by the Valdez entities” (complaint,~ 33). According to plaintiffs, Valdez shared with them the Opinion Letter, which concluded that Kislev had a $142 million tax basis in Euros and that it would incur an ordinary loss in that amount upon sale of the Euros. “Unknown to Plaintiffs, Valdez retained Sidley more than a year and half before the transaction to create the legal opinion for Kislev Partners, which he intended to use to
market to clients at a later date” (complaint, if 5).

Of this alleged scheme between Sidley and Valdez, plaintiffs allege that, unknown to them, but known to Sidley lawyers, the Opinion Letter could not support the supposed tax treatment represented, including in particular the claimed basis in Euros purportedly held by Kislev and sold to plaintiffs. Plaintiffs allege that Valdez provided a copy of the Opinion Letter to them to induce them to pay Valdez the $5,000,000 fee he demanded. Plaintiffs further allege that, at their request, Sidley made various changes to the Opinion Letter, including agreeing to change the addressee of the original Opinion Letter from Valdez to “To Whom It May Concern” at Kislev Partners address.” ”

“”‘The test as to when a plaintiff should have discovered an alleged fraud is an objective one.’ Thus ‘plaintiffs will be held to have discovered the fraud when it is established that they were possessed of knowledge of facts from which [the fraud] could be reasonably inferred”‘ (Gorelick v Vorhand, 83 AD3d 893, 894 [2d Dept 2011 ]). On a motion to dismiss, the burden is on the defendant to establish that plaintiff discovered the fraud or was on inquiry notice of the fraud more than two years prior to the commencement of the action:
[W]here the circumstances are such as to suggest to a person of ordinary
intelligence the probability that he has been defrauded, a duty of inquiry
arises, and if he omits that inquiry when it would have developed the truth,
and shuts his eyes to the fact which call for investigation, knowledge of the
fraud will be imputed to him.
(Aozara Bank, Ltd. V Credit Suisse Group, 144 AD3d 437, 438 [1st Dept 2016][intemal
quotation marks and citations omitted]).

“A court may find that plaintiffs were on inquiry notice where there is information concerning the fraudulent acts available to the plaintiffs in the public domain (Aldrich v March & McLennan Cos., Inc., 52 AD3d 435, 436 [1st Dept 2008][“a finding that plaintiffs were on inquiry notice of the alleged fraud … is supported by the extensive information that was available to plaintiffs in the public domain. Such information included the lawsuits commenced in the early 1980’s … involving nondisclosure of material information”).

Moreover, plaintiffs, according to their own submissions, had actual notice of the alleged fraud in September 2012 when they settled with the IRS. It was not until December of 2014, more than two years later, that the parties entered into the tolling agreement. Plaintiffs commenced this action in March of2018. Thus, under either standard of actual or inquiry notice, plaintiffs’ fraud;.. based claims are time-barred.

Like the fraud-based claims, plaintiffs’ unjust enrichment claim is barred by the applicable statutes oflimitations. Accordingly, I grant Sidley’s motion to dismiss, pursuant to CPLR 3211 (a) (5) and dismisses the complaint in its entirety as against it.”