Utilisave, LLC v Fox Horan & Camerini, LLP  2018 NY Slip Op 33284(U)  December 18, 2018  Supreme Court, New York County  Docket Number: 652318/2014  Judge: Kathryn E. Freed is a complicated case involving rotating ownership of a party in litigation, purchases from the liquidating trustee and 10 lawsuits in multiple states.  Judge Freed eventually rules on summary judgment in what is otherwise a summary decision.

“Utilisave is a limited liability company organized in Delaware with its principal place of business in this state (affirmation of James G. McCamey [McCamey affirmation], exhibit P [complaint] 1 6). Nonparty Michael H. Steifman (Steifman) founded Utilisave’s predecessor in 1991 and served as a Utilisave employee (id.,  9, 14). Nonparty MHS Venture Management  Corp. (MHS), an entity wholly owned by Steifman, was one of Utilisave’s two managing members (id.,  13). Mikhael Khenin (Khenin), the second managing member, was Utilisave’s CEO (id.) In 2007, Steifman and MHS brought an action against Khenin and Utilisave, Stefman v Khenin, Supreme Court, Westchester County Index Number 8271/2007 (the Prior Action), for wrongfully withholding distributions and salary payments and for removal of Khenin as CEO (complaint 15-16). Fox, a law firm based in New York, and Rivkin, a former partner at Fox, represented Utilisave from January 2008 through July 2011, when a judgment was entered against Utilisave after a bench trial (id.,  7-8, 19 and 32).
Plaintiff alleges that, during the pendency of the Prior Action, Khenin’s term as CEO expired in 2009, as set forth in his employment agreement. Nonetheless, under defendants’ counsel, Khenin renewed his employment agreement without MHS’s knowledge, irrespective of the terms in Utilisave’s operating agreement that required the consent of both managing members (id.,  57). Khenin then paid himself unauthorized distributions and excessive compensation, misappropriated Utilisave’s confidential information, and undertook other actions that caused Utilisave harm (complaint,  26-32, 45). Ultimately, the judgment in the Prior Action included a declaration that Khenin’s renewed employment agreement was void (id., 57-58). ”

“”The doctrine of collateral estoppel … precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same” (Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984] [internal citations omitted]). Thus, the two elements necessary to invoke collateral estoppel are “an identity of issue which has necessarily been decided in the prior action and is decisive of the present action” and “a full and fair opportunity to contest the decision now said to be controlling” (Buechel v Bain, 97 NY2d 295, 303-304 [200 I], cert denied 535 US 1096 [2002] [internal citation omitted]). “[T]he burden rests upon the proponent of collateral estoppel to demonstrate the identicality and decisiveness of the issue, while the burden rests upon the opponent to establish the absence of a full and fair opportunity to litigate the issue in the prior action or proceeding” (Ryan, 62 NY2d at 501 ).
The court finds that the Disqualification Order has no preclusive effect on the present action. First, with respect to the element of identicality of issues, the Disqualification Order did not determine any issue that would have precluded a legal malpractice claim against defendants (see Wachtel!, Lipton, Rosen & Katz v CVR Energy, Inc., 143 AD3d 648, 648-649 [I st Dept 2016]). To state a cause of action for legal malpractice, a plaintiff must plead “the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and actual damages” (Leder v Spiegel, 31 AD3d 266, 267 [1st Dept 2006], a.ffd 9 NY3d 836 [2007], cert denied, 552 US 1257 [2008] [citations omitted]). The two issues necessarily decided in the Disqualification Order related to whether the court should (I) disqualify Butler, Fitzgerald, Fiveson & McCarthy P.C. and Tibbets, Keating & Butler, LLC from representing Utilisave because of purported conflicts of interest and (2) order Khenin to consult with and obtain Steifman’s consent on the selection and retention of counsel for Utilisave. Whether defendants were negligent in providing Utilisave with advice was not at issue in the Prior Action. Likewise, the Prior Action did not determine whether defendants breached their contract to Utilisave, whether defendants aided and abetted Khenin’s breach of his fiduciary duty to Utilisave, and whether defendants were unjustly enriched because they were paid for the legal services rendered.

Furthermore, defendants were not in privity with Utilisave, Steifman, MHS or Khenin in the Prior Action. Privity is an “amorphous concept not easy of application” (D ‘Arata v New York Cen. Mut. Fire Ins. Co., 76 NY2d 659, 664 [1990] [citation omitted]). A nonparty to a prior litigation may be deemed in privity with a party in a prior litigation if “his [or her] own rights or obligations in the subsequent proceeding are conditioned in one or another on, or derivative of, the rights of the party to the prior litigation” (id. [citations omitted]). Plainly, Utilisave’s claims are not derivative of or conditioned upon the rights of any party in the Prior Action. More importantly, the language in thepisqualification Order does not absolve defendants of any a_llegedly negligent actions they may have taken. Indeed, the complaint alleges that Utilisave was harmed by defendants’ representation of it in the Prior Action, not that Khenin’s selection of defendants as Utilisave’s counsel was improper. “

Legal malpractice is but a child of professional negligence, and medical malpractice is a sibling.  In “Jane Doe” v Sharma  2018 NY Slip Op 28386  Decided on December 1, 2018 Supreme Court, Nassau County  Judge Brown navigates a very unusual medical malpractice case which has several shocking details.

“In this highly unusual case, the plaintiff has advanced five causes of action: negligent retention and supervision of the defendant Mohan Sharma; assault, battery and endangerment; intentional; negligent infliction of emotional distress; professional negligence and malpractice. This action was tried before a jury for seven days. The jury found the defendant and his practice, defendant Caring Medical, LLC, liable. The jury found (1) that the defendant Mohan Sharma departed from “the accepted standards of medical practice by practicing medicine while impaired by a cognitive disability;” (2) that his departure was a substantial factor in bringing about the plaintiff’s injuries; (3) that Caring Medical, LLC was negligent in permitting the defendant to practice medicine while impaired by a cognitive disability; and (4) that Caring Medical’s negligence was also a substantial factor in bringing about the plaintiff’s injuries. Mohan Sharma was found 70% at fault and Caring Medical was found 30% at fault. The plaintiff was awarded $700,000 for past pain and suffering and $300,000 for future pain and suffering for the upcoming ten years. Mohan Sharma and Caring Medical, LLC presently ask this court to set aside the jury’s findings as against the weight of the evidence.”

“The plaintiff’s claims arose from an incident occurring while the plaintiff was in defendant Mohan Sharma’s medical office along with her grandmother to receive certain test results. It is undisputed that during this visit the defendant Mohan Sharma took his penis out of his pants, masturbated and ejaculated on the plaintiff Jane Doe. The plaintiff, who suffers from intellectual disabilities, testified in sum that she and her grandmother had gone to the defendant’s office for a scheduled appointment on the day in question to obtain the results of urinary and blood tests and to have a bug bite on her grandmother’s arm examined. They were both brought into the examining room, which was a usual practice for them when they saw the defendant. The defendant had the plaintiff’s grandmother sit on the examination table facing the wall while he [*2]examined her back with a stethoscope. The plaintiff testified that he then approached her and stuck out his tongue and then “started unzipping his pants and took his penis out.” She testified that “he was trying to make [her] force of touching him and doing disgusting things to [her] and he eventually ‘semened’ on [her] pants and on the floor.” She further testified that she was able to take a video of his actions by pressing “record” on her phone. That video was shown to the jury. It shows the defendant exposing his penis, masturbating in front of the plaintiff, gesturing to her to touch his penis and to put her mouth on it.”

“The parties did not dispute that due to an aggressive form of frontal temporal dementia, the defendant Mohan Sharma was incapable of forming intent at the time of the sexual abuse. A stipulation was read to the jury consisting of the following: the defendant “was arrested for the acts committed against [the plaintiff] on October 11, 2013 and criminally charged with endangering the welfare of an incompetent or physically disabled person in the first degree in violation of Penal Law § 260.25, a Class E felony, and sexual abuse in the second degree, in violation of Penal Law§ 130.60, a class A misdemeanor. . . .” The stipulation advised the jury that those charges were dismissed because the defendant himself was determined to be an “incapacitated person.” The stipulation also included a statement that “[t]he acts committed against the [plaintiff] by [the defendant] were not intentional but rather were involuntary acts caused by complex partial seizures accompanied by masturbatory automatic behaviors resulting from his cognitive disorders.”

The jury also heard testimony that the defendant had exposed himself to an employee in January 2013, eight months before the subject incident, and the stipulation contained the January victim’s sworn statement that “Dr. Sharma pulled his penis out of his pants and grabbed my hand and tried to make me touch it” and noted that those contentions were never adjudicated because of the defendant’s incapacity. The jury was further advised via the stipulation that on February 26, 2013 Mohan Sharma stated that he engaged in other instances of conduct similar to his misconduct in January 2013.”

“The defendant’s expert acknowledged that he was impaired by a cognitive disorder that was progressive and degenerative at the time of the plaintiff’s assault and that this disability was severe. In fact, he testified that the defendant was in the throes of a major cognitive event when the abuse occurred.”

“These cases, though not directly analogous, highlight the standard to guard patients from foreseeable risks. So, too, the unique facts presented require independent consideration rather [*6]than rote application of general rules. Upon the evidence presented, a reasonable jury could determine that the plaintiff was present in the examination room at the time of the abuse as a patient of Dr. Mohan Sharma and that the events that unfolded were substantially related to her treatment. Further a reasonable jury could have determined that Dr. Sharma’s knowledge of his cognitive decline and his own past acts, together with his failure to protect his intellectually disabled patient from an unreasonable risk of harm was a breach of his professional duty, amounting to professional malpractice. Accordingly, the branch of defendants’ motion to set aside the verdict is denied.”

Tatintsian v Pryor Cashman LLP  2018 NY Slip Op 33152(U) December 10, 2018 Supreme Court, New York County Docket Number: 152022/2017 is extremely complicated, but Judge David Benjamin Cohen unravels the facts and teases out a legal malpractice analysis.

“In this action, plaintiff Gary Tatintsian (Plaintiff) alleges that defendants Pryor Cashman LLP (Pryor Cashman), Eric Hellige (Hellige) and Eudora Partners LLC (Eudora, along with Pryor Cashman and Hellige, collectively, Defendants) participated in a scam perpetrated by Mikhail Vorotyntsev (MV) to “fleece” investors, including Plaintiff. The complaint asserts four causes of action: fraudulent inducement, aiding and abetting fraud, legal malpractice and unjust enrichment.”

“Pryor Cashman is a New York law firm, Hellige is a senior partner of Prior Cashman, and Eudora is a company in which Hellige is its member and manager (complaint, 7-9). In the spring of 2016, Plaintiff sought to invest in ShopLink Inc. (ShopLink), a startup software company in which MV is its chief executive officer and sole board member (id., 12-13). Plaintiff was led to believe that shopLink is a legitimate operating company, but it turned out to be a vehicle through which MV and his wife defrauded investors in order to fund their lavish life style (id.,  14-15). ”

“Prior to 2016, Pryor Cashman and Hellige had represented ShopLink and MV in a myriad of matters, including, among others, a $1.83 million convertible notes offering by ShopLink, and ShopLink and MV accrued substantial legal fees, owed and unpaid, over the years (id., 19). In
addition to the unpaid fees, in June 2012, Hellige caused Eudora to make a $20,000 loan to MV,
and in return for this personal loan, MV granted Eudora a 5% equity interest in ShopLink and
any corporate entities owned by MV, including Counter Capital LLC (Counter Capital), which
owned all of the 15 million initially issued and outstanding shares of ShopLink (id.,  20). ”

“In April 2016, Plaintiff executed the Subscription Agreement, pursuant to which he purchased 340,000 shares of ShopLink’s common stock for $1,098,200, and concurrently therewith, he signed ShopLink’s Stockholders’ Agreement and other documents (collectively, Subscription Documents), including a letter agreement which granted Plaintiff an option to purchase additional ShopLink stock (id., 24). The Subscription Documents were drafted by Hellige and Pryor Cashman (id., ~ 25). In August 2016, Plaintiff exercised the option and bought an additional 100,000 shares of ShopLink stock for $250,000, bringing his total investment to $1,348,200 (id.,  26). When Plaintiff invested in ShopLink, Defendants saw the transaction as leverage over MV and as cash flow which would enable them to obtain payment of their unpaid legal fees and loans, while Hellige could also enhance his equity interest in ShopLink and Counter Capital (id., 21). Defendants even held Plaintiffs investment transaction hostage, warning MV a few days before the closing that unless a payment agreement was reached, the investment funds would be returned to Plaintiff (id., 22). In response to the threat, MV and Defendants ultimately agreed that, upon closing of the transaction, Shop Link would pay Pryor Cashman $15,000 out of the investment proceeds; MV would repay, from the same proceeds, his $30,000 personal loan owed to Hellige in return for a release by Eudora; and MV would sign a $33,000 promissory note payable to Pryor Cashman (id., 23). The existence of this deal, in which Defendants were beneficiaries, was not disclosed to Plaintiff prior to his investment (id.) ”

“In order to plead a legal malpractice claim, the complaint must allege “the negligence of the attorney” and that the negligence is the “proximate cause of the loss sustained” by plaintiff
(O’Callaghan v Brunelle, 84 AD3d 581, 582 [1st Dept 2011][internal citations and quotation marks omitted]). Further, a legal malpractice claim cannot be stated if there is no attorney-client relationship between the parties (Waggoner v Caruso, 68 AD3d 1, 3 [1st Dept 2009], affd 14
NY3d 874 [2010]).

Plaintiff acknowledges that he is not a client of and is not in privity with Defendants, but asserts that he may recover for losses arising from Defendants’ legal malpractice if the complaint alleges “fraud, collusion, malicious acts or other special circumstances” (Plaintiffs opposition at 25, citing, inter alia, Estate of Schneider v Finmann, 15 NY3d 306, 308 [2010]). In such regard, the complaint alleges that Defendants “engaged in fraud, collusion, or malicious or tortious acts against Plaintiff,” and as a result, “Defendants are liable to Plaintiff for legal malpractice” (Complaint,  61-62).
However, Plaintiffs allegation of “collusion” in the complaint is conclusory because he fails to identify any collusive acts between Defendants and MV, and has neither alleged nor  specifically identified any “malicious acts” on the part of Defendants. In his opposition to the motion, Plaintiff merely alleges that because “Defendants committed fraud against him to benefit themselves … and implicitly … Defendants secretly colluded with [MV] to misappropriate Plaintiffs investment for Defendants’ and [MV’s] own enrichment” (Defendants’ opposition at 26-27), The foregoing allegations sound more like an unjust enrichment claim rather than a legal malpractice claim, because the conclusory allegation of “secret collusion” is not supported by any fact. Also, his fraud against Defendant has been dismissed, for the reasons stated above.

Accordingly, the legal malpractice claim should be dismissed (Benzemann v Citibank,
NA., 149 AD3d 586, 586 [1st Dept 2017] [absence of privity, along with conclusory allegation of
fraud and collusion, required dismissal of the legal malpractice claim]). “

A fair number of summary judgment decisions rendered in Supreme Court are reversed in the Appellate Division.  Rather than simply ask how two courts can view the same evidence in such a differing light, note the deep doctrinal differences between that which Supreme Court credited and that which the Appellate Division relied upon  in 762 Westchester Ave. Realty, LLC v Mavrelis  2018 NY Slip Op 08452  Decided on December 12, 2018  Appellate Division, Second Department.

“The plaintiff, a limited liability corporation that owned real property in the Bronx, commenced this action alleging, inter alia, legal malpractice against the defendant Bill Mavrelis, also known as William N. Mavrelis (hereinafter the defendant). Specifically, the plaintiff alleged that it had retained the defendant to prepare and file an application for a tax abatement on the plaintiff’s behalf, that the defendant filed the application late, and that the lateness of the filing was the basis for the denial of the application. Prior to the completion of discovery, the plaintiff moved, inter alia, for summary judgment on the issue of liability with respect to the cause of action alleging legal malpractice. In an order dated January 4, 2016, the Supreme Court, among other things, granted that branch of the motion. The defendant appeals from that portion of the order.

Contrary to the defendant’s contention, the plaintiff’s motion was not premature (see CPLR 3212[f]). However, we disagree with the Supreme Court’s determination to grant that branch of the motion which was for summary judgment on the issue of the defendant’s liability for malpractice.

In an action alleging 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 breach of this duty proximately caused plaintiff to sustain actual damages (see Zaidman v Marcel Weisman, LLC, 106 AD3d 813, 814; Erdman v Dell, 50 AD3d 627, 627-628).

Here, the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law on the issue of the defendant’s liability, as it failed to present any evidence that its application for the subject tax abatement would have been granted had it been timely filed (see Zaidman v Marcel Weisman, LLC, 106 AD3d at 814; Erdman v Dell, 50 AD3d at 628). Moreover, the limited, pre-discovery record before us presents unresolved triable issues of fact regarding the cause of the late filing, including the extent, if any, to which such cause is attributable to any act or omission on the part of the defendant.

Accordingly, the Supreme Court should have denied that branch of the plaintiff’s motion which was for summary judgment on the issue of the defendant’s liability for legal malpractice, regardless of the sufficiency of the defendant’s opposing papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).”

Sometimes lawyers believe that they can affect the climate of litigation by getting a little press attention.  This may work on occasion, but can wreck a case as well.  Barr v Liddle & Robertson, L.L.P.  2018 NY Slip Op 33113(U)  December 3, 2018 Supreme Court, New York County Docket Number: 159781/14 Judge: Manuel J. Mendez is an example of the dangers of announcing a new law suit.

“This action arises from an alleged legal malpractice occurring in December 2002 and January 2003. Plaintiff was a managing director at an investment firm, Robertson Stephens Inc. (hereinafter “RSI”), which was indirectly owned by Robert Stephens Group Inc. (RSGI), both entities were subsidiaries of the parent company, FleetBoston Financial Corporation (hereinafter “FleetBoston”). In July of 2002 plaintiff was terminated from his employment as part of FleetBoston’s shut down of the subsidiaries. Plaintiff’s alleged compensation structure prior to termination consisted of a base salary and an annual bonus that included deferral of bonuses earned in the prior fiscal year, a Cash Equivalent Plan (CEP) and equity in the investment firm in the form of Restricted Stock Units (RSUs). ”

“Instead of signing the separation agreement plaintiff and 41 other former employees of RSI each separately retained defendants to represent them and commenced an arbitration action before the New York Stock Exchange against the RSI, RSGI, and FleetBoston (Mot. Exh.C).  After commencement of the action, defendants made comments to the Wall Street Journal and the New York Times about the arbitration. On December 12, 2002 an article was published in the Wall Street Journal titled “Robertson Band Claims Fleet Owes Some Bonuses.” The article specifically
referred to statements made by defendant Jeffrey Liddle (Mot. Exh. E, Cross-Mot., Barr Aft. Exh. G).

Plaintiff alleges that on December 10, 2002 defendants provided the Wall Street Journal with copies of two press releases, and a copy of a draft Statement of Claim for the arbitration, the day before it was actually filed (Cross-Mot., Haley Aft., Exhs. E, F, G and H). In a letter dated May 2, 2003 RSGI advised plaintiff that he was in violation of the non-disparagement provisions of the CEP section 8.1 and the Restricted Unit Award Agreement, section 4.6. The letter stated that plaintiff would not be paid his Deferred Compensation or awards of stock. The letter does not state the reasons for finding plaintiff was in violation of CEP section 8.1 or the Restricted Unit Awards Agreement (Mot. Exh. F).”

“The parties proceeded with the arbitration. On September 12, 2007 the arbitration panel issued a full and final award of $14,690,000.00, but only as to twenty seven of the claimants. Plaintiff and eleven other claimants were not awarded their bonuses or any compensation (Mot. Exh. I). The parties then commenced an action in the United States District Court which determined that the CEP and RSU claims were resolved as part of the arbitration and barred by res judicata (Mot. Exh. K). On March 23, 2011 the United States Court of Appeals for the First Circuit affirmed the United States District Court (Mot. Exh. L). The United States Court of Appeals for the First Circuit noted that the arbitration panel was silent as to how they reached the amount of the award, but none of the parties requested remand to the arbitral panel for clarification (Mot. Exh. L). On October 11, 2011 the Supreme Court of the United States denied plaintiff’s petition for writ of certiorari (Alt v. Robertson Stephens Group, Inc., 132 S. Ct. 414 [2011]). ”

‘Plaintiff raises an issue of fact on the issue of negligence and duty of care by arguing that only defendants’ “fee” was excluded in the retainer agreement, and that there is no specific language excluding representation as to the CEP plan. Paragraphs D and E exclude the CEP for 2001 and 2002 from the percentage of “recovery” defendants would be entitled to as part of their fees (Mot. Exh. C). The retainer agreement goes on to state ” … our understanding is that…Robertson Stephens and FleetBoston have indicated you will be paid the items listed in A through I above. In the event Robertson Stephens and/or FleetBoston contend, however that you are not entitled to any of the items listed in A through I above, then such contested items will be included within the term “recovery” for the purposes of the above percentages”(Mot. Exh. C). Plaintiff also claims he provided the Separation Agreement and release to the defendants, before he signed the retainer agreement, to show that they were aware his Deferred Compensation was guaranteed, as long as he complied with the requirements of section 8.1 of the CEP (Barr Aff. in Opp., Exh. D). ”

“Plaintiff correctly argues that the “litigation privilege” protects lawyers from claims of defamation and that the defendants have conflated “disparagement” as relevant to the provisions of CEP section 8.1, with “defamation.” Plaintiff has raised an issue of fact as to whether defendants acted negligently in making statements to the press in reliance on the “litigation privilege.” There remains issues of fact as to whether defendants’ erroneously relied on the “litigation privilege” and whether their actions were a reasonable pre-emptive measure to avoid anticipated negative publicity of their clients.”

“The conflicting facts presented warrant a determination at trial as to whether the defendants
act of filing for arbitration on December 11, 2002 was reasonable, warranting denial of plaintiff’s
cross-motion for summary judgment (See Ansah v. A.W.I. Sec. & Investigation, Inc., 129 A.O. 3d
538, 12 N.Y.S. 3d 35 [1st Dept., 2015], 180 Ludlow Development LLC v. Olshan Frome Wolosky LLP, 165 A.O. 3d 594, supra and Genesis Merchant Partners, LP. v. Gilbride, Tusa, Last & Spellane, LLC 157 A.O. 3d 479, supra).

Accordingly, it is ORDERED that defendants’ LIDDLE & ROBERTSON, L.L.P. and JEFFREY
L. LIDDLE’s motion pursuant to CPLR §3212 for summary judgment dismissing plaintiff’s
complaint, is denied, and it is further,

ORDERED that plaintiff’s cross-motion pursuant to CPLR §3212 for summary judgment on
the complaint and for an award of damages against the defendants, LIDDLE & ROBERTSON, L.L.P.
and JEFFREY L. LIDDLE, in the amount of $1,299,999.84 with interest, is denied. “

Whether there has been legal malpractice in a real estate development setting, or no malpractice at all depends on at least four elements.  The least interesting of these elements is the departure.  In almost every legal malpractice case there is a definite departure.  It’s the “proximate cause” and the “but for” portions of the equation that are much more interesting.  In Bauhouse Group I, Inc. v Kalikow  2018 NY Slip Op 33055(U)  December 4, 2018  Supreme Court, New York County
Docket Number: 158277/2017 Judge: Saliann Scarpulla which we discussed last week, not only was collateral estoppel a problem, but the Court found that there was no proximate cause connection between the alleged wrongs and the bad outcome.  Put another way an unwaivable conflict without more is insufficient.

“The remaining allegations in the complaint underlying the malpractice claim are that: Defendants had unwaivable conflicts of interest while representing Plaintiffs because Kalikow was related to Lenders and because Defendants’ represented Lenders in other, unrelated matters; these conflicts were not adequately explained or waived; and Defendants coerced Bauhouse to sign the inadequate Waiver Letter.

To state a claim for legal malpractice, the plaintiff must allege: “the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and proof of actual damages.” Between The Bread Realty Corp. v Salans Hertzfeld Heilbronn Christy & Viener, 290 AD2d 380, 380 (1st Dept 2002) (internal citations omitted). In order to adequately allege proximate cause, the plaintiff “must plead specific factual allegations establishing that but for counsel’s deficient representation, there would have been a more favorable outcome to the underlying matter,” Dweck Law Firm, LLP v Mann, 283 AD2d 292, 293 (1st Dept 2001) (citation omitted), or that “plaintiff would have prevailed in the matter at issue or would not have sustained any damages.” Between
The Bread Realty Corp., 290 AD2d at 380 (citations omitted).

Here, the complaint does not contain factual allegations sufficient to establish that the purportedly ill-explained unwaivable conflicts of interest were the proximate cause of any alleged harm to Plaintiffs. See Schafrann v NV Famka, Inc., 14 AD3d 363, 364 (1st Dept 2005) (“A conflict of interest, even if a violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action.” (citation omitted)); Coleman v Fox Horan & Camerini, LLP, 274 AD2d 308, 309 (1st Dept 2000); see also Kodsi v Gee, 100 AD3d 437, 438 (1st Dept 2012) (citations omitted).

Moreover, the complaint is devoid of any factual allegations to support the Plaintiffs’ contention that Defendants coerced Bauhouse into executing the Waiver Letter. See generally Rau v Borenkojf, 262 AD2d 388, 388 (2d Dept 1999) (complaint containing conclusory allegations, “unsupported by any factual allegations, that the defendants negligently advised and coerced [plaintiff] to settle his claim, and that he would have obtained a higher settlement or judgment but for their negligence” failed to state claim for malpractice).

In sum, to the extent that Plaintiffs’ allegations survive the application of collateral estoppel, they nevertheless fail to state a cause of action for malpractice.”

Real Estate rules Manhattan, and big (really big) money is attracted to the thought of new buildings in prime locations.  Bauhouse Group I, Inc. v Kalikow  2018 NY Slip Op 33055(U)
December 4, 2018  Supreme Court, New York County  Docket Number: 158277/2017
Judge: Saliann Scarpulla is the story of a Sutton Place project which started, started to sour, went bad and almost ended in Bankruptcy Court.  It then morphed into a lost legal malpractice case.

“This action arises out of a failed residential real estate development project (the “Project”) which resulted in several federal and state court actions. The facts of the underlying dispute have been set forth in extensive detail in a post-trial decision from a related adversary proceeding filed in the United States Bankruptcy Court of the Southern District of New York (“Bankruptcy Proceeding”), In re BH Sutton Mezz LLC, AP 16- 01187 (SHL), 2016 WL 8352445 (Bankr SDNY 2016) (hereinafter, the “Bankruptcy Decision”), of which I take judicial notice. ”

“The Principals set out to purchase plots of land located at 426-432 E. 58th Street, New York, New York I 0022 and the related air rights (the “Property”) on which to develop the Project. The Principals led the Project, and Bauhouse planned the development of the Project. Beninati hired numerous advisors to assist Plaintiffs and Debtors in completing the Project, including several debt and equity financing advisors.
On June 24, 2014, Beninati, on behalf of Sutton NY, retained Defendants to represent Sutton NY in the Project.3 The complaint alleges that Plaintiffs retained Defendants in November 2014 to represent them in the Project.
In June 2014, Debtors entered into an agreement to purchase the Property. Thereafter, the Principals, with the help of their advisors, sought equity and debt investors to finance the purchase of the Property and the development of Project. In November 2014, Kalikow and Beninati discussed the possibility of obtaining financing from Kalikow’s cousins, N. Richard Kalikow and Jonathan Kalikow (collectively, “Lenders”), who were the principals of Gamma Funding, LLC. Shortly thereafter, the Principals met with the Lenders to discuss their financing options and
subsequently sent the Lenders additional information about the Project.

During this time, the Principals, Debtors, and their advisors were actively pursuing other investors. These efforts later proved to be unsuccessful and “Debtors had significant difficulties getting financing because they had invested so little of their own money in the [P]roject, thus making traditional lenders unwilling to bankroll the project.” Bankruptcy Decision at 14. ”

“Debtors ultimately defaulted on their loan obligations and filed for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court of the Southern District of New York. The Debtors subsequently commenced an adversarial proceeding against the Lenders.
In November 2016, the Bankruptcy Court conducted a five-day trial, and the posttrial decision organized the Debtor’s remaining thirteen claims (Debtors originally asserted 26 claims against Lenders) into seven categories: unconscionability; lender liability; breach of contract; breach of implied covenant; equitable subordination; fraudulent transfer; and criminal usury. The court ruled in favor of Debtors only for the criminal usury claim5 and granted judgment for the defendants on all remaining claims.

Plaintiffs commenced this action in September 2017, asserting claims for professional negligence and/or legal malpractice, fraud under New York Judiciary Law §487, and breach of contract.
The complaint alleges that Plaintiffs retained Defendants to represent them in the Project in November 2014. During this period of representation, Kalikow introduced Plaintiffs to, and assisted them in obtaining financing for the Project from Lenders, who were principals of Gamma Funding, LLC and related to Kalikow. Kalikow allegedly failed adequately to inform Plaintiffs that he was related Lenders and that Defendants represented the Lenders on various other real estate matters, both of which constitute unwaivable conflicts of interest. To cover up these purportedly un-waivable conflicts, Defendants allegedly drafted and “coerced” Bauhouse to sign the Waiver Letter. ”

“Collateral Estoppel
“The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same.” Ryan v New York Tel. Co., 62 NY2d 494, 500 (1984) (citations omitted); see also Physicians’ Reciprocal Insurers v Loeb, 291 AD2d 541, 543 (2d Dept 2002) (Collateral estoppel “prevents repetitive litigation and potentially inconsistent judgments by providing, in general, that once a particular question of fact has been decided in one judicial forum, that same question of fact may not be reopened for further litigation in the context of a subsequent judicial proceeding.” (citations omitted)). ”

“Plaintiffs’ argument that collateral estoppel cannot apply because the issue of Defendants’ malpractice was not litigated in the Bankruptcy Proceeding is without merit. “[C]ollateral estoppel precludes assertion of the same wrong under a different legal theory,” Korea First Bank of NY. v Noah Enterprises, Ltd., 12 AD3d 321, 323 (1st Dept  2004) (citations omitted), and an issue arising “in an entirely distinct cause of action is no impediment to collateral estoppel.” Fallek v Becker, Achiron & Isserlis, 246 AD2d 394, 395 (1st Dept 1998) (citations omitted).

Although there was no malpractice claim asserted against Defendants in the Bankruptcy  Proceeding, the Bankruptcy Decision necessarily decided and “addressed issues identical to those raised by” Plaintiffs’ malpractice claim here. Sanders v Grenadier Realty, Inc., 102 AD3d 460, 461 (1st Dept 2013) (precluding re-litigation of issues underlying state claim where identical issues underlying claim were decided by federal court that had refused to exercise jurisdiction over state claims); see also Hudson v Merrill Lynch & Co., Inc., 138 AD3d 511, 515 (1st Dept 2016), lv to appeal denied, 28 NY3d 902 (2016) (party estopped from relitigating “discrete factual issues” decided against that party in prior federal litigation); Women’s Interart Ctr., Inc. v New York City
Economic Dev. Corp. (EDC), 65 AD3d 426, 427 (1st Dept 2009). ”

“While Defendants have met their initial burden of proof, Plaintiffs have failed to meet their burden of demonstrating that they lacked a fair opportunity to litigate these issues or to contest the Bankruptcy Decision. Therefore, Plaintiffs here are precluded from relitigating the above findings, including the complaint’s allegations that Defendants negligently put Plaintiff’s into risky commercial transactions that were guaranteed to fail, that Defendants failed to explain the risks involved in entering into these financing transactions, and that Defendants and Lenders were engaged in a loan-to-own scheme. “