Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Riordan v. Cellino & Barnes, P.C., 84 A.D.3d 1737, 922 N.Y.S.2d 728 (2011)

NY: underlying labor and negligence actions

Student Contributor: Alexis Trezza

Facts: Plaintiff commenced a legal malpractice action against defendants seeking damages that plaintiffs alleged resulted from defendants’ negligent representation of Clarence F. Riordan in the underlying Labor Law and common law negligence action. Defendants admit that they were negligent in failing to serve the notice of claim in a timely manner, but claimed that they weren’t liable for legal malpractice because the underlying cause of action was without merit. Plaintiff served a notice to take depositions of two attorneys that were employed by defendant law firm, and defendants moved for a protective order, which was granted.

Issue: Was defendants’ motion for a protective order properly granted?

Holding: No. Pursuant to CPLR 3101(a)(1), “there shall be full disclosure of all matter material and necessary in the prosecution or defense of an action by a party or employee of a party.” This provision has been construed in a liberal way in order to permit discovery “of any facts bearing on the controversy that will assist preparation for trial by sharpening the issues and reducing delay and prolixity.” The test for disclosure “is one of usefulness and reason, and CPLR 3101(a) should be construed to permit discovery of testimony that is sufficiently related to the issues in litigation to make the effort to obtain it in preparation for trial reasonable.” The depositions sought by plaintiff satisfy that test, and defendants failed to meet their burden of making an “appropriate factual showing” that they are entitled to a protective order limiting discovery.

Lesson: CPLR 3101(a)(1) is construed liberally (such that disclosure is preferred). In order to sustain a motion for protective order, defendants must make an appropriate factual showing that they are entitled to same. 

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Bells v. Foster, 83 A.D.3d 876, 922 N.Y.S.2d 124 (2011)

NY: Underlying Real Estate Contract Cancellation

Student Contributor: Alexis Trezza

Facts: Defendant represented plaintiff in a real estate action. Plaintiff (purchaser) entered into a contract for the sale of certain real property. She was given forty-five days in which to secure a mortgage. In the event that she was unable to secure same, plaintiff was allowed to cancel the contract and get her down payment back as long as she did so before the forty-five day period ended. The closing ultimately did not occur, and the seller retained the plaintiff’s down payment as liquidated damages because defendant did not cancel the contract of sale on behalf of plaintiff within the required period of time (even though the period of time in which plaintiff could cancel the sale was extended). Plaintiff retained new counsel, commenced an action against the seller and ultimately was able to get a portion of her down payment back. Plaintiff then brought an action against defendant for legal malpractice. After defendant interposed an answer, plaintiff made a motion for summary judgment on the issue of liability, and alleged that defendant’s failure to timely cancel the contract of sale on her behalf was malpractice as a matter of law. Defendant opposed plaintiff’s motion and simultaneously made a cross-motion for summary judgment in order to dismiss plaintiff’s complaint. Defendant alleged that plaintiff, by her own admission, was in breach of the contract of sale and, as a result, her own actions were the only proximate cause of the damages she sustained. Plaintiff’s motion was granted and defendant’s motion was denied.

Issue: (a) Was plaintiff’s motion for summary judgment properly granted? (b) Was defendant’s cross motion for summary judgment properly denied?

Ruling: (a) No. “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.” In order “to establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages but for the lawyer’s negligence.” Here, plaintiff failed to establish her prima facie entitlement to judgment as a matter of law because she failed to demonstrate that any negligence on the defendant’s part in failing to timely cancel the contract of sale on her behalf was the sole proximate cause of her damages. As such, the Court erred in granting her motion for summary judgment on liability. (b) Yes. Defendant failed to show that the plaintiff was unable to prove at least one of the essential elements of her legal malpractice cause of action.

Lesson: In order to have a motion for summary judgment granted and sustained, plaintiff must demonstrate that there are no triable issues of fact as to each element of her cause of action for legal malpractice, including proximate cause. 

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Berman v. Cullen & Dykman et al., 291 A.D.2d 518, 739 N.Y.S.2d 169 (2002)

NY: underlying commercial transaction, security interest, financing statement

Student Contributor: Alexis Trezza

Facts: Defendants represented plaintiffs in the sale of their business. In connection with same, defendants filed a financing statement in order to perfect plaintiff’s security interest in the purchaser’s property. The plaintiffs’ security interest then lapsed five years later. Plaintiffs commenced a legal malpractice action against defendants where they alleged that the defendant law firm and some of its partners failed to file a continuation statement. Defendants cross-moved for summary judgment dismissing plaintiffs’ complaint, and same was granted. Plaintiffs appeal.

Issue: Was defendants’ cross motion for summary judgment properly granted?

Ruling: No.  (1) The record presents triable issues as to whether the “continuous representation” rule applied so as to impose a duty upon the respondents to file the continuation agreement in 1993. The record shows, among other things, that after the closing, the defendants advised the plaintiffs in regard to the purchaser’s default on its debt to the plaintiffs, and represented the plaintiffs in the purchaser’s bankruptcy proceedings. (2)  the old  six year statute of limitations is applicable to this legal malpractice case since it was commenced in January 1996, before the September 1996 amendment which shortened the six year period to three years. The plaintiff’s malpractice claim regarding the respondents’ failure to file the continuation statement accrued in June 1993, when the original financing statement lapsed. Accordingly, that claim was timely without application of the tolling provision of the continuous representation rule. Furthermore, application of the continuous representation toll would make timely the plaintiffs’ claims of malpractice which were alleged to have occurred before 1993.

Lesson: A showing of “continuous representation” can defeat a defendant’s motion for summary judgment to dismiss an action for legal malpractice. Furthermore, the applicable statute of limitations depends upon the law at the time the malpractice accrued.

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Brodeur v. Hayes, 18 A.D.3d 979, 795 N.Y.S.2d 761 (2005)

NY: underlying suit on  personally guaranteed notes 

Student Contributor: Alexis Trezza

Facts: Defendant and his law firm represented plaintiff and his various businesses for many years. Plaintiff had personally guaranteed several notes and mortgages on a piece of property that he used for his business. When they were in default, National Bank of Delaware County commenced a foreclosure proceeding and the Broome County Industrial Development Agency (BCIDA) commenced an action on its note. In the BCIDA action, defendants accepted service on plaintiff’s behalf and, without first consulting the plaintiff, stipulated that plaintiff had no defense to the action, consenting to a default judgment. A default judgment was also entered in the National Bank action due to defendants’ failure to serve an answer after accepting service on his behalf. Plaintiff commenced an action for legal malpractice against defendants, and there was extensive motion practice by both the plaintiff and defendants. Significantly, the Court granted defendants’ motion for summary judgment dismissing plaintiff’s claim against them. Plaintiff appeals.

Issue: Was defendants’ motion for summary judgment properly granted?

Ruling: Yes, because plaintiffs failed to offer any concrete proof of damages. A legal malpractice cause of action requires proof that the attorney was negligent in handling the plaintiff’s matter, such negligence proximately caused a loss and “plaintiff suffered actual and ascertainable damages.” Failure to timely interpose an answer constitutes negligence through a breach of an attorney’s professional standard of care. To establish proximate cause, however, the client must still show that he or she would have been successful in the underlying action. Plaintiff did not assert any viable defenses to either of the actions and the damages that he asserted were speculative rather than actual, ascertainable damages.

Lesson: In order for a claim for legal malpractice to survive a motion for summary judgment dismissing the claim, a plaintiff needs to both assert and prove each and every element of the malpractice claim. In terms of damages, a plaintiff may not simply assert that he or she suffered damages; he or she must substantiate his or her claim with proof of same. 

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Sevey v. Friedlander, 83 A.D.3d 1226, 920 N.Y.S.2d 831 (2011)

NY: Underlying divorce action

Student Contributor: Alexis Trezza

Facts: Defendant represented plaintiff in a divorce action. Prior to trial, a settlement was negotiated, and a stipulation setting forth the terms of  settlement was placed on the record in July 2003. Plaintiff acknowledged on the record that he understood and accepted the terms of the settlement, and they were included in the divorce judgment in August 2003. In March 2006, plaintiff commenced a legal malpractice action against defendant because he was unhappy with some of the financial terms in the divorce judgment and he alleged that defendant had pressured him into accepting a settlement that was unfavorable. Defendant  attorney moved for summary judgment, which was granted, and plaintiff appealed.

Issue: Was the attorney's  motion for summary judgment properly granted?

Ruling: Yes. 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 the plaintiff to sustain actual and ascertainable damages. As the proponents of summary judgment, defendants had the initial burden of “presenting evidence in admissible form establishing that plaintiff is unable to prove at least one of these elements.” Where this threshold is satisfied, plaintiff must then provide proof raising triable issues of fact and “mere speculation about a loss resulting from an attorney’s alleged poor performance is insufficient.”

Lesson: Merely speculating that you would have obtained a more favorable result at trial is not enough to survive a threshold motion for summary judgment made by defendant.   

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Maddux v. Schur, 83 A.D.3d 1156, 920 N.Y.S.2d 812 (2011)

NY: Underlying tax assessment proceeding 

Student Contributor: Alexis Trezza

Facts: Defendant represented plaintiff in a tax assessment proceeding that she brought against the Town of Oppenheim. During that action, she claims that the town was held in contempt. In 2003, plaintiff commenced a legal malpractice action against the defendant. Plaintiff alleged that the defendant never filed an order with the Supreme Court memorializing the contempt finding that it issued against the Town of Oppenhem. As such, she claims that defendant was negligent in representing her during the proceeding against the town. Defendant’s motion to dismiss plaintiff’s claim was granted after the plaintiff finished presenting her proof at trial. Plaintiff then filed a motion to renew, claiming that she had new evidence that confirmed that the Town of Oppenheim had been held in contempt in the tax assessment proceeding. The Court found that her motion was actually a motion to be relieved from the effects of a prior judgment and denied it. Plaintiff brought another motion to renew one year later. This time, she claimed that she had new evidence that, had it been admitted at trial, would have proven that the defendant was negligent. The Court once again found this motion to actually be a motion to be relieved from a prior judgment and denied it. Plaintiff now appeals.

Issue: Was plaintiff’s motion properly denied?

Ruling: Yes. A motion to renew is not the proper procedural vehicle to address a final judgment and the Supreme Court properly treated plaintiff’s motion as a motion to be relieved from the prior order of dismissal and its resulting judgment. Furthermore, where a motion to be relieved from the effects of a prior judgment is in regards to the trial court’s discretion, reversal is only proper where there has been a clear abuse of discretion.

Lesson: A motion to renew will only be treated as such where the evidence (in this case, evidence of an attorney’s negligence) upon which such a motion is based is actually new and is so compelling that, had it been introduced at trial, it would have resulted in a different ruling. Here, the plaintiff knew of the underlying contempt finding and should have brought adequate proof of it on her case in chief in the malpractice action. 
 

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Long v Cellino & Barnes, P.C., 873 N.Y.S.2d 805, 806-07 (App. Div 4th 2009).

NY: Underlying Labor Law and Common-law Negligence Action.

Student Contributor: Le-el D. Sinai

Facts: Plaintiff was an ironworker and fell about 20 feet to the ground from the mezzanine deck of a warehouse while on the job. Defendant attorneys, retained by the plaintiff, failed to commence the action against the correct general contractor and owner of the construction project within the statute of limitations. Plaintiffs sued defendants for malpractice, breach of contract, and fraud. Defendants admitted to their failure to meet the statute of limitations and thus their negligence, but moved for summary judgment with regard to the breach of contract and fraud causes, and were awarded judgment in their favor as the Court viewed these causes as duplicative of the malpractice claim.

Issue: Whether the lower Court erred in deciding for the defendants in dismissing the causes of breach of contract and fraud.

Ruling: The lower Court’s ruling was upheld. The breach of contract cause arose from the same set of facts and alleged the same damages as the malpractice cause of action, to which defendants already admitted liability. With regard to the fraud cause of action, the Court held that defendants met their initial burden of establishing that the plaintiff did not allege fraud “premised upon one or more affirmative, intentional misrepresetnations – that is, something more egregious than mere ‘concealment or failure to disclose [defendants’] own malpractice’… - which would have caused additional damages separate and distinct from those generated by the alleged malpractice.”

Lesson: The Court essentially established that a malpractice can be viewed as a breach of contract. This eliminates the possibility of any plaintiff to sue for both malpractice and breach of contract when both causes arose from the same set of facts and allege the same damages. 

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Kumar v. Am. Transit Ins. Co., 854 N Y.S.2d 274, 275 (App. Div. 4th 2008).

NY: Underlying Insurance Case.

Student Contributor: Le-el D. Sinai

Facts: Plaintiffs sued defendant Hiscock attorneys and the insurance company (American Transit Insurance Company, or “American”) for assigning the defendant to plaintiffs underlying case. American commenced a third-party action, alleging that the damages which plaintiffs wanted to recover from American were actually caused by the negligence of the Hiscock attorneys. The Hiscock Attorneys moved to dismissed American’s third-party complaint in the New York Supreme Court and were granted this motion. On appeal, the Court decided that the Supreme Court erred in granting the motion to dismiss American’s third-party complaint.

Issue: Whether the principle of ethical subrogation, whereby an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss, establishes privity between the Hiscock attorneys and American? 

Ruling: Even though American has not yet paid the loss of its insured, the Court ruled that equitable subrogation would apply. Moreover, the loss incurred by the plaintiff (and American, by extension), was due to the malpractice of the Hiscock attorneys, specifically their failure to appear and defend the insured. The Court therefore ruled that the complaint withstood the motion to dismiss.

Lesson: An insurer may establish privity and sue the attorney which it assigned to its insured for malpractice through equitable subrogation. Moreover, it may do so even when the insurer has not yet paid out losses. 

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Arnav Indus., Inc. Ret. Trust v. Brown, Raysman, Millstein, Felder & Steiner, L.L.P, 751 N.E.2d 936, 938 (N Y. 2001).

NY: Underlying Loan Payback Case

Student Contributor: Le-el D. Sinai

Facts: The plaintiffs in the underlying and case at bar were Arnav Industries Retirement Trust and Rochel Properties. The defendant in the underlying case was David Schick. Plaintiffs settled a claim against Schick for unpaid loans whereby Schick would make payments for $2,500,000 until the full loan amount of $6,023,702.95 would be paid. If Schick defaulted on any of these payments, then plaintiffs would obtain an immediate judgment for the full loan amount. Schick’s initial payment of $420,000 breached this settlement agreement. Plaintiffs retained a law firm, the defendant in the case at bar, to prepare the stipulation of settlement. Joseph Wassner, a trustee of Arnav and officer of Rochel, allegedly read the stipulation of settlement once it was sent to him by defendant and then executed the agreement. After defendant sent the stipulation to Wassner once more, noting that there was a typographical error in the first paragraph of the document, as the original document stated that the amount of the settlement would be $2,800,000 rather than the correct amount ($2,080,000), Wassner relied on defendant’s statement that this figure was the only difference between the first and second versions of the document and executed the settlement once more. The second version of the settlement, however, erroneously stated in paragraph 13 that the amount of judgment upon Schick’s default would be $2,080,000 rather than $6,023,702.95. Schick later made one payment of $100,000 and then defaulted. Defendant had the judgment entered in the proper courts in accordance with the erroneous amount in the settlement, plus interest, totaling $2,021,986.85. After Schick then involuntarily entered bankruptcy, plaintiffs settled with Schick and filed a malpractice claim against defendant law firm for malpractice.

Issue: Whether a client has a cause of action for legal malpractice where that client signed a revised settlement stipulation without reading it, relying on its attorney’s misstatement that the stipulation was changed to correct only one typographical error.

Ruling: The client stated a cause of action for legal malpractice sufficient to survive a motion to dismiss.

Lesson: When an attorney makes statements regarding his work and his client relies upon those statements without verifying them, a client may still have a malpractice case against said attorney if an issue later arises on the basis of those statements. 

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Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills, Inc., 780 N.Y.S.2d 593, 596 (App. Div. 1st 2004).

NY: Underlying Disparagement Claim

Contributing Student: Le-el D. Sinai

Facts: The underlying case involves Fashion Boutique, plaintiff, who sued Fendi (which was owned by Prada), for violating the Lanham Act and New York State law that prohibited product disparagement. While it represented Fashion Boutique against Fendi, defendant law firm was retained by Prada, which owned Fendi. Fendi made a settlement offer of $1.4 million to Fashion Boutique, which Fashion Boutique rejected even though it was recommended to accept by the law firm. After going to trial, Fashion Boutique was awarded $35,000 in compensatory damages and $75,000 in punitive damages and the Lanham Act claim was dismissed. The dismissal of the Lanham Act claim was later affirmed by the United States Court of Appeals for the Second Circuit on appeal. This litigation began, at first, as a suit for fees by the law firm against its former client, Fashion Boutique. Fashion Boutique then sued the law firm for malpractice and breach of fiduciary duty. The law firm then moved to dismiss these claims. The plaintiff contended that the law firm’s representation of Prada created a conflict of interest and therefore a breach of fiduciary duty. Moreover, as a result of their representation of Prada, the law firm did not adequately use the testimony of a witness, who was a former officer of Fendi, that plaintiffs asserted would have resulted in a higher amount of awarded damages. The lower Court dismissed the legal malpractice claim.

Issue: Whether the law firm properly controverted the plaintiff’s claim that a debilitating conflict of interest and subsequent lack of use of a witness can constitute proximate cause with respect to a legal malpractice claim.

Ruling: The Court ruled in favor of the plaintiff, stating that the claim that, but for the law firm’s failure due to its debilitating conflict of interest, to make proper use of the witness’s testimony, the Fashion Boutique case against Fendi would have had a more favorable result, was not conclusively controverted.

Lesson: Under New York law, in order to establish proximate cause and actual damages for a legal malpractice claim, where the injury is the value of the claim lost, the plaintiff must meet the “case within a case” requirement. This would require the plaintiff to demonstrate that but for the attorney’s conduct, the plaintiff would have prevailed in the underlying case or would not have sustained ascertainable damages. 

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Ryan v. Powers & Santola, LLP, 73 A.D.3d 1273, 899 N.Y.S.2d 486 (2010)

NY: underlying personal injury case

Student Contributor: Alexis Trezza

Facts: Plaintiff was injured while dining at a T.G.I.Friday’s restaurant in September 1999. He retained defendants to represent him in a negligence action against T.G.I.Friday’s and Carlson Restaurants Worldwide, and a lawsuit was commenced in 2002. After defendants failed to comply with a number of discovery orders from the Court on plaintiff’s behalf (despite the Court extending the discovery schedule numerous times), plaintiff’s complaint in the personal injury lawsuit was dismissed. Plaintiffs sued defendants for legal malpractice and breach of contract. Plaintiffs allege that “but for” defendants’ negligence in failing to respond to discovery demands and preclusion motions, in failing to follow court orders, in consenting to conditional orders and in failing to move to vacate the dismissal order, plaintiffs would have been successful in their underlying personal injury action. Plaintiffs moved for partial summary judgment on liability which was denied and plaintiffs appeal.

Issue: Should plaintiffs have been granted summary judgment on the issue of liability?

Ruling: No. A claim of legal malpractice will be sustained if the plaintiff establishes “both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action but for the attorney’s negligence. To succeed on their motion, plaintiffs have the burden of establishing prima facie that “but for” defendants’ negligence, they would have prevailed in their underlying personal injury action. Even if the Court were to have concluded that plaintiffs established their prima facie entitlement, defendants did raise a question of fact as to whether plaintiffs failed to cooperate with defendants in providing them with pertinent economic and financial information with which they could have complied with the discovery orders. Furthermore, plaintiff’s medical history created questions of fact as to causality.

Lesson: This is all about the Clients' Duty to Cooperate with the Lawyer. Just as there are duties of the Lawyer to the Client so to the Client is duty bound to work with their  attorney and provide him/her with the documentation that will allow him/her to comply with necessary discovery orders that would  prevent the clients' complaint from getting dismissed. If client is  not cooperative, they can hardly expect to sue their  lawyer for malpractice when the  complaint gets dismissed because he/she didn’t/couldn’t comply with discovery demands or order.  

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Aaron v. Roemer, Wallens & Mineaux, LLP, et al., Defendants, and Zahnleuter, 272 A.D.2d 752, 707 N.Y.S.2d 711 (2000)

NY: underlying employment discrimination action

Student Contributor: Alexis Trezza

Facts: Plaintiff Steven L. Aaron was the defendant in two consolidated Federal sexual harassment suits. Defendant law firm Roemer, Wallens & Mineaux, or RWM (with defendant Richard J. Zahnleuter as the attorney who was primarily responsible for Mr. Aaron’s representation in the Federal sexual harassment suits) appeared on his behalf and filed answers in July and September 1995, even though plaintiff had neither signed a written retainer agreement nor paid a retainer fee. The relationship between Mr. Aaron and RWM went sour, and RWM indicated to him that it had taken steps to withdraw as counsel. Withdrawal was finalized by the District Court on November 17, 1995. Mr. Aaron retained new counsel and in April 1998 a judgment in the Federal sexual harassment action was handed down which awarded compensatory and punitive damages to the Federal plaintiffs. Mr. Aaron commenced a legal malpractice action on November 17, 1998, alleging that defendants were negligent in failing to assert an affirmative defense (the affirmative defense being that one of the Federal claims would have been time-barred) in the Federal action. Defendant’s answer asserted that the three-year statue of limitations on the malpractice action barred the present action, and defendant moved for summary judgment dismissing the complaint. The Supreme Court denied this motion, asserting that the attorney-client relationship between defendant and plaintiff did not terminated until November 17, 1995. Defendant appeals this ruling.

Issue: Was the motion for summary judgment properly denied?

Ruling:  No. A claim to recover damages for legal malpractice accrues when the malpractice is committed, and must be interposed within three years from that date. The omissions by defendants occurred in July and September 1995 (when they interposed answers on behalf of plaintiff in his Federal actions) and, unless the statute of limitations was tolled by the continuous representation rule, the action is time barred. The court found that the continuous representation rule did not apply here.

Lesson: A claim for legal malpractice accrues when the alleged malpractice is committed, and must be brought within three years thereafter. An action that is not brought within this three-year period will be time-barred unless Plaintiffs are able to invoke the continuous representation rule.  

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Neuman v. Frank, 82 A.D.3d 1642, 919 N.Y.S.2d 644 (2011)

NY: claim for legal malpractice and breach of fiduciary duty

Student Contributor: Alexis Trezza

Facts: Plaintiff  brought an action against Frank,  a partner in defendant law firm, alleging that he committed legal malpractice and breached his fiduciary duty to plaintiff during the course of his representation by acting in such a way that conflicted with plaintiff’s interests. Throughout the course of heavy motion practice by both plaintiff and defendant, defendant cross-moved for partial summary judgment dismissing the first cause of action, which was an action for breach of fiduciary duty, as duplicative of the second cause of action, which was an action for legal malpractice. This motion was denied, and defendant appealed.

Issue: Was defendant’s cross-motion for partial summary judgment properly denied?

Ruling: Yes. “A cause of action for legal malpractice must be based on the existence of an attorney-client relationship at the time of the alleged malpractice.” The fiduciary duty of an attorney, however, “extends both to current clients and former clients and thus is broader in scope than a cause of action for legal malpractice.” Thus, a cause of action for legal malpractice based upon alleged misconduct occurring during the attorney’s representation of the plaintiff is not duplicative of a cause of action for breach of fiduciary duty based upon alleged misconduct occurring after the termination of the representation.

Lesson: A client can bring actions for both legal malpractice and breach of fiduciary duty against his or her attorney without the claims being duplicative of one another if the behavior upon which the claim for breach of fiduciary duty is based occurs after the attorney-client relationship has been effectively terminated. 

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Capogrosso v. Landsman, 83 A.D.3d 638, 919 N.Y.S.2d 899 (2011)

NY: malpractice claim by client against attorney

Student Contributor: Alexis Trezza

Facts: Defendant  Attorney  represented plaintiff former client in a prior action, which resulted in a judgment against client. Attorney filed an appeal on her behalf and then withdrew as counsel in the action. Plaintiff proceeded pro se and perfected her appeal, which resulted in a ruling against her by the Appellate Division. She then brought this legal malpractice action against her former Attorney because she claims that his failure to turn over the case file from the prior action prevented her from perfecting her appeal. Attorney then  moved to dismiss the complaint pursuant to CPLR 3211(a)(1), asserting that the plaintiff had perfected her appeal and lost. He also asserted that he had a retaining lien on the case file in the prior action because Plaintiff  owed him substantial fees. The motion to dismiss was granted, and Plaintiff appeals.

Issue: Was Attorney's  motion to dismiss pursuant to CPLR 3211(a) properly granted?

Ruling: Yes. The documentary evidence submitted by the defendant “utterly refuted the plaintiff’s factual allegations” and conclusively established a defense to the asserted claims as a matter of law.

Lesson: If you proceed on an appeal pro se and owe your attorney fees from his/her representation in the prior action, he can refuse to turn over the case file that is necessary for your appeal and not be held liable for malpractice.

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Neuman v. Frank, 82 A.D.3d 1642, 919 N.Y.S.2d 644 (2011)

NY: claim for legal malpractice and breach of fiduciary duty

Student Contributor: Alexis Trezza

Facts: Plaintiff David Neuman brought an action against Stuart A. Frank, a partner in defendant law firm, alleging that he committed legal malpractice and breached his fiduciary duty to plaintiff during the course of his representation by acting in such a way that conflicted with plaintiff’s interests. Throughout the course of heavy motion practice by both plaintiff and defendant, defendant cross-moved for partial summary judgment dismissing the first cause of action, which was for breach of fiduciary duty, as duplicative of the second cause of action, which was for legal malpractice. This motion was denied, and defendant appealed.

Issue: Was defendant’s cross-motion for partial summary judgment properly denied?

Ruling: Yes.

“A cause of action for legal malpractice must be based on the existence of an attorney-client relationship at the time of the alleged malpractice.”

The fiduciary duty of an attorney, however,

“extends both to current clients and former clients and thus is broader in scope than a cause of action for legal malpractice.”

Thus, a cause of action for legal malpractice based upon alleged misconduct occurring during the attorney’s representation of the plaintiff is not duplicative of a cause of action for breach of fiduciary duty based upon alleged misconduct occurring after the termination of the representation.

Lesson: A client can bring actions for both legal malpractice and breach of fiduciary duty against his or her attorney without the claims being duplicative of one another if the behavior upon which the claim for breach of fiduciary duty is based occurs after the attorney-client relationship has been effectively terminated.

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Dombrowski v. Bulson, 19 N.Y.3d 347, 948 N.Y.S.2d208 (Ct.of Appeals, 2012) 

NY: Underlying Criminal Defense; Ineffective Assistance of Counsel

FACTS: Plaintiff convicted in New York of attempted rape and endangering the welfare of a child. His motion to vacate the conviction on the grounds of "ineffective assistance of counsel" is denied without a hearing. Plaintiff brings a habeas corpus proceeding in federal court. The Magistrate Judge found that "the errors of defense counsel made it difficult for the jury to make a reliable assessment of the critical issue of the victim's credibility".  The habeas petition was granted on condition that further prosecution be brought within 60 days. The State failed to do so. The indictment was dismissed. 

Plaintiff now brings malpractice action seeking, inter alia,  non-pecuniary damages for his defense lawyer's ineffective assistance of counsel asserting he was incarcerated for over 5 years, was subject to post-release supervision which came to an end only after the federal habeas petition was granted. 

ISSUE:  Are non-pecuniary damages available to a plaintiff in a legal malpractice action arising out of a botched criminal defense based on ineffective assistance of counsel? 

RULING:  No.  

The Appellate Division decision, acknowledging that non-pecuniary damages are not available to the legal malpractice plaintiff in actions arising from underlying civil cases, held that they are available when the underling proceedings are criminal, reasoning that the underlying wrong was akin to false imprisonment or malicious prosecution where loss of liberty is compensable in those actions. 

The Court of Appeals, however, disagreed and reversed the Appellate Division, rejecting the appellate court's analogy to those civil actions which are intentional torts unlike the  alleged misconduct of Plaintiff's criminal defense attorney, which was not intentional. 

It makes sense  [wrote the Court] that the scope of recovery for deliberate torts is broader than for torts based on the failure to exercise skill or care.

The Court also emphasized the "negative"  and "devastating consequences" the criminal justice system would suffer with a different rule in criminal cases than there would be in civil based malpractice actions, which would include a

...chilling effect on the willingness of the already strapped defense bar to represent indigent accused.  Further, it would put attorneys in the position of having an incentive not to participate in post-conviction efforts to overturn wrongful convictions.  

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Roller v. Walsh, 278 A.D. 2d 811 (App. Div. 4th Dept. 2000)

NY: Business Law; Conflicts in transaction

Student Contributor: Adam Gardin

Facts: Defendant represented and assisted plaintiffs in the formation of two limited liability companies. Plaintiffs brought legal malpractice and breach of fiduciary duty claims against defendant, for “advancing the interests of the fourth member of the companies to the detriment of the plaintiffs.” In response, defendant moved to dismiss based on signed waivers from plaintiffs acknowledging and absolving defendant from all present and future conflicts of interest, as well as “agreements to hold defendant harmless from any claims arising from conflict of interest.” The Supreme Court granted defendant’s motion to dismiss. On appeal, the Appellate Division reversed.

Issue: Does a waiver of conflict of interest and “hold harmless” provision provide such blanket indemnity from legal malpractice that there are no issues of triable fact sufficient to defeat a motion for summary judgment?

Rule: The Appellate Division held that the “documentary evidence submitted by the defendant did not conclusively establish a defense to the action as a matter of law” and that the further triable issues of material fact are raised by plaintiffs’ contention that “defendant failed to disclose the nature and extent of any existing and potential conflicts of interest.” Moreover, the documents may very well not provide waiver from defendant’s conduct prior to the signing of the waivers.

Lesson: Conflict waivers should be clear and specific. Also, make sure that the waiver does not limit the liability of the attorney unless the client has consulted with independent counsel. 

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Middleton v. Kenny, 286 AD 2d 957 (N.Y. 4th Dept. 2001)

NY: Personal Injury

Student Contributor: Adam Gardin

Facts: Plaintiff was represented by defendants in an underlying personal injury action concerning plaintiff’s “alleged exposure to fumes and chemicals at” his workplace. The action was dismissed by Court, which ruled that the “Supreme Court abused its discretion in granting plaintiff’s motion for an extension of time to file a note of issue after having been served with a 90-day demand…” Plaintiff subsequently filed suit against defendants for negligence in failing to respond to the demand within 90 days.

Issue: 1) But for defendants' negligence, would the plaintiff have been successful in the underlying case? 2) Did the plaintiff suffer an injury sufficiently accepted by the scientific community to pass the Frye-Daubert test?

Ruling: 1) Defendants failed to establish that the plaintiff would not have been successful in the underlying action because it was their which resulted in the failure to file the note of issue within 90 days. 2) Defendants’ attempt to apply the Frye-Daubert test fails because they were unable to demonstrate that plaintiff’s injury has not gained scientific acceptance.

Lesson: Interesting burden of proof switching here. In order to prevail on a summary judgment motion where the client sued the lawyer for blowing a time limitation, the defendant had to prove that the client would not have prevailed in the underlying suit that they had botched.

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Lowe v. Spada, 282 A.D. 2d 815 (N.Y. 3rd Dept. 2001)

NY: Tort Law

Student Contributor: Adam Gardin

Facts: Plaintiff commenced an action against defendants for failing to timely commence a personal injury action against the maintenance company responsible for cleaning the bathroom where she suffered a slip-and-fall. Defendants claimed that plaintiff would not have succeeded in the personal injury action because “she could not have proven that [the maintenance company] created a dangerous condition or had notice of the condition in time to remedy it.” Plaintiff countered by stating that she would have been able to prove that the “maintenance company had notice of a recurring hazardous water puddle…where she tripped.” The Supreme Court relied on the First Department’s ruling in O’Rourke v. Williamson, Picket, Gross (260 A.D. 2d 260) and granted defendant’s motion for summary judgment. On appeal, the Appellate Division reversed, citing Third Department current standards of law.

Issue: Can liability be "predicated upon the theory of a recurring dangerously slippery condition routinely left unaddressed absent any evidence that the floor was actually slippery before [the injured party] walked into the building on the day of the accident?”

Rule: The Court held that “when a property owner has `actual knowledge of the tendency of a particular dangerous condition to reoccur, [that owner] is charged with constructive notice of each specific recurrence of that condition.” In this case there had been recurring water hazards in the area which the maintenance company failed to address. Therefore, there was sufficient evidence of issues of triable fact to defeat summary judgment in the underlying attorney malpractice case. Thus, the Court reversed the Supreme Court’s ruling.

Lesson: Courts have established that “defendants may be found liable for injuries resulting from recurrent, dangerous conditions.” 

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Lowe v. Spada, 282 A.D. 2d 815 (N.Y. 3rd Dept. 2001)

NY: Personal injury. Premises liability

Student Contributor: Adam Gardin

Facts: Plaintiff commenced an action against defendants for failing to timely commence a personal injury action against the maintenance company responsible for cleaning the premises where she suffered a slip-and-fall. Defendants claimed that plaintiff would not have succeeded in the personal injury action because “she could not have proven that [the maintenance company] created a dangerous condition or had notice of the condition in time to remedy it.” Plaintiff countered by stating that she would have been able to prove that the “maintenance company had notice of a recurring hazardous water puddle…where she tripped.” The Supreme Court relied on the First Department’s ruling in O’Rourke v. Williamson, Picket, Gross (260 A.D. 2d 260) and granted defendant’s motion for summary judgment. On appeal, the Appellate Division reversed, citing Third Department current standards of law.

Issue: Can liability be "predicated upon the theory of a recurring dangerously slippery condition routinely left unaddressed absent any evidence that the floor was actually slippery before [the injured party] walked into the building on the day of the accident?”

Rule: The Court held that “when a property owner has `actual knowledge of the tendency of a particular dangerous condition to reoccur, [that owner] is charged with constructive notice of each specific recurrence of that condition.” In this case there had been recurring water hazards in the area which the maintenance company failed to address. Therefore, there was sufficient evidence of issues of triable fact to defeat summary judgment in the underlying attorney malpractice case. Thus, the Court reversed the Supreme Court’s ruling.

Lesson: Courts have established that “defendants may be found liable for injuries resulting from recurrent, dangerous conditions.” Thus even though the plaintiff could not prove that the condition that actually caused her to fall was the "but for" cause, that the landlord knew that such a condition had previously existed and was not repaired, may be enough for the malpractice plaintiff to sustain her burden in proving the underlying case. 

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Ehlinger v. Ferlazzo, PC, 304 AD 2d 925 (3rd Dept. 2003)

NY: Underlying Divorce Action

Student Contributor: Mordechai Goldenberg

Facts: Plaintiff retained defendants to represent him in a divorce action against his wife. One of the disputed issues in the action was ownership of certain real property titled solely in wife's name. Plaintiff claimed an equitable interest in the property based on his having paid off its mortgage in reliance on his wife's promise to name him a co-owner on the deed. Well after the start of the divorce action, and unknown to plaintiff, his wife remortgaged the property. The court found plaintiff was entitled to a constructive trust upon the property, the court ordered his wife either to repay him $161,595.06, the amount he invested in the property, or convey her interest in the property to him. However, his wife's actions in mortgaging the property before the divorce, filing for bankruptcy immediately afterward and precipitating a foreclosure precluded plaintiff from recovering award. Plaintiff then commenced a legal malpractice action alleging that the failure of his attorney to seek pendente lite relief in the divorce action or file a lis pendens as to the property constituted negligence and caused him to lose the divorce award.

Issue: Should defendants have succeeded on their motion for summary judgment which argued that plaintiff was unable to prove at least one of the required elements in a legal malpractice claim?

Ruling: No. The court agreed that defendants' submissions were sufficient to show that their decision not to pursue pendente lite relief did not depart from the applicable standard of care. In this regard, attorney’s affidavit was not conclusory. However, the court reached a different conclusion with regard to attorney’s failure to file a notice of pendency before plaintiff's wife encumbered the property. Defendants' moving papers were insufficient to show that this failure was not malpractice or the proximate cause of plaintiff's damages.

Lesson: To recover damages for legal malpractice, a plaintiff must demonstrate that the attorney was negligent, that the negligence was a proximate cause of the loss sustained and that plaintiff suffered actual and ascertainable damages. If plaintiff is able to provide a sufficient showing for any of the three, the attorney’s motion for summary judgment will be denied.

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Evangelista v. Slatt, 20 AD 3d 349 (1st Dept. 2005)

NY: Underlying Misappropriation Action

Student Contributor: Mordechai Goldenberg

Facts: Plaintiff sued a former employee to recover $7 million he allegedly misappropriated. Due to the former employee’s failure to answer the complaint, Plaintiff obtained a default order directing that the matter be set down for an inquest. Plaintiff alleges that, after entry of the default order, he retained defendant attorneys to represent him in the damages action. Defendants, however, deny ever having agreed to undertake such representation. In either event, the action ultimately was dismissed due to plaintiff’s failure to timely file a note of issue for an inquest. Plaintiff now sues defendants for legal malpractice for the alleged failure to timely file a note of issue for an inquest. (Ed. Note: An "inquest" in NY practice is a hearing on damages after a default has been entered against a defendant.)

Issue: Did plaintiff show that he suffered an actual loss due to the alleged legal malpractice?

Ruling: No. The court explained that even assuming the truth of the disputed contention that defendants agreed to represent Plaintiff in the lawsuit, the record establishes that Plaintiff would not have been entitled to any recovery in that action, notwithstanding the default order that was entered. Plaintiff failed to identify any specific misappropriation of Plaintiff’s personal funds that could have been proven at the inquest. Rather, plaintiff relied solely on allegations of misappropriation from the corporate entities in whose names Plaintiff did business. Whatever right of recovery the corporations might have had against former the employee for such alleged misappropriations, Plaintiff individually — who was the sole plaintiff in the underlying action— had no right to such a recovery.

Lesson: In order to maintain a legal malpractice action in New York, the plaintiff must be able to demonstrate that he suffered an actual loss due to attorney’s misconduct. Entry of a default goes only as to liability; not proximate cause nor damage and does not absolve plaintiff from the burden of shown that he sustained actual loss. 

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Holschauer v. Fisher, 5 AD 3d 553 (2nd Dept. 2004)

NY: Underlying Professional Misconduct Hearing

Student Contributor: Mordechai Goldenberg

Facts: Plaintiff is a physician who was charged with professional misconduct by the New York State Department of Health Office of Professional Medical Conduct. After the disciplinary hearing began, the defendant attorney negotiated a settlement with the OPMC, whereby the plaintiff admitted to some of the charges against him and agreed to a one-year suspension of his license to practice medicine, with 10 months of that suspension stayed, a five-year probationary period thereafter, and a two-year period during which he would be monitored by a practice supervisor. The plaintiff commenced this action to recover damages for legal malpractice, claiming that he was unable to get approval for a practice supervisor and that the defendant attorney should have negotiated a better settlement for him by obtaining pre-approval of a practice supervisor. He claimed that if his license had been revoked, he could have reapplied for a license after three years and thus would be practicing medicine quicker than he now due to his inability to find a suitable practice supervisor.

Issue: Does the fact that the plaintiff was subsequently unhappy with the settlement obtained by the defendant rise to the level of legal malpractice?

Ruling: No. The court noted that while the plaintiff poses an alternative strategy which might have been pursued by the defendant, the "selection of one among several reasonable courses of action does not constitute malpractice." The plaintiff's contention that he would be in a better position if his license had been revoked since he could have reapplied for a license after three years is speculative and conclusory because there was no guarantee that the OPMC would have granted him a new license after three years.

Lesson: In order to maintain a legal malpractice action in New York, the plaintiff must be able to demonstrate that he suffered an actual loss due to attorney’s misconduct, speculative and conclusory allegations will not suffice. 

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Lightning Park, Inc. v. Wise Lerman & Katz, P.C., 197 A.D.2d 52 (1st Dep’t 1994).

NY: Contract action; real estate development

Student Contributor: Nicholas Tam

Facts: Plaintiffs entered into a series of agreements to develop property on West 42nd Street in Manhattan. Plaintiff retained legal counsel from an attorney from the defendant law firm. The law firm represented plaintiff to structure financing. After the financing deal soured, plaintiffs sued their attorneys in 1988 alleging that, as escrow account holders, they breached their fiduciary duty by having secret contact with the other party while representing plaintiffs.

Subsequently, plaintiffs sued defendant attorneys for not fully understanding the agreemend and negligently representing them in the deal. Defendant attorneys retained the law firm of Alkalay, Handler, Robbins & Herman to defend the legal malpractice action. However, Plaintiffs moved for disqualification of defendant’s legal counsel on the ground of conflict of interest. Plaintiffs contend that the same firm had represented them on the negotiations of the finance structuring, and thus, were conflicted out.

Issue: Whether there was a substantial relationship between the fiduciary breach litigation in 1988 and the present case dealing with incompetent representation, and thus, the law firm was conflicted out?

Ruling: Here, Herman’s mere representation of plaintiffs at some earlier point did not constitute a bar to the representation on defendant in the subsequent action because the issues were entirely different. The court reasoned that in order to meet the ‘substantial relationship’ test, the issues of the present litigation must be identical or essentially the same as those in the prior case. The first was a breach of fiduciary duty with secret dealings, while the second action is an incompetency issue where the defendants were not fully aware of the provisions in the agreement.

Lesson: Whether there is a substantial relationship between two actions is a fact-based question. Here, the court looked to the scope of the duties of the law firm in the first action and compared it to the second.

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Montalbano, Condon, & Frank, PC v. Rodi, 54 A.D.3d 1012 (App. Div. 2d Dept. 2008)

NY: Client subsequently barred from raising issues it failed to raise in first malpractice dispute.

Student Contributor: Jared Levy

Facts: The plaintiff law firm represented the defendant in the underlying matrimonial action. The defendant did not pay for the legal services rendered, so plaintiff sued to recover damages for breach of contract The plaintiff also sought compensation of $16,909.50 for disbursements. The defendant counterclaimed for legal malpractice claiming the plaintiff failed to disclose a conflict of interest prior to representing the client. The law firm moved for summary judgment at the trial level for its monetary damages and also to dismiss the defendant’s counterclaim stating that it was barred by res judicata (plaintiff had previously sued the defendants for legal malpractice unsuccessfully).

Issue:   1) Was the plaintiff entitled to summary judgment with regard to services rendered?

 2) Was the plaintiff entitled to summary judgment on the grounds of res judicata?

Ruling: 1) Yes. The plaintiff was entitled to summary judgment on the compensation for legal services because the defendant accepted and received the legal services from the defendant without objection. The defendant also made partial payment on the invoices sent to him from the firm for those legal services. Since defendant was unable to raise a triable issue of fact with respect to these issues, the plaintiff was entitled to summary judgment.

2) Yes. With regard to the defendant’s counterclaim, the plaintiff is entitled to summary judgment on the defendant’s claims being barred by res judicata as they were able to show that a claim for legal malpractice arising from the same representation was dismissed on the merits. It is irrelevant if the prior action was based on slightly different facts because the subject matter is the same. The defendant should have raised any issues regarding the legal representation in its prior claim.

Lesson: With regard to the res judicata analysis employed by the court, New York uses a “transactional approach” to litigating res judicata claims. While the facts may be different, if the subject matter is the same, then the doctrine of res judicata applies.

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Bazinet v. Kluge, 14 A.D.3d 324, 325, 788 N.Y.S.2d 77, 77-78 (2005)

NY: Attorney Escrow Accounts

Student Contributor: Steven Henesy

FACTS:  Attorney was the escrow agent for the owner of two cooperative apartments on Central Park West. Buyer deposited a total of almost three million dollars for a down payment on the two cooperative apartments in Attorney’s escrow account at ABC Bank. Before the sale of the apartments could be completed, ABC Bank was shut down and the Federal Deposit Insurance Corporation was named as receiver. As it turned out, Attorney’s escrow account at ABC Bank was not fully insured by the FDIC and Buyer was unable to recover his down payments. Buyer then brought a legal malpractice action against Attorney on the ground that Attorney negligently held his escrow account in an account that was not fully insured.

ISSUE:  Did Attorney commit legal malpractice by maintaining an escrow account that was not fully insured by the FDIC at a bank that subsequently went under?

RULING:  No. The Court held that (i) there is no requirement that an attorney maintain his escrow account in a fully insured bank account; and (ii) that there was no way for Attorney to have known that ABC Bank was going to go under. The Court held that Buyer had not established that Attorney had failed to exercise that degree of care, skill and diligence commonly possessed and exercised by a member of the legal profession

LESSON:  Escrow accounts are not required to be fully insured by the FDIC, and so long as an attorney has no reason to believe the bank at which the account is held is in no danger of closing, the subsequent closing of that bank cannot be attributed to the liability of the attorney in a legal malpractice action.

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Douglas v. Dashevsky, 62 A.D.3d 937 (2009).

NY: Employment Law

Student Contributor: Nicholas Tam

Facts: In 2002, plaintiff retained the attorney to represent her in a claim of employment discrimination. The plaintiff is an employee who alleges that her former employer wrongfully discharged her as a result of her medical condition, Multiple Sclerosis. She was diagnosed in August 2002. Plaintiff’s attorney learned during the course of representation that the plaintiff was entitled to group long-term disability insurance benefits through the employer’s insurance carrier. After becoming aware of this, in February 2003, the attorney sought to modify the retainer agreement to incorporate legal fees for any recovery of claims for disability insurance benefits.

Pursuant to the insurance policy, plaintiff was required to file a notice of claim within 270 days of her disability in order to claim long term benefits. Since her disability was discovered in August 2002, she was required to file a claim no later than May 2003. Since the time limit had run, Plaintiff was denied disability benefits for not filing a timely claim. The plaintiff alleged the attorney had ample time to file a notice of claim with the employer’s insurance carrier because the attorney had already represented her for nine months since she was first diagnosed with her disability. Moreover, the attorney was aware of the insurance claim since he sought to modify the retainer agreement to reflect the additional fees of taking on this insurance claim. The attorney firm argued that plaintiff retained her solely for representation on the claim of wrongful termination, to obtain a damage award, and restore her to her prior position.

Issue: Whether the attorney acted competently under Disciplinary Rule 6-101 in pursuing the employment discrimination claim, but failing to file a timely notice of claim to the employer’s insurance carrier to cover the plaintiff?

Ruling: The plaintiff pleaded sufficient facts to fit within legal malpractice, and the motion to dismiss, pursuant to CPLR § 3211(a)(7) was denied. The attorney’s failure to file a claim with the employer’s disability carrier harmed plaintiff because the plaintiff was time barred under the statute of limitations and could not collect disability insurance. The modified retainer agreement in February 2003 to account for recovery for a successful insurance claim reflected the attorney’s new duty to competently provide legal services in attempting to obtain disability insurance from the employer, which he failed.

Lesson: The retainer agreement outlines the scope of representation, and as such, the attorney must follow its terms and conditions competently and fully. The failure to diligently perform a legal service or task as outlined in the retainer agreement may amount to legal malpractice if the client suffers harm due to the improper handling of a certain matter.

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Winters v. Dowdall 63 A.D.3d 650 (1st Dep’t 2009).

NY: Real Estate Transaction

Student Contributor: Nicholas Tam

Facts: Plaintiff was selling New York real estate in accordance with exchange transactions section 1031 of the Internal Revenue Code. In 2008, plaintiff retained defendant to perform a number of legal services including advising plaintiff regarding the selection of a ‘qualified intermediary’ for the transaction, coordinating with other professionals to facilitate the transaction, and to provide general legal services and advice in connection with the real estate sale. Their retainer agreement listed these terms, and the scope of the defendants’ legal representation was clearly outlined to cover every aspect of the section 1031 exchange transaction. Defendants held themselves out to be experienced attorneys having specialized knowledge and expertise in the area of section 1031 transactions.

Defendants chose Atlantic Exchange Company (“AEC”) as the ‘qualified intermediary’ in the real estate transaction. Upon this advice from the defendants, plaintiffs transferred $604,919.73 to AEC. These funds were to be held by AEC and put into a separate, interest bearing account for the benefit of plaintiff. At no time following the transfer of plaintiff’s funds into the AEC account did defendants take any action to confirm or ensure that the transfer of the funds were actually in compliance with IRS rules and regulations. The funds were not placed in a secured account, and AEC’s principal had free access to the account where he proceeded to loot the plaintiff’s funds for his personal benefit. AEC filed for bankruptcy. After further investigation, plaintiffs found out that the defendant failed to properly investigate AEC prior to selecting it to act as the qualified intermediary in the section 1031 exchange transaction. Moreover, defendants did not uncover the fact that AEC was inadequately bonded if a situation like this arose.

Issue: Whether defendants had performed due diligence in selecting a properly bonded company as the qualified intermediary for the plaintiff’s exchange transaction?

Ruling: The defendants had failed their duty to perform due diligence. Plaintiff sufficiently pleaded the action for legal malpractice because the defendants failed to properly investigate the company prior to selecting it to act as a ‘qualified intermediary’ in the exchange transaction. Plaintiffs relied upon the defendants, who had carried themselves out to be experts in the field of section 1031 exchange transactions, and plaintiff relied on these representations before hiring them as counsel for a variety of matters. The court specifically found that the defendants’ failures were the proximate cause of plaintiff’s damages.

Lesson: For law firms, it is crucial to perform due diligence when choosing a company for an important purpose such as an exchange transaction. The defendants’ failure to find out that the company chosen was insufficiently bonded arose to the level of legal malpractice.
 

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Eurycleia Partners, LP v. Seward &Kissel, LLP, 12 N.Y.S. 3d 553(2009)

NY: Underlying Securities Fraud

Student Contributor: Mordechai Goldenberg

Facts: Plaintiffs are limited partners in a hedge fund that was managed by John Whittier. Plaintiffs allege that the hedge fund’s offering memorandum asserted the following:
1) That the hedge fund will be audited by American Express Tax and Business Services, Inc.(TBS).
2) To ensure adequate investment diversification, individual holdings in the fund's portfolio would be capped at 10% of the total assets at any given time, based on the original cost of the stock.
Unbeknownst to plaintiffs, the hedge fund—at Whittier's direction—began to invest heavily in the stock of Endwave Corporation. By the summer of 2005, Wood River's investment in Endwave shares represented approximately 65% of the fund's total assets and over 35% of Endwave's outstanding shares. After peaking at $54 per share in mid-July, Endwave's share price gradually declined until it plummeted to $14 in late September. As a result, Whittier was unable to meet plaintiffs' redemption requests.

The offering memorandum had been prepared by defendant- law firm. Plaintiffs allege that the law firm was aware that the hedge fund was not represented by TBS, and that the law firm was aware that the hedge fund had invested more than the 10% cap, and that they had violated SEC laws. Plaintiffs allege that defendants had a duty to disclose this information to them

Issue: Did the law firm have a fiduciary duty to the limited partners?

Ruling: No. The court held that the fiduciary duties owed by a limited partnership's attorney to that entity do not extend to the limited partners.

Lesson: In order to maintain a legal malpractice claim against an attorney the attorney must have a fiduciary duty to plaintiff. As a limited partner, one cannot rely on the fiduciary duty owed to the entity as it does not extend to the limited partners. 

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Selletti v. Liotti, 804 NYS 2d 739, 22 A.D.3d 739 (2d Dept 2005)

NY: Underlying litigation; sanctions for discovery abuses

Student Contributor: M. Rubin

Facts: Defendant attorney represented plaintiff client in a federal action. The federal court  imposed monetary sanctions of $5,000 on plaintiff client for discovery abuses. Plaintiff then brought a claim in state court alleging that defendant’s mishandling the federal action resulted in the monetary sanction. The state motion court denied plaintiff’s motion for summary judgment on the issue of liability, in plaintiff’s action to recover damages for legal malpractice.  The Appellate Court  explains that

“While the issue of whether certain conduct constitutes legal malpractice is generally a factual determination to be made by the jury, a plaintiff will be entitled to summary judgment in a case where there is no conflict at all in the evidence, the defendant's conduct fell below any permissible standard of due care, and the plaintiff's conduct was not really involved .”

Issue: Did plaintiff establish that his own conduct was not really involved in the attorney’s actions that were sanctioned?

Ruling: The court held that the plaintiff failed to establish that his own conduct had nothing to do with the monetary sanctions being imposed, and the court thus upheld its denial of plaintiff’s motion for summary judgment

Lesson:  In a legal malpractice claim based on  sanctions imposed for discovery abuses,  it is important for a plaintiff to present evidence sufficient to establish that his own conduct in the sanctioned conduct  was not involved.  

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Landa v. Blocker, 87 A.D.3d 719, 928 N.Y.S.2d 779 (App.Div. 2d Dep't 2011)

NY Underlying Matrimonial

Student Contributor: Richard Sadowski

Facts: The plaintiff, an attorney, represented the defendant in her divorce. The plaintiff commenced this action to recover the legal fees charged in the matrimonial action based on the theory of an account stated. The defendant brought a counterclaim for, among other things, legal malpractice. The Supreme Court granted the plaintiff’s motion for summary judgment based on the theory of an account stated.Plaintiff timely submitted legal invoices “setting forth his hourly rate, the billable hours expended, and the particular services rendered, and establishing that the defendant signed such invoices, failed to timely object to the invoices, and made partial payments thereon.” In opposition, defendant submitted an affidavit denying she acquiesced to the correctness of the invoices. She claimed that she signed the invoices because plaintiff refused to continue his legal representation until she did so. She asserted that she did not intend to give up her right to ever challenge the invoices.

Issue: Was there a triable issue of fact as to whether defendant’s acts of signing the invoices were acquiescence to their correctness?

Ruling: Yes, the court found there to be a triable issue of fact as to whether the act of signing the invoices constitute acquiescence to the amounts of the invoices. The court points out that the attorney’s refusal to continue work on the case without first obtaining the defendant’s signature would not constitute duress to invalidate the documents. However, here the defendant does not seek to invalidate the invoices. She only seeks to challenge plaintiff’s summary judgment motion by raising a question of fact as to whether she acquiesced to the amounts on those invoices.

Lesson: A client’s affidavit can be enough to present a triable issue of fact as to whether the client’s signature on legal services invoices represents intent to agree to the amount of those invoices. But this case seems to raise another ethical issues such as, is it proper for a lawyer to condition continued representation on a client's agreeing that the fees charged are reasonable?  

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Christ v Law Offs. of William F. Levine & Michael B. Grossman, 72 A.D.3d 721 (2d Dep't 2010)

NY: Underlying legal malpractice suit

Student contributor: Zahava Schwartz

Facts: The underlying case was another legal malpractice action where the clients alleged that the lawyer did not timely bring a property damage claim from a sewer backup at their house against the village. Clients obtained another attorney, defendant in this case, to represent them in that underlying legal malpractice suit but the lower court granted that attorney’s motion for summary judgment dismissing the complaint. That court found no triable issues of fact in regards to the village’s negligence because there was no evidence to show that the sewer backup was recurring or that the village had notice of that defect. Subsequently, plaintiffs discovered documents that there was a history of backups in that village and that both attorneys had made a freedom of information law requests for those documents yet failed to follow up on that request. Accordingly, plaintiffs brought a legal malpractice action alleging that the defendants did not obtain those documents prior to the dismissal. To prevail on this legal malpractice claim they needed to prove that they would have obtained a successful judgment but for the attorneys negligence to obtain those documents. A trial was held on whether the underlying case had merit and the jury returned a verdict that was favorable to the plaintiffs. The defendant made a CPLR 4404 (a) motion “to set aside the jury verdict and for judgment as a matter of law, or to set aside the jury verdict as contrary to the weight of the evidence and for a new trial.” The lower court granted that motion and directed a new trial on that issue. Plaintiffs appealed and the defendants cross-appealed that the lower court should have entered a judgment as a matter of law for the plaintiff. 

Issue: Was the lower court correct in granting defendants CPLR 4404(a) motion?

Rule: No. The lower court should have denied the defendants motion to begin with. “To be awarded judgment as a matter of law pursuant to CPLR 4404 (a), a defendant has the burden of establishing that there is no rational process by which the jury could find for the plaintiff against the moving defendant. The plaintiff's evidence must be accepted as true, and the plaintiff is entitled to every favorable inference which can reasonably be drawn from the evidence.” In this case the defendants did not meet that burden and the plaintiffs’ expert testimony established that the village did not properly maintain their sewers. “A jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict by any fair interpretation of the evidence” which is not a question about law but rather it is discretionary and about balancing factors. In this case, the jury’s verdict that the village was negligent was supported by a fair interpretation of the evidence.

Lesson: It is a tough burden to have a CPLR 4404 (a) motion granted. It entails the moving party to establish that there is no rational process by which the jury could find for the non-moving party. Also, a jury verdict should not be set aside contrary to the weight of the evidence unless the jury could not have reached that verdict by any fair interpretation which is determined by multiple factors and is discretionary.

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Wilk v. Lewis & Lewis, P.C., 75 A.D.3d 1063 (4th Dep’t 2010)

NY: Underlying personal injury action

Student Contributor: Zahava Schwartz

Facts: The plaintiff was injured while repairing railroad cars. He hired defendant lawyers to handle this case against his employer. His lawyers did not commence the suit on time and he was time barred and his suit was therefore dismissed. When the lawyers (defendants) commenced a Labor Law and common-law negligence action on behalf of plaintiffs they used the same index number that had been used in the pre-action discovery proceeding. The action was dismissed because in New York, failure to purchase a new index number rendered the case a nullity since it was never properly commenced. Plaintiff argues that his lawyers did not commence his labor law and common law negligence case in a timely manner causing its dismissal. The lawyers argued that even if they had commenced his suit on time he would not have succeeded. The lawyers said that their negligent behavior was not a proximate cause of his loss because successor counsel did not file a notice of appeal and this was an intervening cause to their negligence which caused the dismissal.

Issue: Did the lawyers fail to act with ordinary reasonable skill by allowing the case to be dismissed and was the lawyer’s negligence the proximate cause of plaintiff’s loss?

Rule: Yes. In a legal malpractice case the plaintiff must prove that the lawyer did not act with ordinary reasonable skill that a member of the legal community would have. Also, that this breach of attorney-client duty was a proximate cause of the client’s loss. In order to win the legal malpractice case the plaintiff must show that but for the lawyers’ action he would have succeeded on the merits of the case. The lawyers intervening factor argument was dismissed since they did not prove successor counsel had enough time to adequately protect plaintiff’s rights. The lawyer’s failure to commence the action on time would be enough to show they did not exercise the ordinary reasonable skill. The court denied lawyers’ request to dismiss the complaint and gave plaintiff partial summary judgment.

Lesson: In a malpractice claim not only does the plaintiff need to properly plead the substantive elements of the claim-- that the lawyer did not act with ordinary reasonable care that that the breach of duty is the proximate cause of the clients loss, but must also comply with the procedural requirements of how to properly commence the action in a timely manner. 

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R. Brooks Assoc., Inc. v Harter Secrest & Emery LLP ; 2012 NY Slip Op 00602 ; Decided on January 31, 2012 ; Appellate Division,

NY: Underlying corporate and commercial transaction

Student Contributor: Audrey Mars

Facts: Plaintiff retained Defendant law firm to: (1) create a new corporation comprised of the assets of a financially failing pipeline inspection company (PES) and (2) to draft an employment agreement between Company’s former owner (McNulty) and the new corporation. Since PES was so deeply in debt, Plaintiff sought to ensure that he would not be personally held liable its debts. After  the closing, McNulty: (1) used the new company’s assets to satisfy his old debt; (2) McNulty’s son left the company and formed a new competitive company; (3) McNulty bad-mouthed the new company to former clients and diverted business to his son’s company. After suspending McNulty, Plaintiff contacted defendant regarding terminating its relationship with McNulty. Instead of terminating McNulty pursuant to the terms in the employment agreement, Defendant claimed that McNulty resigned. McNulty sued plaintiff for breach of contract and prevailed.

Issue: Whether the acts which allegedly constituted malpractice which occurred at the latest August 3, 1999, were time barred when a suit was commenced on August 2004, or whether the continuous representation doctrine applied to toll the statute of representation?

Ruling: Plaintiff’s action is time-barred because defendant’s additional work on plaintiff’s behalf did not constitute continuous representation- it was instead “ an extended general relationship between parties.”

Lesson: For the continuous representation doctrine to apply both plaintiff and defendant must have a mutual understanding to that effect, and (2) plaintiff must be under the impression that defendant was actively addressing [its] legal needs" with respect to the subject of the alleged malpractice. 

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New Kayak Pool Corp, v. Kavinoky Cook LLP, 74 A.D.3d 1852, 902 N.Y.S.2d 497 (App.Div 4th Dpt. 2010)

NY: Underlying Trademark Infringement

Student Contributor: Richard Sadowski

Facts: Plaintiff brought action for legal malpractice alleging that the defendant failed to ascertain the existence of insurance coverage in the plaintiff’s underlying trademark infringement action. The attorney, then a partner at the first law firm, began representing the plaintiff in 1999. The attorney later joined, a second law firm and executed a consent to change attorney form in June 2003, substituting the second firm in place of the first,  as plaintiffs' attorneys of record. That underlying action settled in February 2004 and the instant malpractice action commenced in January 2007.

Issue: Is the malpractice action against the original law firm of record barred by the statute of limitations where that firm was replaced more than three years before the commencement of an action?

Ruling: No.

“[T]he statute of limitations was tolled by the doctrine of continuous representation during the time that the same attorney represented plaintiffs in the underlying action.”

Lesson: The original law firm can not escape liability in a legal malpractice action by alleging a statue of limitations violation even if the attorney on record switches firms and executes a change of attorney form. The statue of limitations period is tolled while the underlying action continues with the relocated attorney at his new firm. 

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Malik v. Beal, 54 A.D.3d 910 (App. Div. 2d Dept. 2008)

NY: Underlying negligent negotiation of a contract for real estate

Student Contributor: Jared Levy

Facts: Plaintiff Malik, as purchaser, entered into a contract with the seller to purchase certain multiuse commercial real property and improvements. The plaintiff retained the defendant attorney to negotiate the terms and conditions of the contract. The executed contract contained a provision that "[a]t closing, the Seller shall deliver copies of all existing Certificates of Occupancy for the premises." Subsequently, the Seller refused to produce certificates for all of the buildings and improvements on the premises, asserting that they did not exist and that he had no obligation under the language of the contract to procure and deliver them. As a result, the plaintiff was unable to obtain financing for the acquisition, and the seller declared the plaintiff in breach of the contract and retained the plaintiff's down payment of $173,000. The plaintiff then commenced a legal malpractice claim against the defendant attorney (as well as a breach of contract against the Seller). The defendant attorney moved to dismiss the claim of malpractice against him, or in the alternative, stay the proceeding to determine whether the plaintiff would prevail on the breach of contract action against the Seller first. Supreme Court denied the motion completely.

Issue:Has the plaintiff adequately pled a cause of action for legal malpractice?

Ruling: Yes. The defendant attorney here claims that the plaintiff cannot state a cause of action to recover damages for legal malpractice because he cannot establish the "but for" element. However, the court disagreed. In his complaint, the plaintiff alleges that the defendant attorney negotiated the terms and conditions of the contract of sale, thereby permitting the Seller to refuse to procure and deliver the necessary certificates of occupancy for the improvements on the subject premises so that he could obtain financing for the sale. As a result, the complaint alleges that the plaintiff has been damaged by Seller’s retention of the $173,000 down payment. The court held that this certainly was enough to establish the “but for” causation of the defendant attorney’s negligence.

Lesson: While the facts here are similar to those of Savings Bank v. Ward, here we have the privity of contract between the attorney and the plaintiff that we lacked in that case. Defendant’s negligence in this case was the direct “but for” cause of the plaintiff’s actual damages in the underlying real estate transaction. Therefore, there is a cognizable cause of action to be made against the defendant attorney here.

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Breen v. Law Office of Bruce A. Barket, P.C., 52 A.D.3d 635, 862 N.Y.S.2d 50 (2nd Dept. 2008)

NY: Underlying Divorce Settlement

Student Contributor: Daniel Schick

Facts: During the course of resolving a divorce action, Eileen (“Plaintiff”), and her former husband, George, executed various stipulations of settlement to resolve their respective equitable distribution claims as to their marital assets. Eileen and George jointly owned two parcels of land in Connecticut, initially conveyed to them by a single deed. In their agreement, George agreed to pay purchase Plaintiff’s interest in one parcel, whereas the second parcel would be sold with the proceeds being divided equally between them. George retained a Connecticut attorney, Hecht, to draft a quitclaim deed which would transfer Plaintiff’s interest in one of the parcels to George. Plaintiff reviewed the proposed deed and noted that it erroneously described both parcels of property. She showed her attorney (“Defendant”) this draft document and discussed the error with him. Nonetheless, Plaintiff signed the quitclaim deed upon her counsel’s advice conveying her interests in both parcels of land to her former husband. Plaintiff sued Defendant and Hecht inter alia for legal malpractice. Defendant in turn filed cross-claims against Hecht for contribution or indemnification. Hecht made a motion for summary judgment dismissing Plaintiff’s complaint as well as Defendants’ cross-claims as a matter of law. The lower court denied Hecht’s motion. On appeal, the Appellate Division reversed the lower court holding that summary judgment should be granted dismissing the complaint and all cross-claims asserted against Hecht.

Issue: Can Plaintiff sue her former husband’s attorney for legal malpractice, especially when she lost a contracted for benefit because of the erroneous property description contained in the quitclaim deed Hecht drafted?

Ruling: No. Absent special circumstances such as fraud, collusion or malicious acts, which are not present here, Hecht will never be liable to third parties such as Plaintiff for the harm caused by his alleged professional negligence, because this attorney was never in privity or near privity with Plaintiff as there was no attorney-client relationship between them.

Lesson: In the absence of an attorney-client relationship or a relationship closely resembling privity between the parties, a third party wronged by an attorney’s professional negligence will only be able to sustain a claim of legal malpractice against that attorney, if facts can be shown that the attorney engaged in common scheme or plan with his client to defraud that third party.
 

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DiTondo v. Meagher, 24 Misc. 3d 720, 883 N.Y.S.2d 690 (Sup 2009).

NY: Underlying negligence action, choice of law

Student Contributor: Nicole Milone

Facts: Joseph DiTondo (“DiTondo”) was injured while unloading a chain link fence he delivered to a National Rent-A-Fence facility in North Carolina. DiTondo hired Frederick J. Meagher, Jr of Meagher & Meagher Law Firm  to represent him in the underlying negligence action. The injury took place in North Carolina, where there is a contributory negligence bar to negligence actions. However, DiTondo lives in New York and Rent-A-Fence has its principal place of business in California, and both states practice comparative negligence law. Meagher brought the action in federal district court in New York. Rent-A-Fence submitted a motion for summary judgment, which went unopposed. Chief Judge Scullin struck Meagher’s opposition papers because they failed to comply with federal rules. The summary judgment motion argued that North Carolina’s law of contributory negligence should apply in this case, which would bar DiTondo’s recovery. The judge determined that North Carolina has the most contacts with this litigation, being the site of the injury and the location of a Rent-A-Fence facility, and applied North Carolina law. However, the judge denied Rent-A-Fence’s motion for summary judgment, finding they did not meet the high standards applied in North Carolina to contributory negligence cases on summary judgment. Before the case went to trial, Meagher filed a motion to withdraw as DiTondo’s counsel, which the judge granted provided he located another attorney willing to take the case.

Issue: Whether a lawyer’s failure to properly research and argue the choice of law in a federal diversity case constitutes legal malpractice?

Ruling: Yes. Meagher failed to meet the proper standard of care in representing his client. If not for his error, DiTondo would have prevailed in the underlying case. Meagher should have argued that applying the New York choice of law rule, or the Neumeier rule, North Carolina was not the proper choice of law. The judge found that North Carolina law applies because it was the site of the accident as well as the location of a Rent-A-Fence facility. However, Meagher should have pointed out that Rent-A-Fence has its principal place of business in California, which means it is domiciled in California. If Meagher had presented this version of the facts to the judge in the underlying case, he would not have applied North Carolina law. North Carolina has no interest in applying its law to these facts because both parties are not domiciled in the state.

Lesson: A lawyer is responsible for zealously advocating on behalf of their client. Failure to do the proper research and argue the relevant law will result in a malpractice action against the attorney. 

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Hasty Hills Stables, Inc. v. Dorfman, Lynch, Knoebel & Conway, LLP, 52 A.D.3d 566, 860 N.Y.S.2d 182 (App. Div. 1st Dep’t 2008).

NY: Underlying real estate matter

Student contributor: Nicole Milone

Facts: Hasty Hills Stables, Inc. (Hasty Hills) obtained Dorfman, Lynch, Knoebel & Conway, LLP (law firm) to represent them in the purchase of real estate in 1996. Hasty Hills sought to obtain a 50-year lease on the land, and believed the law firm drafted the contract to their desires. However, in July 2001, the lessor sold the land to a new owner. The new owner then utilized a defeasance clause in the contract which allowed them to terminate the lease. Hasty Hills was evicted in May 2003. They brought this action for malpractice in January 2005.

Issue: Whether the three-year statute of limitations on a legal malpractice claim should be tolled for continuous representation of the client by the attorney?

Ruling: No. The continuous representation of Hasty Hills by the law firm was unrelated to the issue that gave rise to a malpractice claim. The statute of limitations for this legal malpractice claim expired in 1999, three years after the law firm represented Hasty Hills in connection with the sale of real estate. The subsequent representation was unrelated to this sale.

Lesson: The three-year statute of limitation on a legal malpractice claim can be tolled under the doctrine of “continuous representation” only if the attorney continues to represent the client in the same matter that the alleged malpractice occurred.  

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Hearst v. Hearst, 50 A.D.3d 959, 857 N.Y.S.2d 596 (App. Div. 2d Dep’t 2008).

NY: Underlying divorce case and undue influence claim

Student Contributor: Nicole Milone

Facts: John Randolph Hearst, Jr. (John) suffered a stroke in 1989. He was married to Barbara in 1990. When Barbara filed for divorce in 2004, John discovered that she and their attorney, Leonard Ackerman, allegedly defrauded him of over $20 million in investments. John claimed his wife and lawyer asserted undue influence on him, which he was susceptible to due to his stroke.

Issue: Is there a triable issue of fact as to whether Barbara asserted undue influence over John with respect to their investments? Did John state a prima facie case of legal malpractice against Ackerman such that summary judgment dismissing the claim was improper?

Ruling: Yes and yes. John raised a triable issue of fact as to Barbara’s undue influence with evidence that she transferred finances from joint accounts to accounts under her control only. The court found that there is an issue here as to whether Barbara was acting within John’s best interests. The court also found that there is sufficient to support a legal malpractice claim against Ackerman. John introduced evidence that Ackerman aided Barbara in the misuse of John’s assets.

Lesson: A client can survive a summary judgment claim if they raise a triable issue of fact with respect to the legal malpractice cause of action.

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Healy v. Finz & Finz PC, 2011 NY Slip Op 1616, App. Div. 2nd Dept., 2011. 

Facts: The plaintiffs retained the defendant law firm to represent them in the underlying medical malpractice action, in which they alleged that the doctors should have delivered plaintiffs' surviving babies immediately after learning that one of the three fetuses had died, and that the delay caused injury to one surviving child.

The plaintiffs' expert medical witnesses were unable to testify as to when the injury occurred, however, and the trial court held that the plaintiffs could not establish the proximate cause element of medical malpractice. The appellate court affirmed. Shortly thereafter, plaintiffs filed suit against their former attorneys. 

Issues: Were plaintiffs' former attorneys liable for the consequences of the experts' inability to testify to key information? 

Ruling: No. 

The defendant attorneys presented affidavits from medical experts in the legal malpractice action alleging that the injury would have occurred immediately upon the death of one fetus in any event - a position directly adverse to that of their former client in the medical malpractice action. The Court allowed this, and in support of its decision to grant summary judgment to the defendants, provided: 

Attorneys are free to select among reasonable courses of action in prosecuting clients' cases without thereby exposing themselves to liability for malpractice...[T]he firm demonstrated that it could not have proven proximate cause in the underlying medical malpractice action, and [] the plaintiffs failed to raise a triable issue of fact in opposition...

Lesson: In New York, the professional judgment rule can serve as a defense to a claim for legal malpractice alleging negligent selection of experts. Further, the Courts will allow the defendant attorneys to submit expert testimony in the legal malpractice action that is directly at odds with the position they advanced on behalf of their client in the underlying action. 

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Morrison Cohen LLP v. Parrish, Supreme Court, New York County, February 9, 2011. 

Facts: The Plaintiff law firm filed an action to recover unpaid fees for legal services allegedly performed for the benefit of Defendant Parrish. Parrish argued that plaintiff seeks fees that were not authorized, fees that were excluded from plaintiffs proposed "litigation plan," fees "for activities not required nor requested," and that plaintiff engaged in unnecessary discovery which "generated well over half of what Plaintiff has billed." Defendant argues that the "activities covered by the fees sought by Morrison Cohen constitute negligence," and that he is entitled to a hearing to determine whether the fees "constitute fraud."

Issues: Did the Defendant have any valid affirmative defenses to Plaintiff's claim for unpaid legal fees? 

Ruling: No. 

First, the Court held that Parrish did not have a bona fide defense or counterclaim for legal malpractice, since New York's three year statute of limitations for that claim had run. The Court further provided: 

The law is well settled that to defeat a motion for summary judgment on an account stated cause of action for legal fees, defendant client must make a sufficient evidentiary showing that he objected within a reasonable time to the invoices he received from plaintiff, and self-serving, bald, conclusory and unsubstantiated allegations of oral protests or objections do not satisfy this standard...As the court previously determined, defendant's conclusory and unsubstantiated allegations that he objected to and complained about plaintiffs services and fees, are insufficient to raise a triable issue as to whether he in fact disputed plaintiffs statement of account.

Lesson: Failure to timely raise a malpractice claim or object to an attorney's billing practices, preferably in writing, may bar the client's right to defend against a later action for unpaid legal fees in New York. 

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Cruciata v. Mainiero, Supreme Court, New York County, January 14, 2011.

Facts:  Plaintiff contended that she did not owe Defendant attorney, her former counsel, the legal fees he collected from her in the underlying divorce action since he, allegedly, never provided her with a statutorily compliant retainer agreement.  

Issues: Is an attorney entitled to legal fees if he fails to provide the required retainer agreement under 22 NYCRR 1400.3 - the statute applicable to New York family and divorce lawyers?  What qualifies as a "statutorily compliant" retainer agreement? 

Ruling: As to the first question, no.  As the Court observed, pursuant to the governing case law in New York, simple non-compliance is sufficient to preclude an attorney from recovering any fees.

Here, however, the Court found that Mainiero had served a conforming retainer.  The Court based its holding on the following factors:  (a) the retainer was signed by Mainiero and Cruciata; (b) it specified the work to be completed by Mainiero and the amounts to be charged for the work.

The Court found that such an agreement clearly sets forth the intention of the parties, and therefore, extrinsic circumstances and varying interpretations would not be considered.  Accordingly, the Court denied Plaintiff's motion to recoup her legal fees from Mainiero.

Lesson: In New York written, signed retainers are a must.  The agreement should spell out the scope of the attorney's duties, along with the fees to be charged.  Note that this particular statute contains a requirement not discussed in this case:  "In actions in Supreme Court, a copy of the signed agreement shall be filed with the court with the statement of net worth."

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DePouli v. Barasch, McGarry, Salzman & Penson, New York Supreme, New York County, January 24, 2011.

Facts: Defendant law firm participated in an information session given by the New York City Bar Association for victims of a crane collapse.  At that session, Defendants provided a letter, along with a notice of claim, to prospective claimants.

After the session, DePouli, one of the attendees, retained the law firm.  The firm, however, upon further review of the matter, decided that it would not represent DePouli.  In the meantime, DePouli's time to file his notice of claim had expired.

DePouli, thereafter, sued the firm for malpractice, and the firm presented several defenses, including (1) plaintiff had adequate time and information to file the notice of claim himself; and (2) the firm's decision not to file a notice of claim was protected by the "Professional Judgment Rue."

Issue: Did the firm commit malpractice by failing to timely file a notice of claim on behalf of DePouli?

Ruling: No.

The Court held that it was sufficient for the firm to have notified DePouli that a notice of claim must be filed by a certain date, provided him with a form notice of claim and attachments.  Indeed, the firm had even advised DePouli where the notice must be mailed.  

Furthermore, the Court held that the firm's decision not to pursue suit against the City for plaintiff's injuries was covered by the "Professional Judgment Rule" in any event.  

BMS&P's choice to not pursue claims against the City, but rather to recover solely from the construction companies, does not support a claim for malpractice. Selection of one among several reasonable courses of action does not constitute malpractice...Neither an error in judgment, nor in choosing a reasonable course of action constitutes malpractice...In order to state a claim for malpractice, plaintiff must allege that the chosen course is bereft of legal authority.

Lesson: The decision would appear to support the notion that counsel are not liable for missing deadlines that a plaintiff could have observed, provided the attorney put them on notice of the deadline and gave them the information necessary to comply with the deadline.  Furthermore, an attorney's decision not to sue every potential defendant is not malpractice, so long as the decision is well-reasoned and can find support in prevailing legal authority.

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McCann v. Manheimer,  New York Supreme, Nassau County, January 10, 2011.

Facts: Plaintiff filed suit for legal malpractice against her former attorneys.  Defendant attorneys moved for summary judgment on the basis that the suit was barred by the applicable statute of limitations because it had been filed more than three years after the termination of the attorney-client relationship.

Defendants alleged that the attorney-client relationship ended on October 28, 2005, at or around the time when they mailed a letter to plaintiff terminating the attorney-client relationship.  Plaintiff, however, alleged that she never received the letter, and that she understood the attorney-client relationship continued through March, 2007.

Issue: Was Defendants' disengagement letter enough to establish the termination of the attorney-client relationship? 

Ruling: Not necessarily.

Defendants presented evidence from their paralegal who testified that she had mailed the disengagement letter out in or about October, 2005, and the testimony of a representative of the Defendants' case management software program who stated that the letter had been created, modified, and printed in or around that time period.

Plaintiff testified that she never received the letter, and had her mother testify that the letter never came to the address to which it was sent.  She also produced an affidavit from a "certified Microsoft Windows IT specialist" who opined that document properties could be manipulated to create the appearance that the document was drafted on an earlier date.

Despite New York law providing that a letter that has been mailed is presumed to have been received, the Court held that plaintiff had raised a triable issue of fact, since "the credibility of the parties [was] central to the determination of the [issue]."

Lesson: The decision alerts attorneys to the importance of disengagement letters, and quite possibly, the need to deliver them by courier who can confirm delivery and signature.

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Vlahakis v.Mendelson & Associates, 54 A.D.3d 670, 863 N.Y.S.2d 479 (App. Div. 2d Dep’t 2008).

NY: Underlying bankruptcy proceeding

Student contributor: Nicole Milone

Facts: John Vlahakis retained Mendelson & Associates to advise him in his bankruptcy proceeding. The attorneys assured their client that he would not have to pay the arrears he owed on his home mortgage. Based upon this advice from counsel, Vlahakis did not pay. He then continued to live in his home for seven years without paying mortgage, taxes, and insurance.. Eventually, Vlahakis was required to pay the bank what he owed on his home mortgage. However, he did not provide any evidence to support his claim that this amount was more than the money he saved by living in his home for seven years without paying mortgage, taxes, and insurance.

Issue: Whether summary judgment dismissing a malpractice case was proper when the lawyer in the underlying matter gave a client inaccurate advice?

Ruling: Yes. Summary judgment was properly dismissed because the lawyer demonstrated the client did not sustain any damages due to the inaccurate advice.

Lesson: Even when an attorney makes a clear error and the client relies on that advice to his detriment, if the client cannot prove damages related to the mistake, there will not be an actionable claim for legal malpractice.

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Schorsch v. Moses & Singer LLP, 60 A.D.3D 557, 876 N.Y.S.2d 367 App. Div. 1st Dep’t 2009).

NY: Underlying insurance claim

Student Contributor: Nicole Milone

Facts: M.R.S. Antiques was a family-owned business that sold art and antiques. The business was run by Margaret Schorsch, her brother David Schorsch, their mother Marjorie Schorsch, and two other unrelated employees. M.R.S. Antiques had an insurance policy through Utica Mutual Insurance Company (Utica). On September 23, 1995, M.R.S. Antiques was robbed. Their inventory, valued at roughly $2 million dollars, was missing. M.R.S. Antiques reported the theft to the police and filed a claim of loss with Utica. Margaret Schorsch believed that her brother David had committed the theft. Based on this belief, she retained Moses and Singer, LLP (Moses) to represent her and the company in an action against her brother. Moses also came to represent M.R.S. Antiques in the Utica insurance claim regarding the theft. In 1997, Utica denied M.R.S. Antiques’ claim due to the “dishonest acts exclusion” of their policy. The policy denies coverage for a loss caused by dishonest acts committed by anyone with an interest in the property. Utica mistakenly quoted the wrong policy in their letter informing M.R.S. Antiques that they were denying the claim. However, the policy quoted in the letter is materially the same as the policy that covers M.R.S. Antiques in this claim.

Issue: Whether the lower court erred in dismissing the client’s case where the attorney did not pursue a legal action against an insurance company who mistakenly cited an incorrect policy when denying client’s insurance claim?

Ruling: No. The error made by the insurance company and the lawyer’s failure to pursue a cause of action against them for their mistake would not have changed the outcome of the underlying matter. The policy incorrectly cited by the insurance company was only slightly different than the policy that actually covered M.R.S. Antiques. The “dishonest acts exclusion” still applies because Margaret Schorsch claimed David Schorsch, an employee with an interest in the company, committed the theft. This clearly applies as an exclusion under the insurance policy, proving that coverage was properly denied.

Lesson: Even if an error was committed in the underlying matter by opposing counsel which goes unnoticed by their adversary, that does not guarantee a legal malpractice claim. A client must prove their attorney’s negligence was the proximate cause of their damages.

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Roni LLC, et al. v. Afra et al., 2010 WL 3703047, September 16, 2010

NY: Underlying real estate investments

Facts: This action arose from a series of business transactions in which investors acquired membership interests in limited liability companies that purchased and managed multi-family residential buildings in NY. The Defendants, either directly or through their wholly owned companies, located the properties, arranged financing, organized the limited liability companies, and managed the properties. Plaintiffs alleged, amongst other things, that Defendants made a secret profit at the expense of Plaintiffs’ and their LLCs. While Defendants allegedly disclosed some of the profits made from the business venture, they allegedly concealed that property sellers and mortgage brokers directly or indirectly paid them commissions of up to 15% of the purchase price of the property.

Plaintiffs asserted claims of breach of fiduciary duty, fraud (both actual and constructive) and waste. Defendants filed a motion to dismiss for, among other things, failure to state a cause of action and failure to plead actual fraud and breach of fiduciary duty with specificity.

Issue: Whether a fiduciary duty claim had been sufficiently pled based on both the parties’ relationship and on the defendants’ status as the organizers of the business venture?

Ruling: The parties business or personal relationship is not sufficient to establish a fiduciary relationship. A conventional business relationship between parties dealing at arms length does not give rise to fiduciary duties, unless the plaintiff shows the defendant “had superior expertise or knowledge about some subject and misled the plaintiff by false representations concerning that subject”. While Defendants held themselves out to be experts, Plaintiffs did not allege that Defendants misled them in any way that would affect the transactions.

It is well settled that before and after a corporation comes into existence, a promoter, much like Defendants’ role in this case, acts as the fiduciary to the corporation and its present and anticipated shareholder. By extension, the organizer of an LLC is a fiduciary of the investors it solicits to become members. Therefore, Plaintiffs’ allegations that the Defendants planned the business venture, solicited plaintiffs to invest and organized the LLC are sufficient to establish a fiduciary relationship.

The fiduciary duty includes the obligation to fully disclose any interests of the promoter that might affect the company and its members, including profits. Therefore, Plaintiffs’ allegations that the Defendants: failed to reveal that they would receive commissions from sellers and mortgage brokers in addition to their other, disclosed profit from the venture was sufficient to establish a cause of action for breach of fiduciary.

Lesson: In order to establish a breach of fiduciary duty claim between promoters and investors, there must be sufficient facts alleged to establish the fiduciary relationship as well as the duties owed within that relationship.
 

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 Community Capital Bank v. Fischer & Yanowitz 47 A.D.3d 667, 850 N.Y.S.2d 508
N.Y.A.D. 2 Dept., 2008

NY: Underlying Commercial Transaction

Student Contributor: Ryan O'Donnell

Facts: Plaintiff filed a legal malpractice action against Fischer & Yanowitz, and Jeffery Yanowitz. Plaintiff filed a motion to join Patricia Fischer and Jeffery Yanowitz as partners based upon partnership law and the doctrine of partnership by estoppel. The Supreme Court, Kings County granted plaintiff’s motion to consolidate, and denied a motion by Yanowitz for summary judgment dismissing the complaint insofar as asserted against him.

Issue: Does a partnership exist between parties who do not agree to share in the profits or losses of a business?

Ruling: A partnership did not exist between Fischer and Yanowitz, as there was no mutual promise or undertaking to share in the profits in the business or to submit to the burden of making good the losses. The doctrine of partnership by estoppel was inapplicable because Yanowitz never represented that him and Fischer were partners, there was no evidence that he consented to Fischer representing him as a partner, nor was there any indication that plaintiff relied on Fischer and Yanowitz being partners in retaining Fischer as counsel.

Lesson: If there is no written agreement between the parties, a court will look to the conduct, intention, and relationship of the parties to determine if a partnership exists. A partnership does not exist if there is no “mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses.”

A court will impose a partnership under the doctrine of partnership by estoppel, Partnership Law §27, when

“a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to any one, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.”

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Phillips v. Moran & Kufta, P.C., 53 A.D.3d 1044, 862 N.Y.S.2d 875 (2008)

NY: Underlying personal injury claim against municipality

Student Contributor: Michael Park

Facts: The plaintiff retained attorney in an underlying personal injury claim which occurred on municipal property. Attorney failed to commence an action against the municipality and also failed to make an application for leave to serve a late notice of claim against the municipality. Attorney made a motion for summary judgment and the trial court denied it. The attorney then appealed.

Issue: Was the motion for summary judgment properly denied?

Ruling: Yes. In affirming the decision by the Supreme Court, Monroe County, the Supreme Court, Appellate Division, Fourth Department held for the plaintiff for the following reasons:
1) The Court relied on the decision in Ippolito v. McCormack, Damiani, Lowe & Mellon, 265 A.D.2d 303, 696 N.Y.S.2d 203 and ruled that it is the burden of the defendant in bringing the motion for summary judgment to show that the plaintiff is unable to prove at least one of the elements of their legal malpractice claim, of which elements are:
1. the defendant attorney failed to exercise that degree of care, skill, and diligence commonly possessed by a member of the legal community
2. proximate cause
3. damages
4. the plaintiff would have been successful in the underlying action had the attorney exercised due care

2) Defendant failed to meet their burden and actually raised a triable issue of fact on “whether discretionary leave to file a late notice of claim...would have been available”.

Lesson: The defendant in a legal malpractice case needn't disprove every element of the plaintiff's case. Rather, they just need to establish that at least one of the elements cannot be proven by the plaintiff. In creating a triable issue of fact, the defendant actually helped the plaintiff by showing that a trial would be required to see if the plaintiff could have been successful in the underlying action.

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Silberman v. Reisman, Abramson, P.C.  55 A.D.3d 402, 866 N.Y.S.2d 42 (2008)

NY: Underlying Workers Compensation proceeding

Student Contributor: Josh Aronson

Facts: Plaintiff brought a malpractice action against the defendant arising out of the defendant’s representation of the plaintiff in a worker’s compensation proceeding. The plaintiff is claiming that the defendant was negligent in failing to obtain the plaintiffs medical records for an intervening accident that occurred 7 years after the original accident to show that the intervening accident had no effect on her present claim that she was unable to work. Furthermore, the plaintiff claims that because of the defendant’s failure to obtain these medical records, the Worker’s compensation Board rejected a reopening of her original claim.

Issue: Did the plaintiff sufficiently prove that the content of the medical records would have shown that the intervening accident had no effect on her claimed present inability to work?

Ruling: No. The plaintiff failed to demonstrate an issue of fact as to proximate cause of the Worker’s Compensation Board failing to reopen the original case. The plaintiffs claim is dismissed due to her failure to show that “but for” the defendants negligence, the original Worker’s Compensation claim would have been reopened.

Lesson: Failure to demonstrate an issue of fact as to proximate cause requires dismissal of a legal malpractice action regardless of whether the attorney was negligent.
 

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In re Dorfman,  304 A.D.2d 273; 760 N.Y.S. 2d 413 (2003)

NY Underlying Tort Action

Student Contributor: Natalie Resto

Facts: A client hired the attorney to bring an action against the New York City Department of Health for emotional distress arising from its testing error that resulted in a report incorrectly indicating that he was HIV positive. The attorney filed a notice of claim but he was mistaken as to the filing deadline, and failed to seek leave to file a late notice of claim, which resulted in the dismissal of the action. The client brought a legal malpractice and fraud action against the attorney. The court found that the attorney had convinced his client to retain him by providing a resume that was “filled with patent falsehoods and misrepresentations designed to portray him as an experienced litigator,” and further found that the dismissal of the client’s state court action resulted solely from the attorney’s negligence. The jury found for the client. The disciplinary committee brought a proceeding against the attorney, seeking an order finding him guilty of professional misconduct. The issue of sanctions was referred to a referee, who recommended public censure.

Issue: Is public censure an appropriate sanction when an attorney has made misrepresentations in his resume to induce a client to hire him and has negligently filed a notice of claim for the client’s case?

Ruling: Yes, given the totality of the circumstances, a public censure sufficed to demonstrate to the legal profession to take the lawyer's misconduct seriously.

Lesson: The court takes into account the nature of the misconduct, and the various mitigating factors when sanctioning attorneys who are guilty of professional misconduct.  Here, the duty of candor that a lawyer owes to a prospective client was surely at issue. 

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Ramirez v. 164 W 146 Street, LLC et al., 2010 NY Slip Op 32323, Supreme Court, New York County, August 27, 2010.

Facts:  A temporary receiver commenced a nonpayment proceeding against Plaintiff, a rent-stabilized tenant.  After the temporary receiver obtained a money judgment against Plaintiff and executed its eviction warrant, Plaintiff brought an action to invalidate the warrant on the basis that it was not in the name of the new owner of the apartment building.  The Court agreed and held that the warrant was invalid because the new owner's attorney, Cornicello, had failed to seek a new warrant in his client's name or substitute his client 's name in place of the temporary receiver.

Plaintiff subsequently commenced an action against the new owner's attorney seeking damages associated with her illegal lockout. 

Issue:  Was Cornicello liable for damages sustained by his client's adversary as a result of his alleged negligence? 

Ruling:  No. 

In this State, the general rule is that absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties, not in privity, for harm caused by professional negligence.  In order to state a valid cause of action for legal malpractice with an attorney or law firm one is not in privity with, one must allege that the attorney committed more than a mistake; an allegation of bad faith is necessary in that situation.  Ramirez was never a client of or in privity with Cornicello.  Thus, In order to survive the instant motion to dismiss, Ramirez's complaint must have alleged that Cornicello acted in bad faith or acted fraudulently.  Plaintiffs' complaint only alleges that Cornicello helped procure the eviction and that Cornicello is liable for [the] illegal lockout.  Plaintiffs' complaint does not allege that Cornicello acted in bad faith.

Note, however, that the showing of "bad-faith" has not been difficult to fulfill in similar matters.  In another case, Mayes v. UVI Holding, Inc., the Court found bad faith where the law firm admitted to a "major screw-up" in handling an eviction proceeding.  Since Cornicello "believed" he was executing a valid warrant, the Court did not label his actions as tortious or malicious.  The Court indicated that the result would have been different had he known the warrant was invalid before the eviction took place.

Lesson:  Attorneys will not be liable to non-clients in New York for alleged professional negligence absent knowing misconduct, fraud, bad faith, collusion, or other malicious act.

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 Ambra v. Awad, 2010 NY Slip Op, Supreme Court of New York, Nassau County, April 13, 2010.

Facts:  Plaintiff filed suit against the defendant attorneys after entering into a settlement in the underlying personal injury action.  In the course of discovery in the underlying matter, defendant disclosed that it had liability insurance of $1 million, but did not disclose its' excess policy limit of $5 million.  The jury awarded damages in the sum of of $2,020,000.  Defendant's excess carrier, however, disclaimed coverage on the basis of late notice.  Plaintiff eventually agreed to settle for $1,000,000 and then brought the instant action against his former attorneys.

Specifically, plaintiff argued that his attorneys committed malpractice by (1) incorrectly advising that the defendant's resources were insufficient to cover the jury verdict in the underlying matter; and (2) coercing him into accepting an inadequate settlement.

The defendant attorneys argued that (1) plaintiff was barred from pursuing his suit because he implicitly ratified the underlying settlement by waiting over two years to challenge it; (2) was not coerced to accept the settlement; (3) was provided with correct information with regard to defendant's ability to pay in the underlying action; and (4) the recommendation to settle represented one of several reasonable courses of action.  

The defendant attorneys filed a motion for summary judgment, and plaintiff argued that it must be denied because the attorneys' contentions were not supported by expert opinion. 

Issue:   Can plaintiff enter into a settlement in the underlying action and then sue his former attorneys for malpractice? 

Ruling:  Yes.  Initially, the Court noted that the absence of expert opinion does not preclude summary judgment for the defendant attorneys.  With respect to the issue of whether plaintiffs' decision to settle the underlying matter bars the present action, the Court reasoned: 

To the extent that [plaintiff's] implicit ratification of the settlement, if any, is inconsistent with his present position that the settlement was detrimental to him, that inconsistency is not a bar to the present action, but rather a factor to be considered in connection with the other evidence. Insofar as this action was timely commenced in accordance with the applicable statute of limitations...any purported delay in seeking relief on the part of plaintiff is not a basis for dismissal.

The Court then noted that the defendant attorneys' advice could only be considered to be "reasonable" if it was based on sufficient and accurate information, and if plaintiff was afforded the opportunity to choose among fairly presented alternatives.  In that regard, the Court took into account one of the attorney's affidavits to the effect that plaintiff was advised of all potential options including post-trial motions, excess coverage litigation, and collection of the judgment.

In rendering its decision, the Court further noted that plaintiff had been under no time pressure to accept the settlement in the underlying litigation, and that plaintiff's prior refusal of a $750,000 settlement offer recommended by his attorneys suggested generally that he was not unduly influenced by counsel.  

Nevertheless, the Court allowed the action to proceed and ordered an evidentiary hearing to determine exactly what information was known or communicated to plaintiff to warrant settlement on the basis that the defendant in the underlying action was a collection risk.  The Court specifically noted plaintiff's right to recover from his former attorneys in the event their failure to investigate or communicate material information with regard to collecting on the underlying judgment influenced plaintiff's decision to enter into the settlement.

Lesson:  A settlement in the underlying action is not necessarily a bar to a subsequent professional negligence suit in New York. 

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Nason v. Fisher, 36 A.D.3d 486; 828 N.Y.S.2d 51 (2007)

NY: Underlying Commercial Transaction

Student Contributor: Colleen Gaedcke

Facts: The plaintiff retained the defendant attorneys based on one of the defendant attorneys representation that he was experienced in handling commercial partnership cases. The plaintiff brought a cause of action against the defendant for false representation in violation of NY Judiciary Law section 487, but the court dismissed the action for the plaintiff’s failure to establish the statutory requirement of “chronic and extreme pattern of legal delinquency.” Additionally, the plaintiff also brought a legal malpractice claim against the defendants. The plaintiff’s claimed that the defendant’s alleged violation of Disciplinary Rules are evidence of malpractice.

Issue: Whether the court properly granted the defendant’s motion for summary judgment, dismissing the legal malpractice claim?

Ruling: Yes.

Lesson: Allegations of violations of Disciplinary Rules may be evidence of malpractice, however such a violation alone will not establish that the attorney’s conduct was the “but for” cause of the plaintiff’s loss.

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Gamer v. Ross, 2008 NY Slip Op. 2107 (App Div. 2d Dept)

NY: Underlying personal injury action; missing discovery causes summary judgment dismissing complain

Student Contributor: Josh Aronson

Facts: In the underlying case, the plaintiff was injured when he tripped and fell over wires and debris while roller skating on a public sidewalk adjacent to a construction site. The plaintiffs retained the defendants to commence a negligence action against the owner of the construction site as well as a contractor who had performed construction work on the site. Both of the plaintiff’s complaints were dismissed on summary judgment and motion to dismiss respectively. The plaintiff then brought action against the defendant to recover damages for legal malpractice, alleging that the defendants were negligent in their handling of the two underlying actions by failing to conduct proper discover that would have enabled them to successfully oppose the summary judgment and motion to dismiss. The defendant claims that the plaintiffs could not have succeeded in the underlying actions because the wires and construction debris over which the plaintiff tripped were open and obvious conditions that were not inherently dangerous. Furthermore, the defendant contends that the plaintiffs could not have succeeded in the underlying actions because they failed to adduce any evidence showing that the landowner of the construction site or its contractor caused or created the alleged dangerous condition.

Issue: Must the defendant in a legal malpractice action establish that their negligence would not have prevented the dismissal of the plaintiffs underlying actions?

Ruling: Yes. The court found that the landowner and its contractor would have had sufficient notice of the dangerous condition and therefore would have been liable for injuries resulting from its failure to correct the danger. As a result, the Court found that the burden was on the defendants in the malpractice action to establish that the missing discovery—which they failed to do, would not have prevented the dismissal of underlying actions.

Lesson: The defendant in a legal malpractice action must establish that “but for” the negligence claimed by the plaintiff, the outcome of the underlying action would not have changed.  

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730 J&J, LLC v. Polizzotto & Polizzotto, Esqs., Supreme Court of New York, Appellate Division, Second Department, January 12, 2010

Facts:  Plaintiff commenced a legal malpractice action to recover damages for the defendant attorneys' alleged failure to secure a deficiency judgment.  Defendants argued the action was time barred under New York's three year statute of limitations.  Plaintiff argued that the statute of limitations was tolled during the time Defendants continued to represent them in the underlying matter.

Issue:  Is the statute of limitations for legal malpractice matters tolled during the time the allegedly negligent attorney continues his representation? 

Ruling:  Yes.  A cause of action for legal malpractice accrues on the date the malpractice was committed.  Nevertheless, under the doctrine of "continuous representation," the statute of limitations is tolled while the attorney continues to represent the client in the same matter in which the malpractice allegedly occurred: 

The parties have a mutual understanding that further representation is needed with respect to the matter underlying the malpractice claim.

Lesson:  In New York, the three year statute of limitations in legal malpractice actions will be tolled where the purportedly negligent attorney continued his representation in the underlying matter after the malpractice was committed.

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Senate Ins. Co. v. Tamarack Am. 14 A.D.3d 922; 788 N.Y.S.2d 481 (2005)

NY Underlying Real Estate Transaction

Student Contributor: Natalie Resto

Facts: The attorney, who was employed full time by the Lawrence Group, Inc. as its general counsel, represented the plaintiff when it purchased some real estate property for $2,600,000. The Lawrence Group was a holding company for various insurance underwriting and agency components, which included the plaintiff. The Lawrence Group and the seller of the land later filed for bankruptcy. The plaintiff argued that because of the lien on the property it was out $2,600,000. The attorney then left the Lawrence Group and affiliated with a firm on an “of counsel” basis.
The plaintiff brought this legal malpractice action against the attorney. The attorney provided notice of the action to the defendant insurance company, which had issued a “claims made” policy to the firm. The defendant insurance company denied the coverage because it was provided “only to the extent such lawyer performs services on behalf of the named insurance,” and since the attorney rendered services as an employee of a corporation separate from the named insured, his acts fell within an exclusion contained in the policy. The defendant moved for summary judgment and the lower court granted the motion based on the policy language with respect to an attorney acting “of counsel.” The plaintiff appealed.

Issue: Does a policy issued to the law firm provide coverage for legal malpractice of an attorney who is affiliated with the law firm on an “of counsel” basis?

Ruling: Not when the policy at issue defined an “insured” to include, among others, “each lawyer acting as ‘of counsel,’ but only to the extent such lawyer performs services on behalf of the firm.” Id. at 923.

Lesson: New York’s Code of Professional Responsibility provides that the term “of counsel” nay be used “if there is a continuing relationship with a lawyer or law firm, other than as a partner or associate.”

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Sitar v. Sitar, 50 A.D.3d 667, 854 N.Y.S.2d 536 (2008)

NY Underlying Commercial Transaction: Conflicts of Interest

Student Contributor: Maninder (Meena) Saini

Facts: Client (plaintiff) brought an action against attorney and attorney's law firm (defendants), alleging legal malpractice. This action arose out of attorneys' representation of plaintiff in the sale of the plaintiff’s business to his son and daughter-in law. The attorney was a member of the plaintiff’s board of directors and acted as an attorney for both the plaintiff and his son in the transaction. The purchase price of the business was to be determined according to the profits made while under the control of the plaintiff’s son and daughter-in-law. The complaint alleged that the attorney was aware and did not disclose to the plaintiff that the new owners had engaged in unauthorized behavior that lowered the value of the business. The court granted the defendant’s motion to dismiss complaint for failure to state cause of action insofar as asserted against him and his law firm. The plaintiff then appealed.

Issue: Were the plaintiff’s allegations sufficient to state a cause of action to recover damages for legal malpractice?

Ruling: The appellate court held that the complaint  asserted  valid causes of actions for legal malpractice and breach of fiduciary duty because there was a conflict of interest since the attorney represented both sides of the underlying transaction and he was aware of important information that should have been disclosed to his client-plaintiff.   A legal malpractice action requires proof that the attorney “failed to exercise the ordinary and reasonable skill and knowledge commonly possessed by a member of the legal profession.”

Lesson: It is commonly known within the legal profession that a lawyer is considered to be a fiduciary to each client. A lawyer must consider carefully whether it is appropriate to  represent parties on both sides of a single transaction since  potential conflict of interests may materialize.  Unless the conflict is knowingly an voluntarily waived by all sides, it may be impossible for the attorney to proceed with representation.  In this case, the attorney had a duty to communicate to the plaintiff the information that adversely affected the plaintiff’s business. 

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Pechko v. Gendelman,  20 A.D.3d 404; 799 N.Y.S.2d 80 (2nd Dept. 2005)

NY Underlying Medical Malpractice Action

Student Contributor: Natalie Resto

Facts: The plaintiff underwent a mammogram while a patient with Doctor #1, who, she claimed, told her that the mammogram was normal. Later that year she underwent a mammogram with Doctor #2 and was diagnosed with cancer. The surgeon recalled seeing in the first mammogram certain “micro-calcifications” that were “suspicious of cancer.” The plaintiff sued Doctor #1 for medical malpractice. During the course of representation, the attorney who was representing her forwarded the mammogram films to a radiologist for evaluation, who before the evaluation misplaced them. The plaintiff then retained an appellate law firm to represent her in the medical malpractice action. Doctor  #1 moved for summary judgment arguing that the films constituted key evidence, and that the loss of that evidence irreparably prejudiced his ability to defend the action. The lower court granted the doctor’s summary judgment because the plaintiff failed to counter the motion with expert affidavits sufficient to create issues of fact. The plaintiff then brought this action against the law firm to recover damages for legal malpractice for failing to properly defend her against the summary judgment motion in the medical malpractice action.  The law firm argued that because it was not responsible for the loss of the mammogram film, which occurred before it was retained, its negligence was not the proximate cause of the plaintiff’s damages. The law firm moved for a motion to dismiss for failure to state a claim. The lower court denied it and the law firm appealed.

Issue: Was the law firm negligent in its representation of the plaintiffs in a medical malpractice action?

Ruling: Yes. The court found that the motion was properly denied because the absence of the mammogram films did not require the conclusion that the plaintiff would be unable to establish the law firm’s negligence. Here the firm did not rebut the plaintiff’s claim that they were negligent in failing to obtain secondary evidence concerning the films.

Lesson: Even when a court’s determination in an underlying medical malpractice action may be read as holding that the plaintiff will be unable to establish the merits of the medical malpractice action, that determination should not be given collateral estoppel effect against the plaintiff when he or she has alleged that the determination in the underlying action was the result of his or her attorney’s negligence.

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Boone v. Bender, Supreme Court of New York, Appellate Division, June 22, 2010

Facts:  Defendant attorneys represented the plaintiff in a matrimonial action which ended in a settlement.  Subsequently, the plaintiff commenced this malpractice action alleging that defendants compromised their level of advocacy and coerced her into entering into the settlement.  The defendants moved for summary judgment dismissing the complaint, and the Supreme Court denied the motion.  Defendants appealed.

Issue:  Can Plaintiff pursue a malpractice action after consenting to a settlement in the underlying matter? 

Ruling:  No. 

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. 

Applying that standard to the instant case, however, the Court found that:

[T]he plaintiff was satisfied with the defendants' representation of her, that she had discussed the terms of the settlement with the defendants, that she understood that she would have the right to a trial if she did not wish to enter into the stipulation, that she had not been threatened or forced into entering into the stipulation, that she was entering into the stipulation voluntarily and of her own free will, that she had not taken any medications that would hamper her ability to understand the court proceedings, and that she had no additional questions for the defendants.

Accordingly, the Court concluded that plaintiff's subsequent "unhappiness" with the settlement did not rise to the level of legal malpractice.  Further, the Court found that the attorneys' reasonable exercise of judgment in pursuing settlement did not constitute malpractice, and the plaintiff's allegation that defendants did not pursue her claims "zealously" was mere speculation.

Lesson:  Conjecture, conclusory allegations of malpractice, and mere dissatisfaction concerning a settlement that was entered into voluntarily, do not constitute the necessary factual or legal basis upon which to pursue a subsequent action for professional negligence.

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Kahn v. Hart, 270 A.D.2d 231 (N.Y. App. Div. 2d Dep't 2000)

NY: Underlying loan transaction

Student Contributor: Melissa Goldberg

Facts: The Plaintiff commenced this action against Defendants alleging legal malpractice arising from representation on two loan transactions. The Plaintiff alleged that he did not learn until ten years later, after defaults on the loans, that Defendants failed to record two mortgages executed to secure the loans.

Issue: Was this action barred by the statute of limitations?

Result: the Plaintiff's claims of legal malpractice should have been dismissed as time-barred.
1) Pursuant to CPLR 214 (6), an action to recover damages for legal malpractice must be commenced within three years of the accrual of the claim;
2) A claim to recover damages for legal malpractice accrues when the malpractice is committed, not when it is discovered;
3) The legal malpractice complained of occurred more than three years before the commencement of this action, and the Statute of Limitations.

Lesson: This is a harsh rule for Plaintiffs. It does not matter when a Plaintiff learns of a potential legal malpractice action. It only matters when the malpractice occurs. 

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Middleton v. Kenny,286 A.D.2d 957;731 N.Y.S.2d 425 (4th Dept.2001)

NY:Underlying Personal Injury Action

Student Contributor: Natalie Resto

Facts: The plaintiff in the underlying action sued the architects, engineers and HVAC contractors for the alleged exposure to fumes and chemicals at their workplace. The appellate division dismissed the underlying action holding that the lower court abused its discretion in granting the plaintiff’s motion for an extension of time to file a note of issue after having been served with a 90-day demand pursuant to CPLR 3216. The defendant attorneys argued that the court erred in denying their cross motion seeking summary judgment because the plaintiff’s employer, not them, was the one responsible for the ventilation problem.

Issue: Did the attorneys submit evidence establishing as a matter of law that plaintiff would have been successful in the underlying action?

Ruling: No. The court found that the conflicting opinions of the experts presented issues of credibility to be determined by a trier of fact. The court held that the defendants were negligent in failing to respond to the 90-day demand and ordered a trial on the issues of proximate cause and damages.

Lesson: Even if the attorney can substantiate that someone else, here the employer, was liable for the plaintiff’s injuries, the attorneys still need to establish as a matter of law that the plaintiff would have been unsuccessful in the underlying action. 

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Pollicino v. Roemer & Featherstonhaugh, 277 A.D.2d 666; 716 N.Y.S.2d 416 (3rd Dept. 2000)

NY Underlying Personal Injury Action; Notice of Claim vs. municipality

Student Contributor: Natalie Resto

Facts: Plaintiff retained defendant law firm to represent him in a personal injury action against the New York City Transit Authority when he lost sight in his eye after a bus ran over a glass bottle causing a shard of glass to strike him in the eye. The notice of claim that the law firm actually served incorrectly listed the date of the accident, which was also repeated in the summons and complaint. About a month later the law firm amended the pleadings correcting the accident date but it made no motion to similarly amend the notice of claim until some three years after service of the erroneous notice of claim. The Transit Authority cross-moved to dismiss the complaint on the ground that the plaintiff’s notice of claim was defective and the action should be dismissed. The lower court denied the law firm’s motion to amend the notice of claim on the ground that the 4 ½-year delay in seeking to amend the notice of claim was prejudicial to the Transit Authority.
The plaintiff then commenced this malpractice suit against the law firm. The lower court granted the defendant law firm’s motion for summary judgment on the ground that the underlying decision holding that the plaintiff’s negligence action would have been dismissed regardless of the alleged malpractice, was entitled to preclusive effect. The plaintiff appealed.

Issue: Does collateral estoppel preclude the malpractice action?

Ruling: Here the court found that the lower court’s comment that the plaintiff’s action would have been dismissed was not entitled to preclusive effect because it was dicta and not necessary to resolve the issue. The court found that the law firm’s failure to serve a proper notice of claim was the error that required dismissal, and that the complaint was dismissed on that ground.

Lesson: To invoke the doctrine of collateral estoppel it must be shown that there is an identity of issue that has necessarily been decided in the prior litigation and which is decisive of the present action, and that the party sought to be estopped had a full and fair opportunity to contest the decision that is now claimed to be controlling.

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Estate of Nevelson v. Carro, Spanbock, Kaster et al. 259 A.D.2d 282; 686 N.Y.S.2d 404 (1st Dept.1999)

NY Underlying Estate Tax Matter

Student Contributor: Natalie Resto 

Facts: Plaintiff corporation was created upon the advice of defendant law firm for the purpose of organizing the financial affairs of Louise Nevelson, a deceased sculptor, and in an attempt to cause her artwork and the income from it to pass outside of her taxable estate. Nevelson’s son, who was also the executor of her estate, owned the corporation. This malpractice action arose after the IRS assessed millions of dollars in estate taxes against Nevelson’s estate and gift taxes against her son. After Nevelson’s death, the IRS determined that the corporation was a sham used to gift the decedent’s income and assets to her son, and that all the assets of the corporation should have been included in the sculptor’s gross estate. The plaintiffs claimed that the law firm never advised them of any risks of potential gift or estate tax liability that could arise based on the level of compensation that the corporation paid Nevelson.

Issue: Did the law firm depart from the requisite standard of care when they failed to adequately advise the plaintiffs that their failure to substantially compensate the decedent could result in adverse tax consequences under the plan that they recommended?

Ruling: Yes. The court found that here the defendants offered only conclusory, self-serving statements with no expert or other evidence that would establish that they did not depart from the requisite standard of care. The defendants had an obligation to do so. 

Lesson: The requirement that a plaintiff come forward with expert evidence on the professional’s duty of care may be dispensed with where ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service. Id. at 283; Kulak v. Nationwide Mut. Ins. Co., 40 NY2d 140, 148.

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Keller v. Loews Corp., 895 NYS 2d 376 (2nd Dept. 2010)

Facts:  In house counsel sued for religious discrimination after the termination of his employment.  The defendant counterclaimed for breach of fiduciary duty.  More specifically, the defendant alleged that counsel disclosed confidential information in his discrimination complaint.  The trial court dismissed the counterclaim on the ground that there is no fiduciary relationship between an employer and an at-will employee.

Issue:  Does in house counsel owe any fiduciary upon the termination of his at-will employment? 

Ruling:  Yes.

[A] lawyer, as one in a confidential relationship and as any fiduciary, is charged with a high degree of undivided loyalty to his client.  Indeed, the duty to preserve client confidences and secrets continues even after representation ends.  Thus, we conclude that an in-house attorney, his status as an at-will employee notwithstanding, owes his employer client a fiduciary duty.

Lesson:  In house counsel owes his client a fiduciary duty irrespective of his status as an "at-will employee".  The fiduciary duty continues even after termination of counsel's employment.

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Liberty Associates v. Etkin, 2010 NY Slip Op 225 (2nd Dept. Jan. 10, 2010)

Facts:  In March, 2002, the plaintiff, Liberty Associates, commenced an action to recover damages for legal malpractice against their former attorney. In January, 2003, the attorney's firm commenced an action against Liberty Associates in the Superior Court of New Jersey to recover fees for the legal services rendered. In 2004, during the pendency of the malpractice action, Liberty Associates and the attorney's firm settled the New Jersey fee dispute action, which was dismissed with prejudice. Upon learning of the settlement, the attorney moved for summary judgment dismissing the complaint in the malpractice action. The Supreme Court granted the attorney's motion.

Issue: Was Liberty Associates' pending malpractice claim against its former attorney barred by the doctrine of res judicata because of the dismissal of a separate action by the former attorney's firm to collect attorney's fees?

Ruling:  Yes.  

[T]he plaintiff's claim is barred by the doctrine of res judicata, which "precludes a party from litigating a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. A valid final judgment bars future actions between the same parties on the same cause of action, which includes "all other claims arising out of the same transaction or series of transactions . . . even if based upon different theories or if seeking a different remedy."

The Court further noted that a stipulation of discontinuance with prejudice without reservation of right or limitation of the claims disposed of is entitled to preclusive effect under the doctrine of res judicata.

Lesson:  Dismissal of one action involving the underlying matter, without an adequate reservation of rights, will preclude the client from pursing malpractice claims as to the same matter in a separately filed action. 

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Alaimo v. McGeorge, 893 N.Y.S.2d 331 (3rd Dept. 2010)

Underlying Personal Injury Action

Facts:  Plaintiffs initiated a pro-se personal injury action in 1999.  In May, 2004, Plaintiffs retained the defendant attorneys to prosecute their claims.  Approximately one month later, Plaintiffs' action was struck for failure to present a medical expert.  Plaintiffs were given one year to restore the case, but failed to timely comply.  Defendants subsequently refunded the retainer and terminated representation. 

Shortly thereafter, Plaintiffs moved to restore their complaint pro-se.  The Supreme Court denied the motion and dismissed the case with prejudice for failure to present a reasonable excuse for not refiling the personal injury action within the one year time limit.  The Court further noted that the reports from Plaintiffs' medical providers with the motion to reinstate "failed to establish any causal connection between any allegedly improper conduct [and the injuries complained of]."

Plaintiffs subsequently sued the defendant attorneys for legal malpractice.

Issue:  Is Plaintiffs' legal malpractice action barred by the doctrine of collateral estoppel, since the Court had already made a determination as to the Plaintiffs' inability to succeed in the underlying personal injury matter?  Did Plaintiffs state a cause of action for legal malpractice in light of the Supreme Court's finding that they failed to establish proximate cause?

Ruling:  Plaintiffs stated a cause of action for legal malpractice and the doctrine of collateral estoppel did not apply. 

The Appellate Division explained the elements of collateral estoppel:

• An identical issue decided in the prior action that is decisive of the instant action; and
• The party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior determination.

The Court ruled that collateral estoppel did not apply, since Plaintiffs' motion to reinstate the case required a showing of merit sufficient to establish a triable issue of fact, and that in that setting conclusory allegations are insufficient.  In contrast, on defendants' motion to dismiss, even conclusory allegations with respect to the medical evidence are deemed to be true.  Accordingly, defendants failed to establish that the showing of proximate cause as to Plaintiffs' alleged injuries was identical in the underlying action and the malpractice action.

Similarly, although the medical evidence may not have been sufficient for purposes of the motion to reinstate the underlying matter, it was entitled to the benefit of every reasonable inference on a motion to dismiss for failure to state a claim.   

Lesson:  Where the plaintiff's burden of proof is heavier in the underlying action than in a preliminary motion in the malpractice action, plaintiff's claims will not be barred based upon its failure to meet a heavier burden in the underlying matter.  

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Mamorella v. Derkasch, 716 N.Y.S.2d 211(2000).

NY: Underlying employment law

Student Contributor: Jason Zemsky

Facts: Plaintiff Mamorella was appointed to a three-year probationary appointment as principal of the Auburn West Middle School. One year into her employment the Superintendent of Schools sent plaintiff a letter notifying her of his intention to terminate her probationary appointment. Plaintiff contacted Empire State Supervisors and Administrators Association (ESSAA), an association of local bargaining units of public school administrators and supervisors across the State, which represents the bargaining unit to which plaintiff belonged to represent her. Derkasch was assigned to her case and filed a grievance against the school, which was denied. The plaintiff commenced the instant action against Derkasch for legal malpractice and against ESSAA for the negligence of Derkasch under the doctrine of respondeat superior, based upon the alleged status of Derkasch as an employee of ESSAA. The court dismissed the plaintiff’s claims finding that Derkasch was an independent contractor and that ESSAA cannot be held liable for negligent acts of an independent contractor. The plaintiff appealed.

Issue: Can an attorney who performs services on behalf of a union be held liable to individual members of the union where the services at issue constitute a part of the collective bargaining process?

Ruling: No. the plaintiff's legal malpractice claim is preempted by Federal labor law, and that attorneys who perform services for and on behalf of a union may not be held liable for malpractice to individuals where the services performed constitute part of the collective bargaining process.

Lesson: An attorney who is handling a labor grievance on behalf of a union as part of the collective bargaining process has not entered into an ‘attorney-client’ relationship in the ordinary sense with the particular union member who is asserting the underlying grievance.
 

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Proskauer Rose Goetz & Mendelsohn LLP v. Munao, 270 A.D.2d 150 (N.Y. App. Div. 1st Dep't 2000)

NY Underlying business transaction

Student Contributor: Melissa Goldberg

Facts: In April 1991, Plaintiff allegedly gave Defendants negligent advice that they could shelter income through a certain joint venture. Plaintiff filed a summons with notice in October 1996, and served a complaint in December 1996, to which Defendants responded, in January 1997, with an answer containing counterclaims alleging the negligent advice. October 8, 1996 therefore marks the timeliness of the claims.

Issue: Which Statute of Limitations applied to this cause of action?

Result: Claims subject to six-year statute of limitations. The newly enacted three years statute does not bar it.

“While amended CPLR 214 (6), which reduced what would have been a six-year Statute of Limitations in this case to three years, applies to claims, such as these, interposed after its effective date of September 4, 1996, due process requires that such claims be entertained if brought within a reasonable time after September 4, 1996--clearly the case here, where the claims were presumably interposed only one month, and actually interposed only four months, after September 4, 1996.” 

Lesson: The Statute of Limitations in New York is now three years. 

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 Oster v. Kirschner, et al 2010 NY Slip Op. 05981 (App Div, 1st Dept. 7-6-2010)

NY: Underlying Private  investment

FACTS: A NJ law firm, Lum, Danzis, Drasco & Positan,LLC lost its bid to stay out of a NY law suit brought by investors in a private investment  plan named Cobalt,  which turned out to be a Ponzi scheme  operated by a convicted felon with the help of an admitted criminal with numerous convictions for securities violations and  who was banned from the securities industry.  Investors lost over $22 million. As Cobalt's attorneys,  the law firm is accused of preparing the private placement memorandum  (PPM) which failed to disclose the criminal histories  of the investment's managers, although the Firm's attorneys were aware of it.  Also, the PPM allegedly contained other affirmative misrepresentations to which plaintiffs pointed in their "aiding and abetting" , fraud and breach of fiduciary duty Complaint. The Law Firm also served as the  escrow agent for the investment transactions. The Law Firm "did not seriously dispute that they had knowledge of [their clients'] criminal backgrounds." It just claimed that knowledge and the knowledge of misrepresentations in the PPMs--"the admitted vehicle by which investment in the Ponzi scheme was carried out--does not sufficiently allege actual knowledge..."

ISSUE: Does the Complaint adequately plead fraud, or should the trial court's dismissal of the Complaint be reversed?

HELD: Order dismissing Complaint reversed. Complaint re-instsated.

1. A plaintiff alleging an aiding and abetting fraud claim must allege the existence of he underlying fraud, actual knowledge and substantial assistance.  Actual knowledge of fraud can be "discerned from surrounding circumstances."

2. The Law Firm's preparation of the PPM, including, significantly, a backdated amendment to it that showed the investment managers criminal past which it had not previously disclosed, constitutes "substantial assistance."

The PPMs authored by defendant attorneys were the means by which the Cobalt...entities were able to solicit funds for ...[the] Ponzi scheme. The PPM is the very mechanism by which investments such as Cobalt are placed in the marketplace, and the admitted "but for" cause of plaintiff's investment losses. Yet defendants assert that "loss causation" is lacking because it has not been adequately pleaded that defendant attorneys had actual knowledge that their clients--whom they admittedly knew to be criminals, banned from the securities industry for engaging in fraudulent investment schemes--would operate...Cobalt...as a Ponzi scheme. If the facts and circumstances herein do not support an inference of actual knowledge, then it is doubtful that any action for aiding-and-abetting fraud could be sustained against any attorney, who, like defendant attorneys, consciously chose to look the other way when their clients asked them to prepare the PPM...To say that defendant attorneys merely furnished legal services to help solicit investments in...Cobalt..., and did not have knowledge of the fraud they helped perpetrate...[is] simply not tenable. The Court cannot and will not endorse what is essentially a "see no evil, hear no evil" approach. 

LESSON:  Is the NY Court expanding the duty of vigilance of the lawyer regarding disclosure of information that non-clients should be entitled to know?  Will there be an appeal from this ruling? Let's wait and see. 

For an interesting NJ case involving a different NJ law firm also involved in composing a "defective" PPM, see Profit Sharing Trust v. Lampf Lipkind, 630 A.2d 1191 (1993).

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Estate of Schneider v. Finmann, Court of Appeals of New York, June 17, 2010

Facts: The defendant attorney represented decedent Saul Schneider from April 2000 to his death in October 2006. In April 2000, the decedent purchased a $1 million life insurance policy. Over several years, he transferred ownership of that property from himself to an entity of which he was principal owner, then to another entity of which he was principal owner and then, in 2005, back to himself. At his death in October 2006, the proceeds of the insurance policy were included as part of his gross taxable estate.

The decedent's estate commenced this malpractice action in 2007, alleging that defendant negligently advised the decedent to transfer, or failed to advise the decedent not to transfer, the policy which resulted in an increased estate tax liability.

The New York Supreme Court granted defendant's motion to dismiss the complaint for failure to state a cause of action. The Appellate Division affirmed, holding that, in the absence of privity, an estate may not maintain an action for legal malpractice. The estate appealed.

Issue: Whether the estate can hold the decedent's estate planning attorney liable for damages resulting from negligent representation that causes enhanced estate tax liability?

Ruling: Yes.

Privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the estate planning attorney. We agree with the Texas Supreme Court that the estate essentially stands in the shoes of a decedent and, therefore, has the capacity to maintain the malpractice claim on the estate's behalf. The personal representative of an estate should not be prevented from raising a negligent estate planning claim against the attorney who caused harm to the estate. The attorney estate planner surely knows that minimizing the tax burden of the estate is one of the central tasks entrusted to the professional.

The Court did note, however, that strict privity remains a bar against beneficiaries' and other third-party individuals' estate planning malpractice claims absent fraud or other circumstances, since such claims would lead to "uncertainty and limitless liability".

Lesson: Privity is not a bar to an estate's legal malpractice lawsuit against the decedent's purportedly negligent attorney.

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Benaquista v. Burke, Supreme Court of New York, Appellate Division, Third Department, June 10, 2010

Facts: Plaintiff and his mother co-owned various corporations and the Defendant attorney represented the corporation in various matters. In December 2002, Plaintiff's mother and corporate entities commenced a suit against Plaintiff for misappropriation of corporate funds. Defendant represented the mother and corporate entities against the Plaintiff in this underlying litigation. Plaintiff subsequently commenced this legal malpractice action alleging that he had utilized the Defendant's services concerning business issues with his mother, and in doing so, had revealed confidential information. Plaintiff further alleged that he had suffered damages as a result of the Defendant's decision to utilize the confidential information to institute the underlying lawsuit.
Defendant moved for summary judgment prior to the end of discovery, and argued that Plaintiff's complaint failed to state a cause of action for legal malpractice.

Issue: Is summary judgment for failure to state a claim appropriate in legal malpractice actions prior to the close of discovery?

Ruling: Yes. Defendant met this burden by proffering a sworn affidavit, alleging that his firm had represented plaintiff's mother and the corporations prior to his representation of plaintiff — which consisted only of the incorporation of a business owned by plaintiff — and that no conflict of interest existed. In addition, the plaintiff's bill of particulars failed to specifically identify any personal or confidential information used by the defendant against plaintiff or any damages suffered by plaintiff. Plaintiff's only opposition to defendant's cross motion was an attorney affirmation and various documents which consisted primarily of billing records:

Inasmuch as plaintiff failed to proffer any sworn allegations of an individual with personal knowledge of the relevant facts and the documents submitted were not in admissible form, his opposition was insufficient to sustain his burden of raising a triable issue of fact to defeat defendant's entitlement to judgment as a matter of law.

Accordingly, Supreme Court of New York, Appellate Division, affirmed the trial court's summary judgment dismissing Plaintiff's legal malpractice complaint.

Lesson: In New York, a plaintiff will not be able to defeat a motion for summary judgment, or obtain discovery on a claim for legal malpractice, without pointing to a concrete issue of fact that remains undecided after consideration of the parties' affidavits and other documentary evidence.

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Yousian v. Eisenberg, 34 A.D.3d 228 (2006)

NY Underlying Medical Malpractice Action

Student Contributor: Ally Shuster

Facts: Plaintiff went to hospital complaining of gastrointestinal pain. Over the next few months, Plaintiff underwent a series of tests in order to diagnose his condition. He underwent a sonogram, the results of which showed that he had stones in his gallbladder. Subsequently, he underwent surgery and was left with debilitating pain that he alleges to be a result of the surgery. Plaintiff retained Defendants and sued for medical malpractice. The Defendant attorneys failed to timely re-calendar the case, which is the  basis for this legal malpractice claim.

Issue: Is there a valid legal malpractice claim?

Ruling: No. There is no issue of fact as to whether the treatment Plaintiff received at the Hospital constituted medical malpractice.

Lesson: In order to win a legal malpractice claim, a Plaintiff MUST prove that he could win the underlying case. Although it was troubling that Defendant attorneys failed to timely re-calendar the case, Plaintiff did not prove that he would have been successful in the underlying case but for the Defendant attorneys’ negligence.

“In order to prevail in a legal malpractice suit, the clients must prove that their former attorneys were negligent and that they could have prevailed and recovered a judgment but for that negligence.” Tanel v. Kreitzer & Vogelman, 293 A.D.2d 420
 

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Leder v. Spiegel  31 AD3d 266, aff'd 9 N.Y.3d 836, 872 N.E.2d 1194 N.Y., 2007

NY Underlying probate

Student Contributor: Ryan O'Donnell

Facts: Defendant represented plaintiff in an underlying probate matter. Rather than accept a settlement offer, plaintiff decided to continue at trial, where they were unsuccessful in challenging the will. The plaintiff bases his malpractice claim on defendant’s advice on the prospect of success in the underlying case, and that he would have accepted the settlement were it not for his attorney’s advice. There was no documentary evidence that shows that plaintiff refused to settle strictly based on defendant’s advice.

Issue: Is an attorney liable for legal malpractice if he was not the proximate cause of the client’s damages, even if he negligently represented his client?

Ruling: No.

"In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence"

The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent. Since there was no evidence that the defendant’s advice was the sole basis for refusing the settlement, the defendant was not the proximate cause of the plaintiff’s loss, the defendant attorney was not liable for malpractice.

The Lesson: Even an attorney who negligently represents his client will not be liable for malpractice if he is not the “but for” cause of the client’s damages. To establish liability based on the loss of a settlement opportunity, the plaintiff must prove that but for the attorney’s negligence he would have accepted the settlement offer. A court will not rely on bare allegations of fact by a plaintiff without documentary evidence to prove proximate cause.

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Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (A.D. 3 Dept., 2008).

NY: Litigation, Duty to Investigate

Student Contributor: Ryan O'Donnell

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client.

The Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry. 

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Erdman v. Dell 50 A.D.3d 627, 854 N.Y.S.2d 755 N.Y.A.D. 2 Dept., 2008.

NY Undelrying personal injury; worksite accident; scaffolding

Student Contributor: Ryan O'Donnell

Facts: Client filed a legal malpractice suit against attorney arising out of the attorney’s representation of client in an underlying NY Labor Law  § 240 (1) action. Plaintiff was injured while working on a scaffold doing pipe work in a building at 100 Broadway. Defendant’s mistaken brought an action against the owners of the building at 100 Pine street. By the time the mistake was realized, the statute of limitations had already expired. There was some questions as to whether the plaintiff had followed certain safety precautions that may have helped avoid the accident, and whether plaintiff had secured safety locks on the wheels of the scaffolding that may have prevented the accident.

Issue: Is an attorney liable for malpractice if he is not the proximate cause of the plaintiff’s damages, even if the attorney negligently allowed for the statute of limitations to expire?

Ruling: No. "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 the plaintiff to sustain actual and ascertainable damages" An attorney is not liable for damages to his client if he was not the proximate cause of those damages. Since there were questionable issues of fact as to what the proximate cause of the accident was, the defendant’s conduct was not a proximate cause of plaintiff’s damages.

Lesson: Summary judgment for legal malpractice liability is precluded if there is a genuine issue of material facts of proximate cause in the underlying action. But  even if an attorney fails to name a proper party as a defendant and the  statute of limitations expires, the  attorney is not liable for malpractice if a plaintiff can not prove that but for the attorney’s failure to file a timely suit the client would have succeeded in the underlying cause of action.

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In re Estate of Remsen, 99 Misc. 2d 92 (N.Y. Sur. Ct. 1979)

NY Underlying Will Transaction

Student Contributor: Melissa Goldberg

Facts: Decedent died leaving a last will and testament in which she distributed her residuary estate in equal shares to her two sisters, the Plaintiffs and to eight nieces and nephews and one relative by marriage. Plaintiffs retained an attorney whose firm had represented the decedent's family for a long period. His duties were to represent them in the administration of this estate, including probate of decedent's will, preparing and filing tax proceedings and terminating the estate by formal or informal means, depending upon the agreement of the parties. For more than eight months, no action was taken to probate the decedent's will. The present proceeding to determine the fee of the former attorney, after his dismissal by Plaintiffs as their attorney, when he apparently refused or was otherwise unable to represent them at the scheduled title closing in the sale of the decedent's residence. Plaintiffs claimed that their former attorney unduly delayed the probate of the decedent's will, delayed the payment of the funeral expenses and other debts, and taxes and caused the loss of interest income.

Issue: Were the Plaintiffs correct in raising the issue of their former attorney’s ability to provide prompt legal services in a proceeded to fix and determine attorney fees within Surrogate’s Court?

The Result: Plaintiffs of an estate acted properly in raising the issue of their former attorney's inability to provide prompt legal services in a proceeding to fix and determine the attorney's fees as their failure to raise the issue at this proceeding might bar a subsequent malpractice claim.

The Lesson: The jurisdiction of the Surrogate’s Court is not so limited that it cannot determine the issues of malpractice of an attorney whose services and competence are relied upon by a lay fiduciary in the administration of an estate.

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Montes v. Rosenzweig, 21 A.D.3d 460, 800 N.Y.S.2d 444 (N.Y. App. Div. 2005)

NY Underlying Litigation: Wrongful Death and Negligence

Student Contributor: John Anzalone

Facts: Decedent retained Defendant Attorney to represent her in her claim against a building owner after she was injured by a faulty elevator. Decedent shortly thereafter died from complications from her injuries before an action was commenced against the building owner. Defendant brought suit on her estate's behalf, but failed to get letters of administration. Consequently, the suit was dismissed for lack of standing. After failing in his attempts to obtain letters of administration, Defendant told Plaintiffs that he was withdrawing and that the action had been dismissed. However, Defendant continued to represent the Plaintiffs in their attempts to get letters of administration so that they could sue the building owner. Defendant later told Plaintiffs that a suit against the building owner had become practically impossible to maintain because the statute of limitations that had run several years earlier. Plaintiffs sued Defendant Attorney. The case was dismissed based on time bar and failure to state a cause of action.

Issue: Was the statute of limitations tolled by the "continuous representation doctrine?"

The Ruling: In reversing the lower court, the Appellate Division held that the "continuous representation doctrine" tolled the statute of limitations, based on the following considerations:
1) The "continuous representation doctrine" tolls the three year statue of limitations doctrine period in the matter in which the alleged malpractice occurred.
2) The doctrine is triggered when there is a "continuing attorney-client relationship" after the malpractice occurs.
3) Here, the defendant continued to represent the Plaintiffs after first failing to obtains letters of administration to bring the negligence and wrongful death suits,
4) The alleged malpractice occurred because Defendant failed to obtain letters of administration before both statue of limitations expired.
5) After the malpractice occurred, Defendant allegedly led the plaintiffs to believe that a suit could still be filed against building owner if the letters of administration were obtained.
6) The Defendant did not inform the plaintiffs until well after the statute of limitations against the attorney had run that it was practically impossible from the Plaintiffs to sue the building owner.

The Lesson: Although the statute of limitations may have run for a malpractice claim against an attorney, that period may be tolled if the Attorney continually represents the plaintiff during the period after the cause of action accrues.
 

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Boomer v. Gross, 34 A.D.3d 1096, 825 N.Y.S.2d 171 (N.Y. App. Div. 2006)

NY Underlying Criminal Defense

Student Contributor: John Anzalone

Facts: Defendant attorney was paid by Plaintiff's stepfather to help file a motion on behalf of criminal defendant Plaintiff. Defendant concluded that the motion he was asked to help file would be frivolous and offered to refund "some or all" of the payments made to him. Plaintiff was convicted of several crimes including attempted murder. Plaintiff' brought a legal malpractice suit against Defendant that was dismissed.

Issue: Can the Plaintiff sue an Attorney who did not represent him at trial for legal malpractice in a criminal case if his conviction has not been overturned?

The Ruling: In affirming the lower courts grant of summary judgment for Defendant, the Court held that Plaintiff could not sue the attorney, based on the following considerations:
1) It is a "well-settled principle" that criminal defendants cannot sue attorneys for legal malpractice in their criminal cases if they were found guilty and that determination was not subsequently disturbed.
2) This principle is applicable to attorneys who represent the defendants at the criminal trial and those that represent the defendants solely outside of the court room.

The Lesson: The undisturbed determination of the plaintiff's guilt is a complete defense to a claim for legal malpractice in a criminal case. These plaintiffs cannot sue their attorneys for malpractice. This applies to all attorneys who do work for criminal defendants and is not limited to their trial attorneys.
 

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Waggoner v. Caruso, 2009 NY Slip Op 6739 (1st Dept. Sep. 29, 2009)

Underlying Commerical Matter

Facts:  Plaintiff Waggoner retained Attorney Caruso to trace and attach the assets of Suisse Security Bank and Trust ("SSBT") and British Trade and Commerce Bank ("BTBC") in an effort to recover $10 million.  Caruso attached SSBT's property to the extent of $3 million.  He asked Waggoner, however, to sign an affidavit stating that he had recovered approximately $7.7 million.  In the meantime, BTBC's chairman, Rodolfo Requena, pleaded guilty to federal money laundering charges and Caruso, allegedly, agreed to represent Requena without disclosure to Waggoner.  Waggoner subsequently filed a suit for legal malpractice, fraud, breach of fiduciary duty, fraud, and conspiracy to commit fraud against Caruso, his firm, and his previous employer, Pillsbury Winthrop ("Pillsbury").        

Pillsbury argued that Waggoner's claim for legal malpractice was time-barred, since their representation had terminated more than three years prior to the date the malpractice suit was instituted.

Issue:  Can a former client bring a suit for malpractice against a firm more than three years after the firm's representation has been terminated, in the event the client continues to be represented in the same matter by an attorney previously employed at the firm? 

Ruling:  Yes.  In New York, a legal malpractice action must be commenced within three years of accrual.  Accrual occurs when the malpractice is committed. A client, however, "cannot be expected to jeopardize a pending case or relationship with an attorney during the period that the attorney continues to handle the case".  Since "an attorney-client relationship would certainly be jeopardized by a client's allegation that his or her attorney committed malpractice", the statute is tolled as to a malpractice claim against a law firm where the attorney who handled the case continues to represent the client in the same matter. 

Lesson:  Under the "doctrine of continuous representation", the statute of limitations is tolled while representation on the same matter is ongoing by the same attorney at a new law firm.

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Steinberg v. Schnapp, 2010 NY Slip Op 02991 (1st Dept. April 13, 2010)

Underlying Probate Matter

Facts: Steinberg and Schnapp, both attorneys practicing independently, undertook the representation of another attorney, Borstein. Borstein had retained Steinberg and Schnapp to represent him with respect to “all legal proceedings and asset administration concerning the wills, assets and estate of the late Isi Fischzang”. More specifically, Borstein’s retainer agreement provided that Steinberg was “the general counsel…with respect to all litigation proceedings concerning the wills, assets, and estate”.

Soon after the commencement of the representation, however, Steinberg instituted an action against Schnapp for quantum meruit and interference with an advantageous economic relationship. Essentially, Steinberg alleged that Schnapp fired him to shift the blame for delays in the probate action that upset Borstein.

Issue: Where two attorneys are retained by an executor, one as trial counsel and the other as “Of Counsel”, should “Of Counsel” be permitted to seek his fees from trial counsel?

Ruling: No. The Court resorted to principles of contract law to resolve Steinberg’s claim, and held that the written documents evidenced that Steinberg’s client was the estate, not Schnapp:

In this case Steinberg has sought to recover compensation for his services from a party who did not have any obligation to compensate him – his co-counsel – with whom he was clearly not in privity. There is not even a suggestion that the estate is an undisclosed principal, in which case liability might attach to Schnapp, under time-honored principles.

The Court further held that Steinberg’s claims would fail in any event, since “[a]s a general rule, where there is a contractual relationship between a lawyer and client, the client has the right to terminate the attorney-client relationship at any time with or without cause”:

At best, Steinberg is suggesting that Schnapp made an inaccurate statement about the quality of Steinberg’s work, which statement led Borstein to terminate the attorney relation, a relationship that is terminable at will, in any event. Such statements would be neither tortious nor criminal.

Lesson: An attorney cannot seek compensation for services rendered from co-counsel, even where co-counsel’s representations allegedly led the client to terminate the representation. A client can terminate the attorney-client relationship at will. The attorney can seek to recover compensation for his services only from his former client.

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Sayeh v. 66 Madison Ave. Apt. Corp., 2010 NY Slip Op 03844 (1st Dept. May 6, 2010)

Underlying Commercial Transaction

Facts: Plaintiff, an owner of seven apartments in a coop, sought to purchase an eighth unit. Plaintiff’s application to purchase the eight unit was disapproved by the coop board members, despite an exclusion in the proprietary lease for a stockholder-to-stockholder exemption from the requirements of board approval for assignment of shares. Plaintiff, subsequently, commenced an action for legal malpractice and intentional tort against the coop’s attorney, Silberman.

Issue: Was Silberman liable to Sayeh for alleged damages sustained by the coop’s wrongful disapproval of his application to purchase an additional unit?

Ruling: No. The Court dismissed Sayeh’s claim for legal malpractice against Silberman, since “there [was] no evidence of privity or near privity to support the imposition of [such] a claim”. The Court also dismissed the claim for intentional tort, since there was no evidence of “collusion, malice, or fraud to warrant the imposition of liability”.

Lesson: An attorney will not be held liable to a third-party with whom he has no attorney-client relationship, nor any reason to suspect that the third-party is relying on him for advice.

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Ryan v. Powers & Santola, LLP, 2010 NY Slip Op 03827 (3^rd Dept. May 6, 2010)

Underlying Personal Injury Action

Facts:  Plaintiff Ryan was struck on the head by highchair while dining at a restaurant.  He then retained Powers & Santola to represent him in a negligence action against the restaurant. 

In response to the defendants’ motion to compel production of a verified bill of particulars and responses to outstanding discovery demands, the trial court issued an order in the underlying action providing that the matter would be dismissed if Ryan failed to provide the outstanding discovery.  Although Ryan eventually served discovery responses, a number of responses required more specific answers.  The trial court, thereafter, extended the discovery schedule twice with a conditional order that the action would be dismissed if plaintiff continued to fail to provide responses.  Ryan failed to comply and the matter was in fact dismissed. 

Subsequently, Ryan commenced a legal malpractice action against Powers & Santola for “failing to follow court orders…consenting to conditional orders…and failing to move to vacate the dismissal order”.  Ryan moved for partial summary judgment on the issue of liability. 

Issue:  Is Ryan’s alleged failure to cooperate with counsel in preparing discovery responses a viable defense to his action for legal malpractice?

Ruling:  Yes.  The Court held that:

A claim of legal malpractice will be sustained if the plaintiff establishes…that [he] would have succeeded on the merits of the underlying action but for the attorney’s negligence…We agree…that the plaintiff’s conclusory assertions – that ‘but for’ defendants’ alleged negligence, they ‘would have been able to prosecute all causes of action to a successful outcome’ – failed to establish their prima facie entitlement to summary judgment…There are questions of fact as to whether plaintiff failed to cooperate with defendants in providing them with information and documents necessary for motion practice after the underlying action was dismissed.

Lesson: A former client’s failure to cooperate is a question of fact in assessing the liability of the attorney in a malpractice action.  Failure to cooperate, more likely than not, would prevent plaintiff from establishing that “but for” his former counsel’s malpractice, he would have prevailed in the underlying action.   

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Wright v. Meyers & Spencer, LLP, 849 N.Y.S.2d 274 (N.Y. App. Div. 2d Dep't 2007)

NY Underlying Bankruptcy Action

Student Contributor: Melissa Goldberg

Facts: This is an action for legal malpractice arising out of Defendants' representation of Plaintiff in a bankruptcy proceeding. Plaintiff alleges in the verified complaint that he made a transfer to his “daughter” Plaintiff and this disclosed in the bankruptcy petition. The bankruptcy trustee brought an adversarial proceeding alleging that the transfer was fraudulent because it was made within one year of the filing of the bankruptcy proceeding. Plaintiff claimed that the Defendants should have advised Plaintiff to delay filing for bankruptcy until one year after the transfer was made to avoid the adversarial proceeding.

Issue: Does the Plaintiff have standing to file this suit against the Defendants?

Result: No, the Plaintiff did not have standing because
• Any legal malpractice cause of action necessarily accrued prior to the filing of the Plaintiff's bankruptcy petition so,
• Upon commencement of the Plaintiff's bankruptcy proceeding, the malpractice cause of action became "property of the estate" pursuant to the Bankruptcy Code.

Lesson: In a Bankruptcy action, any cause of action that arises prior to a bankruptcy proceeding beginning is property of the estate and not the individual. Only a person with standing can sue.

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Birnbaum v. Misiano, 52 A.D.3d 632, 861 N.Y.S.2d 711

NY: Underlying loan; uncollectiblility

Student Contributor: Michael H. Park

Facts: Attorney represented plaintiff in a series of loans made to a third party whom the attorney knew socially. The third party provided watches as collateral on the loans. At no time over the course of the 21 months in which the loans were issued did the attorney recommend that plaintiff get an appraisal as to the value of the watches. Eventually, it was discovered that the watches were worthless, and the plaintiff brought a legal malpractice action against the attorney for failing to ensure that the loans were adequately collateralized. The attorney moved to dismiss on the grounds that the plaintiff failed to prove that the attorney's actions were the proximate cause of his damages because the plaintiff could not show that a judgment was obtained against the third party that could not be collected. The trial court dismissed the complaint and the plaintiff appealed.

Issue: Does the lack of an uncollectable judgment against a party in an underlying action preclude a plaintiff from going after their attorney for legal malpractice?

Ruling: No. In reversing the Supreme Court, Nassau County, the Appellate Division, Second Department held that the complaint was improperly dismissed for the following reasons:
1) The burden of the plaintiff is to show that the attorney did not “exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the attorney's breach of that duty proximately caused the plaintiff to sustain actual and ascertainable damages”.
2) There is nothing to suggest that because the plaintiff has not pursued an action against the third party to whom money was loaned and that a judgment obtained against the third party would be uncollectable, Plaintiff will be unable to prove that the attorney's conduct was the proximate cause of their damages.

Lesson: Even if a plaintiff does not pursue a cause of action against the party in the underlying action, they can still bring a legal malpractice claim against the attorney who represented them. Just because there exists the possibility of recovering money against another party does not eliminate the attorney as a proximate cause of the plaintiff's damages.

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Rechberger v. Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 A.D.3d 1453, 848 N.Y.S.2d 459 (2007)

NY: Business losses allegedly attributed to malpractice.

Student Contributor: Michael Park

Facts: Plaintiff was a shareholder in a corporation represented by an attorney. Through the course of business, the plaintiff lost money in his investment in the corporation. The plaintiff then brought a legal malpractice suit against attorney alleging that the attorney's conduct was the cause of the investment loss. The attorney moved to dismiss the complaint on the grounds of no attorney-client relationship and the trial court denied the motion. The attorney then appealed.

Issue: Did the trial court err in denying the motion to dismiss for lack of attorney-client relationship?

Ruling: Yes. In reversing the ruling by the Supreme Court, Wyoming County, the Appellate Division, Fourth Department held for the attorney for the following reasons:
1) An individual’s belief that he had an attorney-client relationship with a lawyer does not necessarily “confer upon him the status of a client”. In a legal malpractice action, an attorney-client relationship must be established.
2) Furthermore, while the plaintiff was a shareholder in the corporation represented by attorney this does not necessarily mean they had an attorney-client relationship. The plaintiff failed to produce documentary evidence that the relationship with the attorney rose to the level of an attorney-client relationship.

Lesson: A shareholder in a corporation does not necessarily enjoy an attorney-client relationship with a lawyer who represents that corporation because that person is a shareholder. Furthermore, more than a mere belief by the client that they have an attorney-client relationship with a lawyer is needed to prove the existence of that relationship.

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Nelson v. Kalathara, 48 A.D.3d 528, 853 N.Y.S.2d 89 (2008)

NY: Underlying litigation, privity. 

Student Contributor: Michael Park

Facts: An incapacitated person had a guardian assigned to them and their property. The plaintiff, who happened to be the previous guardian’s brother, eventually replaced the guardian. However, the previous guardian entered into a contract to sell property belonging to the incapacitated person and retained an attorney to represent him. The purchaser also retained an attorney and the sale went through successfully. However, the plaintiff discovered the sale and brought an action against the purchaser's attorney alleging that he committed legal malpractice in handling the real estate sale. The purchaser's attorney then made a motion to dismiss for lack of privity, which was denied by the trial court. The attorney then appealed.

Issue: Did the trial court properly rule that privity was not required between the purchaser's attorney and the plaintiff in the legal malpractice action?

Ruling: No. In reversing the ruling of the Supreme Court, Westchester County, the Appellate Division, Second Department held that the purchaser's attorney's motion was improperly denied for the following reason:

There is an exception to the privity rule required in legal malpractice actions. This exception states that if an attorney's behavior could be categorized as fraud, collusion, malicious acts, or other special circumstances, then no privity is required or simply a showing of near-privity is all that is required to link the attorney to the damaged party.

Lesson: A third party to an attorney's alleged legal malpractice does not need to establish privity if it can be established that the attorney's conduct constituted fraud, collusion, malicious acts, or other special circumstances. In the absence of those conditions, the third party must establish privity with the attorney to be able to bring a legal malpractice claim.

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Cobalt Multifamily Investors I, LLC v. Shapiro, 2009 WL 2058530 (S.D.N.Y. July 15, 2009)

Facts:  Receiver for the defunct Cobalt Multifamily Investors I, LLC entities (“Cobalt”) filed suit against three sets of attorneys and their law firms for malpractice, looting, aiding and abetting conversion, conversion, unjust enrichment, breach of fiduciary duty, and breach of contract.  

The defendants moved to dismiss for lack of standing under the Wagoner Rule and the Court granted their motion.  The Wagoner Rule provides that a bankrupt corporation, and by extension, an entity that stands in the corporation’s shoes, lacks standing to assert claims against third parties for defrauding the corporation where the third parties assisted corporate managers in committing the alleged fraud. The Court rejected the Receiver’s argument that the adverse interest exception applied and granted the motion to dismiss, holding that the managers’ misconduct provided at least some financial benefit to the Cobalt entities, and therefore, they did not totally abandon the interests of the corporation, and were not acting entirely for their own or another’s purpose.  The Receiver filed a Motion for Reconsideration.  

Issue:  Did the Receiver have standing to bring a professional malpractice claim against the law firm defendants on behalf of Cobalt?

Ruling:  The Receiver had standing to bring a malpractice suit on behalf of the defunct entity. 

Applicability of the Adverse Interest Exception to the Wagoner Rule:

In granting the Motion for Reconsideration, the Court rejected the notion that a benefit to the corporation from the wrongdoer’s conduct precludes application of the adverse interest exception, and instead held that a corporation’s manager can totally abandon a corporation’s interests even if the manager’s actions somehow benefit the corporation because the relevant inquiry is whether the manager intended to benefit the corporation. 

Under this standard, the Court agreed that the Receiver’s allegations supported the conclusion that Cobalt’s managers had the intent to totally abandon Cobalt’s interests by utilizing investor funds for their personal benefit.  

The Court rejected the attorneys’ argument that the adverse interest exception is inapplicable because the managers set up a corporation expressly for the purpose of defrauding outsiders and by doing exactly that, they actually furthered the corporation’s interests:

Implicit in this argument is the view that the interests of the corporation should be defined solely by considering the interests of the managers, and not by considering the interests of the shareholders as well. Law Firm Defendants offer no compelling legal support for this position. Moreover, this position runs contrary to basic principles of corporate law that take into account the interests of the shareholders when defining the interest of the corporation.

Applicability of the Sole Actor Rule to the Adverse Interest Exception:

The Law Firm Defendants argued that even if the adverse interest exception applied to the Wagoner Rule, the sole actor rule would still preclude the Receiver’s standing to bring claims against them. The sole actor rule is an exception to the adverse interest principle and applies where the principal and agent are one and the same. In such instances, the agent’s knowledge is imputed to the principal, unless the corporation had owners or managers who were innocent of the fraud. 

The Court held that the sole actor rule would not prevent the Receiver from pursing his claims against the Law Firm Defendants, since the corporation (the principal) had 300 innocent shareholders versus three fraudulent managers. More importantly, the shareholders had the authority to stop the fraud, and would have done so had they known about it.

The Law Firm Defendants argued that the managers dominated and controlled the corporation, and therefore, the sole actor rule must apply notwithstanding the innocent shareholders. The Court found no merit to this argument, however, since the managers of Cobalt did not have “complete control”, i.e. the shareholders had the authority to remove them.

Lesson:  A Receiver will be allowed to bring professional malpractice claims where he can establish the insiders' intent to benefit themselves at the expense of the corporation and its shareholders.

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Shaw v. Manufacturers Hanover Trust Co.,  68 N.Y.2d 172, 499 N.E.2d 864(App. Div.1986)

NY: Underlying  Personal Injury Action--Fee Dispute

Student Contributor: Candice L. Deaner

Facts: The Plaintiff brought a personal injury claim and retained the law firm  on a contingent fee basis. The agreement did not mention appeals. After the trial ended in a verdict for the defendant, the Plaintiff wanted to appeal. The law firm agreed, on the condition that Plaintiff advance the litigation expenses. Plaintiff refused and retained new counsel and eventually obtained an award of $1.5 million in the retrial. The original law firm then sought to collect on the award and the client objected.

Issue: Whether an attorney can collect on a contingency fee agreement when the terms of representation were not clearly stated?

Ruling: The New York State Court of Appeals denied the fee request.

1)  Retainer agreements should be clear on the scope of representation. The Court said,

"The importance of an attorney's clear agreement with a client as to the essential terms of representation cannot be overstated. The client should be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements.”

2) The contract should be viewed in a light most favorable to the client. The court held “Had the client maintained that the retainer agreement required respondent's representation through conclusion of the matter, that would have been the mandated interpretation. But here, the client has asserted that the contract terminated upon entry of an adverse judgment. We hold that the agreement must be construed so to provide."

3) The court found that the agreement only spoke of adjudicating the claim. Even if the contract applied to an appeal, the law firm breached the contract by insisting on an additional term for handling the appeal; namely, advancing  expenses. The retainer agreement only addressed the computation of the ultimate fee, it made no provision for expenses.

The Lesson: Retainer agreements should contain clear language stating the legal services to be provided. The attorney should be sure that the client understands the scope of the attorney’s representation.. Attorney’s can safeguard themselves by including any and all limitations in writing, so that there is no question as to what the scope of employment was from the beginning of the attorney/client relationship.

Note: From a malpractice viewpoint, a clear "scope of the engagement" clause is critical to protecting the lawyer from liability for services that are beyond the scope of the engagement.

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Rechberger v. Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 A.D.3d 1453, 848 N.Y.S.2d 459 (2007)

NY Underlying Commercial Transactions

Student Contributor: Maninder (Meena) Saini

Facts: Plaintiff (Rechberger) filed a lawsuit against defendant (law firm), alleging legal malpractice. Plaintiff was seeking damages for investment losses arising from the defendant’s malpractice. The plaintiff contended that defendant's representation of a corporation of which plaintiff was a shareholder establishes that defendant had an attorney-client relationship with plaintiff.

Issue: Does an attorney’s representation of a corporation establish an attorney-client relationship with its investors/shareholders?

Holding: The Appellate court held that the defendant lacked an attorney-client relationship with plaintiff. A “unilateral belief by parties that they had an attorney-client relationship with an attorney does not by itself confer upon them the status of clients,” for purpose of a legal malpractice action. The plaintiff’s complaint was dismissed.

Rule: A unilateral belief by one party that an attorney-client relationship exits is not dispositive of the actual existence of such a relationship. To succeed on an action for legal malpractice, a plaintiff must prove, among other things, the existence of an attorney-client relationship.

Lesson: This case illustrates the principal of privity between individuals, corporations and attorneys. An attorney is not liable to plaintiff for damages in a legal malpractice action unless the attorney and the plaintiff had a direct attorney-client relationship. In this case, the defendants met its burden by establishing that it had no attorney-client relationship with plaintiffs.

NOTE: See also, RPC 1.13 Organization as the Client, where the representation by a lawyer of an entity is separate and distinct from its members. That Rule applies, with few exceptions, to business entities and shareholders, partners or members.  

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Sash v. Schwartz,  2007 WL 30042 (S.D.N.Y. 2007).

N.Y. underlying criminal conviction

Student contributor: Cheryl Neuman

Facts: Plaintiff was represented by defendant attorney in a criminal proceeding. Plaintiff was arrested for unlawfully possessing and producing N.Y.P.D. badges and selling counterfeit police badges. He was also arrested for possession of counterfeit bar code stickers for merchandise at K-Mart stores. After appearing before the magistrate judge, plaintiff pled guilty to two counts. He was  sentenced to eight years of supervised release. The Second Circuit affirmed the conviction but decreased the supervised release to three years. Plaintiff was also indicted for fraud, arising from filing false insurance documents claiming that his wife had been killed in the World Trade Center attacks on 9/11. Plaintiff claims that but-for defendant’s negligent representation, he would not have pled guilty to the various crimes with which he was charged.

Issue: Is the defendant liable to the plaintiff for legal malpractice?

Ruling: No, the defendant is not liable to the plaintiff for legal malpractice because a criminal defendant must show that the alleged legal malpractice was the “cause of the conviction.” Claudio v. Heller, 119 Misc.2d 432 (N.Y. Sup. Ct. 1983). The standard for a criminal defense malpractice claim differs from the standard for civil legal malpractice.  A plaintiff must allege his innocence of the underlying offense to successfully bring a legal malpractice case against his attorney in an underlying criminal proceeding. The elements of a malpractice case in N.Y. are:
1) A duty
2) A breach of the duty, and
3) Proof that actual damages were proximately caused by breach of the duty

Lesson: “A criminal defendant may be able to prove that but for the action of his counsel he would have invoked the 5th amendment or succeeded in suppressing evidence.” Carmel, 70 N.Y.S.2d 173. A criminal defendant, however, who pled guilty or was found to be guilty, cannot assert his innocence. It is for that reason that a criminally convicted plaintiff cannot bring a legal malpractice cause of action under these circumstances. Had the conviction been overturned or vacated, then plaintiff’s claim might  not have been barred.

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Baccash v. Sayegh, 862 N.Y.S.2d 564 (App. Div. 2008); 53 A.D.3d 636.

Student contributor: Cheryl Neuman

N.Y. underlying business acquisition

Facts: Plaintiff owned Iman Bridal Couture, Inc. and retained Defendant lawyer to represent her in connection with buying the “Peggy Peters’” trade name. Peggy Peters was another bridal boutique located near plaintiff’s store. Plaintiff wanted to buy the trade name so that she could open a bridal boutique under the Peggy Peters name. The defendant, however, told plaintiff that she would have to buy all the inventory in order to buy the Peggy Peters trade name. The plaintiff agreed to that arrangement, but unbeknownst to the plaintiff, defendant negotiated a stock purchase rather than an asset purchase of Peggy Peters. The plaintiff didn’t read the stock purchase agreement because she trusted and relied on defendant. Plaintiff subsequently sued defendant for legal malpractice because he negotiated a stock purchase agreement rather than an asset agreement, as they had agreed.

Issue: Whether defendant is liable to plaintiff for legal malpractice because he negotiated a stock purchase agreement instead of an asset purchase agreement?

Ruling: Defendant is not liable to plaintiff for legal malpractice because the plaintiff’s proof was insufficient to establish that she sustained actual damages as a result of the defendant’s conduct.

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.  (citing, Rudolf v. Shayne, Dachs, Stanisci, Corker, & Sauer, 8 N.Y.3d 483 (App. Div. 2007).

Lesson:  The plaintiff paid off the debts of Peggy Peters through Iman Bridal Couture. This fact, however, was not dispositive in ascertaining damages because the court stated, “Although it is undisputed that the plaintiff is Bridal Couture’s sole officer and shareholder, a corporation has a separate legal existence from its shareholder even when the corporation is wholly owned by a single individual,” such as in this case. 

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Rudolf v. Shayne, Dachs, Stanisci, Corker, & Sauer,8 N.Y.3d 438; 867 N.E.2d 385 (2007).

N.Y. underlying personal injury action

Student contributor: Cheryl Neuman

Facts: Plaintiff was walking across Sunrise Highway when he was struck by a car. He suffered personal injuries and retained defendants to represent him in his case against the driver. There was a traffic signal that controlled the intersection where the accident occurred. There was conflicted testimony as to whether plaintiff was in the crosswalk at the time that the car struck him. Defendants requested, at the completion of testimony, that the court should instruct the jury regarding the statutory requirements of Vehicle and Traffic Law § 1151. Section 1151 concerns intersections without traffic signals. The provision also imposes a duty on pedestrians not to “suddenly leave a curb or other place of safety and walk or run into the path of a vehicle which is so close that it is impractical for the driver to yield.” The jury returned a verdict that both plaintiff and driver were negligent, apportioning 50% of the liability to each party. Plaintiff retained new counsel to set aside the verdict, claiming that the court gave the wrong charge to the jury.

Issue: Whether it was legal malpractice for the defendants to request a jury charge of §1151, when §1111 was the appropriate section that defendants should have requested?

Ruling: Yes, the failure to object to the §1151 jury charge and not to request §1111 was legal malpractice. Section 1111 applies to intersections regulated by traffic signals and grants pedestrians “facing any steady green signal the right of way within a crosswalk.” The erroneous charge was a fundamental error requiring a new trial because it affected the jury’s consideration of the plaintiff’s liability.

Lesson: Damages in a legal malpractice case are designed to make the injured client whole. A plaintiff’s damages may include litigation expenses incurred in attempt to avoid, minimize, or reduce the damage caused by the attorney’s wrongful conduct. The plaintiff in this case was therefore entitled to litigation expenses he incurred in the legal malpractice lawsuit. 

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Garten v. Shearman & Sterling LLP, 859 N.Y.S.2d 80 (N.Y. App. Div. 1st Dep't 2008)

Student Contributor: Melissa Goldberg

NY: Underlying Commercial  Real Estate Transaction

The Facts: Plaintiff stated a cause of action for legal malpractice by alleging that "but for" Defendant's failure to prepare and procure documents necessary to provide him with a first-priority security interest, he would have been able to recover the amounts owed to him by the defaulting borrower. The agreement between Plaintiff and Defendant mentioned the  "Documentation relating to Security Agreement".  Defendant's closing documents checklist included "[e]vidence that all other action that the Lender may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement has been taken (including, without limitation, UCC-3 termination statements)."

Issue:
1) Did the Defendant commit legal malpractice by failing to prepare and procure documents that would be necessary to provide Plaintiff with a first priority security interest?

Ruling:
1) The documentary evidence did not establish a defense because Defendant was obligated not only to prepare the loan documents, but also to protect Plaintiff's expectation that the agreement that he would hold a senior security interest was effective.
• Neither the borrower's failure to repay the loan nor the senior creditors' eventual failure to act honorably and adhere to the understanding that their liens were to be junior to Plaintiff's relieves Defendant of potential liability for its negligence.
• The Plaintiff is not responsible for his own loss simply because he executed the documents that Defendant prepared for him.

Lesson: Generally, the actions of other parties do not relieve a Defendant’s liability for its own legal malpractice. A lawyer has a duty to protect his client’s interests, first and foremost. 

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West Vil. Assoc. LP v. Balber Pickard et al.,  PC, 854 N.Y.S.2d 340 (App. Div. 1st Dep't 2008)

NY Underlying Real Estate Action

Student Contributor: Melissa Goldberg

Facts: Plaintiff alleged that Defendant failed to take appropriate steps to assure property would be free from rent regulation. Plaintiff claims that she received ongoing advice regarding rent regulation from the Defendant.

Issue: Was the Plaintiff barred by the statute of limitations?

Ruling:  No.  Under the "continuous representation" doctrine, a client cannot reasonably be expected to assess the quality of the professional service while it is still in progress. The continuous representation doctrine is "generally limited to the course of representation concerning a specific legal matter," Here,
1. The Plaintiff’s complaint went beyond mere allegations that Defendants continuously represented Plaintiffs in a general professional relationship after the specific act of malpractice occurred.
2. The Plaintiff specifically alleged the continued advice they received from Defendants regarding rent regulation.

Lesson: A legal malpractice claim accrues when the malpractice is committed, not when the client discovers it. To fall under the continuous representation doctrine, the pleading must assert more than simply an extended general relationship between the professional and client, and the facts are required to demonstrate continued representation in the specific matter directly under dispute.

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Heartbreak Cabaret Corp. v. Cruz & Toledo Restaurant Corp., 699 F.Supp. 1066 (S.D.N.Y. 1988)

Underlying Action: Purchase of Real Property

Student Contributor: Candice L. Deaner

Facts: Attorney represented a corporation in negotiations for a nightclub. In the course of negotiations, the attorney also began to represent defendants who were the owner’s of the lease where the club was intended to be. The venture between the parties quickly became bitter and resulted in litigation. Soon after, the corporation brought suit against the attorney for breach of fiduciary duty; however, when the corporation brought this claim against the attorney, they immediately moved to disqualify any testimony that attorney may proffer in his own defense, using the protection of the attorney client privilege.

Issue: Whether an attorney may be excused from the duty of confidentiality when using the communications to defend against a legal malpractice claim

Ruling: The District Court used the following factors to dismiss the corporation’s claim:
1) Disciplinary Rule 4-101(c) provides:

“A lawyer may reveal … Confidences or secrets necessary … to defend himself or his employees or associates against an accusation of wrongful conduct.”

2) The court reasoned that “as a matter of common sense, when a former client sues his former attorney, the client places the attorney in a position where previously confidential communications must be revealed to trial counsel defending the attorney in the suit.” The court held that this is necessary to provide an attorney a reasonable opportunity to defend against such a professional criticism.

Lesson: An attorney defending against a claim of legal malpractice is relieved of  the duty of confidentiality for the purposes of defending himself. This exclusion does not render an attorney immune from his duty to his former client with regard to disclosures to third parties. In such an instance, the attorney may still barred from disclosing client confidences to a third party.

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Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537 (2nd Cir. 1994)

NY Underlying Representation: Prospective Purchase of Bankrupt Company's Assets

Student Contributor: John Anzalone

Facts: Defendant Law firm represented Plaintiff through an agent in her attempt to purchase the assets of a bankrupt company. Problems occurred with the deal and the Agent was dismissed by the Plaintiff. Agent then told Firm that he wanted to buy the assets of the bankrupt company. Despite knowing that Plaintiff still sought to purchase the assets, Firm told Plaintiff that it would represent Agent in his attempt to purchase the assets. Plaintiff objected to this subsequent representation of Agent. Agent outbid Plaintiff with Firm's assistance. The jury found that Firm's representation of Plaintiff's Agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Was the determination that Firm breached its duty to its former client by representing Plaintiff's agent in the same transaction incorrect?

Ruling: In affirming the lower court, the Second Circuit held that the Firm breached its fiduciary duty to Plaintiff, based on the following considerations:
1) Firm committed a serious breach of its fiduciary duties to Plaintiff as a former client by representing a party with interests adverse to the Plaintiff in the same transaction.
2) The nature of this breach triggers the prophylactic rule so plaintiff has to prove that Firms' actions were a substantial factor in its damages instead of the normal requirement of proximate cause.
3) The jury could have found that Firm's action were a substantial factor in Agent purchasing the assets rather than Plaintiff because their presence could have given Agent more credibility. The jury could have found that the deal moved forward because Agent and Firm agreed to use Plaintiff's money in an escrow account for Agent's purchase too. This potential usage also could have been held as interfering with Plaintiff's negotiations because she had to take action to protect her funds from usage by her former agent.
4) There was factual evidence supporting that Firm used confidential information gained from Plaintiff in its representation of Agent because it knew that Plaintiff was not willing to bid higher than she had previously stated to them. 

Lesson: If an attorney or a law firm is alleged to have breached their fiduciary duty to the client they are subject to the prophylactic rule that will make it easier for a plaintiff to prove the proximate cause element of the legal malpractice cause of action. The burden will be reduced from “but for” to “substantial factor”.

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Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (N.Y.A.D. 3 Dept., 2008)

NY: Underlying personal injury; workers compensation

Student Contributor: Ryan M. O'Donnell

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

 Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client. 

Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry.

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 Lafasciano v. Lorber, 823 N.Y.S.2d 427, (2006)

NY Underlying matrimonial action; holding marital assets in trust

Student Contributor: Jason Zemsky

Facts: During a matrimonial action between the Lafascianos, the Supreme Court determined that the proceeds of the sale of certain real property owned by a closely held family corporation, was marital property. Lorber, the attorney who represented the sale placed the proceeds in a non-interest bearing escrow account. The court then ruled that the money Lorber placed in the trust account should be divided equally among the Lafascianos. The wife, Carla M. Lafasciano, sued Lorber for legal malpractice claiming that he had failed to put that money in an interest bearing account. Lorber moved for Summary Judgment which the trial court granted.

Issue: Does a lawyer commit legal malpractice by not placing sale proceeds in an interest bearing account?

Ruling: Affirmed. The plaintiff failed to prove that the court directed Lorber to place the sale proceeds in an interest bearing account and Judiciary Law § 497(4) allowed Lorber to place the proceeds in a non-interest bearing escrow account.

Lesson:   It might have been prudent for the lawyer to deposit the  proceeds into an interest bearing escrow account pending resolution of any dispute.  But would that have avoided the legal malpractice action?  Maybe yes. Maybe no.   RPC 1.15 "Safekeeping of Property" provides guidance.  Otherwise, Court Rules generally do not require Attorney Trust Accounts to be interest bearing.  

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Leder v. Spiegel 9 N.Y.3d 836, 872 N.E.2d 1194 (2007)

NY: Underlying Will Contest

Student Contributor: Ryan O'Donnell

Facts: Defendant represented plaintiff in an underlying probate matter. Rather than accept a settlement offer, plaintiff decided to continue to trial, where they were unsuccessful in challenging the will. The plaintiff bases his malpractice claim on defendant’s advice on the prospect of success in the underlying case, and that he would have accepted the settlement were it not for his attorney’s advice. There was no documentary evidence showing that plaintiff refused to settle strictly based on defendant’s advice.

Issue: Is an attorney liable for legal malpractice if he was not the proximate cause of the client’s damages, even if he negligently represented his client?

Ruling: No.

"In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence"

The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent. Since there was no evidence that the defendant’s advice was the sole basis for refusing the settlement, the defendant was not the proximate cause of the plaintiff’s loss, the defendant attorney was not liable for malpractice.

Lesson: Even an attorney who negligently represents his client will not be liable for malpractice if he is not the “but for” cause of the client’s damages. To establish liability based on the loss of a settlement opportunity, the plaintiff must prove that but for the attorney’s negligence he would have accepted the settlement offer. A court will not rely on bare allegations of fact by a plaintiff without documentary evidence to prove proximate cause. 

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Adamopoulos v. Liotti, 708 N.Y.S.2d 706, (2000)

NY Underlying tort action

Student Contributor: Jason Zemsky

Facts: Plaintiff was injured when she tripped and fell on a stair case at an LIRR station. The plaintiff retained the defendant to represent her in the action, but the defendant failed to timely commence an action on her behalf. The plaintiff then brought an action for legal malpractice against the defendants. The Defendants filed a motion to dismiss, which was denied.

Issue: Did genuine issues of materials facts exist that the plaintiff could have proved to prevail if the defendant had timely commenced an action?

Ruling: Affirmed.

“To state a claim for legal malpractice, the plaintiff must show that the defendants failed to exercise the skill commonly exercised by an ordinary member of the legal community, that such negligence was the proximate cause of damages, and that ‘but for’ such negligence the plaintiff would have prevailed on the underlying action.”

Contrary to the defendants' contention, it cannot be concluded as a matter of law that the defect in the staircase was of such a trivial nature that it could not have given rise to a legal liability on the part of the LIRR. There is an issue as to whether or not the plaintiff would have prevailed against the LIRR had the defendants filed a timely action.  

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Lawrence v. Miller 48 A.D.3d 1, 853 N.Y.S.2d 1 (1st Dept., 2007)

Student Contributor: Maninder (Meena) Saini

NY Underlying Estate Litigation-Attorney fees

Facts: A husband passed away and left the estate to respondent-wife and their three children. The will was admitted to probate in January 1982. The respondent (Lawrence) retained the Graubard law firm on an hourly basis to represent her in connection with the estate. Respondent was billed over $18 million in legal fees over a 22-year lengthy dispute over the estate. Throughout the years, more than $350 million in distributions were made to the beneficiaries. To conclude the litigation, a $60 million settlement was offered but the respondent declined. The respondent then renegotiated the existing agreement with the law firm. The law firm would continue to get an hourly rate, but there was an annual cap of 1.2 million. In addition, the agreement contained a 40% contingency fee provision for any additional monies that were distributed to the beneficiaries. Months later, the law firm reached a settlement agreement for approximately $104.8 million. The respondent refused to pay the law firm the 40% of the additional $40 million it obtained. The law firm filed a petition to compel payment. The respondent then brought a lawsuit for, inter alia, breach of fiduciary duty.

Issue: Whether the revised contract that contained a contingency fee of 40% of any future monies distributed to the beneficiaries is unconscionable on its face.

Ruling: The court found that a 40% contingent legal fee of $40 million for five months work was not unconscionable on its face, especially following years of litigation. Thus, the law firm did not breach any fiduciary duties.

 “Any determination of unconscionability generally requires a showing of both procedural and substantive unconscionability, requiring an examination of the contract formation process and the alleged lack of meaningful choice.”

Lesson: Should it be unconscionable for an attorney to place high contingency fees in the retainer agreement when the attorney is investing his time and risking collecting nothing in the event of a loss? The attorney must demonstrate that he did not exploit the situation and that the client understood the terms of the agreement. Even though it may seem excessive at first blush, the circumstances underlying the agreement must be fully evaluated. Agreements are to be enforced when no deception is involved in making the contract between competent adults. 

Editor's Note: The "bottom line" is given all the circumstances, the fee must be reasonable. RPC 1.5 (a). 

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Leder v. Spiegel, 9 N.Y.3d 836, 840 N.Y.S.2d 888 ( 2007)

Student Contributor: Maninder (Meena) Saini

NY Underlying will contest

Facts: Plaintiff (attorney) unsuccessfully represented defendants (clients) in a will proceeding and the defendants refused to compensate the plaintiff for the work done on their behalf. The plaintiff then petitioned for legal fees. The defendants counterclaimed for legal malpractice, alleging that “but for” the plaintiff’s negligent representation, which was failing to anticipate that certain evidence would be inadmissible, they would have settled. The plaintiff moved for an order dismissing the defendants’ counterclaim. The lower court dismissed the defendants’ counterclaim. Defendants appealed.

Issue: Did the defendants allege a prima facie case of legal malpractice?

Holding: The appellate division held that the defendants’ counterclaim alleging that the plaintiff failed to anticipate the court’s evidentiary ruling does not establish proximate cause. The plaintiff actively encouraged the defendants to settle but they refused to accept it. Thus, the defendants failed to make a prima facie case of legal malpractice. The lower court’s decision was affirmed.

Rule: “In order to sustain a legal malpractice claim, a client must establish that the attorney failed to exercise ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages, and that the client would have succeeded on the merits of the underlying action “but for” the attorney's negligence.”
Lesson: The plaintiff must be able to show that the attorney’s negligence was the proximate cause of the damages. The dismissal of a legal malpractice action is warranted if the plaintiff fails to demonstrate proximate cause regardless of whether the attorney was negligent. 

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Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537 (2nd Cir. 1994)

NY Underlying Commercial Action/Conflict of Interest

Student Contributor: John Anzalone

Facts: Defendant law firm represented Plaintiff, through an agent, in her attempt to purchase the assets of a bankrupt company. Eventually, however, Plaintiff dismissed the agent. The agent, thereafter, advised Defendant law firm of his interest in purchasing the assets of the same bankrupt company.

Despite being fully aware that Plaintiff still sought to purchase the assets, Defendant law firm informed the Plaintiff that it would represent the agent in his attempt to purchase the assets, and despite Plaintiff’s objections, proceeded with the representation. Ultimately, the agent outbid Plaintiff with the firm's assistance.

The jury found that the firm's representation of Plaintiff's agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Did the firm breach its duty to Plaintiff by representing her former agent in the same transaction?

Ruling: In affirming the lower court, the Second Circuit held that the firm had breached its fiduciary duty to Plaintiff, and reasoned as follows:

1. The firm committed a serious breach of its fiduciary duties to Plaintiff by representing a party with interests adverse to the Plaintiff in the same transaction.
2. The nature of this breach triggers the prophylactic rule so that, instead of establishing proximate cause, plaintiff has to prove only that the firm’s actions were a substantial factor in the resulting damages.
3. Here, the substantial factor test was satisfied given the likelihood that (a) the agent and the firm conspired to use Plaintiff’s escrow funds for the agent’s purchase of the bankrupt entity’s assets; (b) this conspiracy interfered with Plaintiff’s negotiations to purchase the same assets; and (c) the firm and the agent conspired to use confidential information regarding Plaintiff’s bid.

Lesson: If an attorney or a law firm terminates its relationship with one client and commences an engagement with another party with directly adverse interests in the same transaction, they will be subject to the “prophylactic rule” which makes it easier for a plaintiff to prove malpractice by substituting the usual "but for" causation in fact  requirement with the “substantial factor” test.

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Wallenstein v. Cohen, 45 A.D.3d 674, 845 N.Y.S.2d 428 (App. Div. 2007)

NY Underlying  Fee Arbitration

Student Contributor: Maninder (Meena) Saini

Facts: Defendant-attorneys represented the plaintiff-client in a matrimonial action that resulted in a judgement for divorce pursuant to a stipulation of settlement. The plaintiff then complained to the grievance committee that the defendants over-charged her for their services and did not protect her interests. The case was transferred to Fee Arbitration. During the arbitration, it was found that defendants were entitled to the fees, which they sought. Two years later, the plaintiff commenced an action, alleging that defendants charged excessive fees and committed legal malpractice in representing plaintiff.

Issue: Can plaintiff re-litigate the issue of excessive attorney’s fees that was formerly resolved in arbitration?

Ruling: The Appellate Division held in this case that the action was barred by fee arbitration award and by collateral estoppel because all of the allegations in the complaint were “reasonably and plainly comprehended to be within the scope of the dispute submitted to arbitration.”

[T]he determination fixing the value of the defendants' services necessarily determined that there was no malpractice.

Lesson: If the excessive fee allegation in the complaint was resolved by previous arbitration, the fee awarded to the attorney during arbitration may ultimately conclude that there is no malpractice. This is a fact sensitive ruling.  The  jurisdiction of the Fee Arbitration Committees in New Jersey, however, does not extend to deciding issues of legal malpractice, even if they are raised in the fee arbitration proceeding. 

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Darby & Darby, P.C. v. VSI International, Inc. 95 N.Y.2d 308 (2000)

NY Underlying insurance coverage

Student Contributor: Maninder (Meena) Saini

Facts: Defendant (VSI International Inc.), a Florida corporation retained plaintiff (Darby & Darby) a New York law firm to represent it in two Florida lawsuits. Even though defendant paid a portion of a substantial legal bill, the defendant still owed nearly $200,000 in outstanding legal fees. Plaintiff moved to withdraw as counsel because the defendants did not pay them. The plaintiff was relieved as counsel in October 1993. In August 1996, plaintiff commenced an action to recover the outstanding amount in legal fees, plus interest and incidental costs. The defendant then asserted a counterclaim, alleging the plaintiff committed legal malpractice and breached a fiduciary duty by failing to advise defendant that its then-existing general liability insurance policy could have covered defendant’s litigation expenses.

Issue: Does a NY law firm specializing in patent litigation,  retained to defend a corporate client in a Florida patent infringment action have a duty to advise the client about possible insurance coverage to cover the cost of litigation?

Ruling:

 ...attorneys should familiarize themselves with current legal developments so that they can make informed judgments and effectivey counsel their clients... However, [the law firm] should not be held liable for failing to advise [the client] about a novel and questionable theory pertaining to their insurance coverage.

In a legal  malpractice action, a party must demonstrate that an attorney failed to employ “the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession”. What is reasonable skill and knowledge is to be determined at the time of representation.

Lesson: The standard of reasonable care applicable even to specialist-attorneys does not require attorneys to comply with   novel and questionable theories of law. An attorney only has a duty to represent a client in a manner that is reasonable and consistent with the law, as it existed at the time of representation.

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Leffler v. Mills, 285 A.D.2d 774 (3 Dept. 2001)

Underlying NY Probate Action

Student Contributor: Marina Kritikos

Facts: Plaintiffs were beneficiaries of a will. They had hired the defendant attorney to probate the will. As part of his duties, the attorney paid state estate taxes due by the beneficiaries, but failed to timely pay the federal taxes due. Although the attorney then secured an extension to pay the federal taxes by January 1, 1995, he failed to actually make the payment until November 6, 1995. As a result, the Internal Revenue Services charged penalties and interest in the amount of $158,853.33 to the estate. Plaintiffs subsequently discharged the attorney, and in December 1998, brought an action for legal malpractice. Both Plaintiffs and the defendant attorney filed motions for summary judgment. The trial court ruled in favor of the Plaintiffs, and the attorney appealed that ruling.

Issue: Did the lower court correctly grant Plaintiffs’ motion for summary judgment in light of New York’s three-year statute of limitation for the filing of legal malpractice actions?

Ruling: The lower court erred in granting Plaintiffs’ motion for summary judgment. There is a three-year statute of limitations for legal malpractice actions which may be tolled if there is “ clear indicia of an ongoing continuous, developing, and dependent relationship between the client and the attorney.” The Supreme Court of New York, Appellate Division, Third Department, found the evidence to be insufficient to establish a continuing relationship as a matter of law, despite the fact that the attorney was listed as “attorney of record” for the estate on an accounting dated January,1996 and federal and state estate income tax returns dated April, 1996.

Lesson: Although the court will toll the three-year statute of limitations for legal malpractice actions, the extension will only be granted where there exists clear, unequivocal evidence of an ongoing attorney-client relationship and continued dependence and reliance on the attorney with regard to the matter that was, purportedly, negligently handled.

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Katz v. Herzfeld & Rubin, P.C., 853 N.Y.S.2d 104 (2 Dept. 2008)

NY Underlying Personal Injury Action

Student Contributor:  Jason Klein

Facts: Plaintiffs retained Defendant attorneys as counsel for a personal injury action which was eventually settled. Subsequently, Plaintiffs commenced an action for legal malpractice alleging that Defendants refused to pursue a claim for loss of income, and as a result, Plaintiffs were forced to settle their personal injury action for an amount far below what they could have recovered. Defendants filed a motion to dismiss arguing that because Plaintiffs dismissed Defendants and hired new counsel five months prior to settling, the Defendants’ actions did not proximately cause the alleged damages. The trial court granted the Defendants’ motion to dismiss and Plaintiffs appealed

Issue: Did the trial court properly grant Defendants’ Motion to Dismiss in light of Plaintiff’s decision to terminate their representation five months in advance of the settlement of which they now complained?

Ruling: Yes. Successor counsel had been retained in a timely fashion and had every opportunity to protect the Plaintiff’s rights in advance of the time of their decision to enter into a settlement.

Lesson: Plaintiffs had sufficient time in which to pursue its claims with successor counsel, and therefore, could not establish that any alleged damages resulting from their decision to settle were proximately caused by the acts or omissions of their former counsel.

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Daly v. Peace, 863 N.Y.S.2d 770, 2008 N.Y. Slip Op. 06955 (2 Dept.)

NY Underlying criminal action

Student Contributor: Angela Ignelzi

Facts: Plaintiff brought an action against his former defense attorney for legal malpractice after, allegedly, being wrongfully convicted. The attorney made a motion to dismiss plaintiff’s complaint on the grounds that the client could not prove he was innocent of the charges brought against him in the underlying action. The trial court granted the attorney’s complaint and plaintiff appealed the dismissal.

Issue: Did the trial court correctly dismiss plaintiff’s malpractice complaint because of his inability to prove his innocence with regard to the claims asserted against him in the underlying action?

Ruling: The Supreme Court of New York, Appellate Division, Second Department, held that:

(1) The trial court has correctly assessed that the plaintiff could not establish his innocence with regard to the charges made against him in the underlying action, and, therefore

(2) The Plaintiff had no cause of action for legal malpractice against his criminal defense attorney, unless and until he ultimately succeeded in his attempts to have the underlying conviction reversed.

Lesson: A former client, even in an underlying criminal action, can only prevail on a claim for legal malpractice by successfully applying the “suit within a suit” method: No presumption of innocence is available to those convicted in the first place, purportedly, as a result of negligent representation.

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Campagnola v. Mulholland, Minion & Roe, (pdf)
76 N.Y.2d 38 (N.Y. 1990); 555 N.E.2d 611

N.Y. Underlying personal injury action

Student Contributor: Jason Klein

Facts: Plaintiff was struck by a car while working as a crossing guard and was permanently disabled. Plaintiff retained Defendant to pursue a claim for personal injuries and agreed to a contingency fee of one third for any money recovered. The owner of the car that struck Plaintiff was insured for only  $10,000. Plaintiff herself was insured under a Government issued policy for underinsured benefits for $100,000. The Government policy required consent prior to the settlement of any claim against the person deemed responsible for the insured’s injuries. Defendant failed to notify the Government insurance company before settling with the car owner for $10,000, of which $3,150 was deducted as a fee and $550 for expenses. When Plaintiff submitted a claim under the Government issued policy, her claim was denied because the settlement with the car owner was made without consent. Plaintiff commenced this action against Defendant seeking $100,000 in damages for malpractice and Defendant asserted an affirmative defense to reduce any recovered damages by the amount Defendant would have received as attorneys’ fees and expenses in the personal injury action.

Issue: In a malpractice action against an attorney, can the attorney deduct the “hypothetical” fee that would have been payable to the attorney in the underlying action?

Ruling: No. An attorneys’ malpractice constitutes a failure to honor faithfully the loyalty owed to a client. Thus, the plaintiff’s recoverable damages are not limited by a deduction for the fee that she would have paid the defendant had the defendant  properly performed the contract of representation.

The Lesson: A reduction in the plaintiff’s recovery  equal to what the attorney would have earned but for his negligence, is impermissible because a negligent attorney is precluded from collecting a fee. 

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Daly v. Peace,54 A.D.3d 801, 863 N.Y.S.2d 770, 2008 N.Y. Slip Op. 06955

NY Underlying defense of criminal  action

Student Contributor: Angela M. Ignelzi

Facts: Plaintiff-Client brought an action against his Attorney who had represented him in defending a prior criminal action where he was convicted. Client sought to recover damages for legal malpractice. Attorney made a motion to dismiss the complaint on the grounds that the client could not prove he was innocent. Client appealed the dismissal of his Complaint.

Issue: Was the motion Court correct in dismissing the Client’s malpractice complaint?

Ruling: The Appellate Division (2nd Department), held that:

•  Client could not establish his innocence of the underlying criminal charge
•  Client has no cause of action for legal malpractice against his criminal defense attorney, unless he was ultimately successful in his attempts to have the underlying conviction reversed and he proves his innocence.

Lesson: To prove that his lawyer's allegedly negligent conduct in defending him in an underlying criminal case was the proximate cause of his damage, i.e., his wrongful conviction, the client must have his conviction reversed and he must prove his innocence of the underlying criminal charges. 

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