[Her] deposition testimony in the underlying case was contrary to her opposition to the law firm’s motion for summary judgment.

In Walker v Shaevitz & Shaevitz, Esqs., 192 AD3d 1062 [2d Dept 2021], the court dismissed the client’s legal malpractice action because her deposition testimony in the underlying case was contrary to her opposition to the law firm’s motion for summary judgment. The court held:

The Supreme Court, upon reargument, properly granted the law firm’s motion for summary judgment dismissing the complaint. “ ‘In moving for summary judgment dismissing a complaint alleging legal malpractice, a defendant must present evidence establishing, prima facie, that it did not breach the duty to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, or that the plaintiff did not sustain actual and ascertainable damages as a result of such deviation’ ” (Dominguez v. Mirman, Markovits & Landau, P.C., 180 A.D.3d 646, 647, 119 N.Y.S.3d 136, quoting Mazzurco v. Gordon, 173 A.D.3d 1003, 1003, 100 N.Y.S.3d 894). Here, the law firm established its prima facie entitlement to judgment as a matter of law through the submission of the transcript of Walker’s deposition testimony in the underlying action which showed that she could not identify the cause of her fall (see Colini v. Stino, Inc., 186 A.D.3d 1610, 1611, 129 N.Y.S.3d 826; Ash v. City of New York, 109 A.D.3d 854, 856, 972 N.Y.S.2d 594) and that, even if the law firm had breached its duty to the plaintiffs, they would not have prevailed in the underlying action because Walker was unable to identify the cause of her fall without engaging in speculation (see Hamoudeh v. Mandel, 62 A.D.3d 948, 949, 880 N.Y.S.2d 674; see also Markowitz v. Kurzman Eisenberg Corbin Lever & Goodman, LLP, 82 A.D.3d 719, 719, 917 N.Y.S.2d 683).

In opposition, the plaintiffs failed to raise a triable issue of fact. Walker’s deposition testimony and affidavit in this action are contrary to her deposition testimony in the underlying action and merely raised a feigned issue of fact insufficient to defeat summary judgment (see Mallen v. Dekalb Corp., 181 A.D.3d 669, 670, 121 N.Y.S.3d 331; Dominguez v. Mirman, Markovits & Landau, P.C., 180 A.D.3d at 648, 119 N.Y.S.3d 136).

The Supreme Court also properly denied the plaintiffs’ cross motion pursuant to CPLR 3126 to impose sanctions on the law firm for spoliation. A party seeking sanctions for spoliation of evidence must demonstrate “that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a culpable state of mind, and that the destroyed evidence was relevant to the party’s claim … such that the trier of fact could find that the evidence would support that claim” (Pegasus Aviation I, Inc. v. Varig Logistica S.A., 26 N.Y.3d 543, 547, 26 N.Y.S.3d 218, 46 N.E.3d 601 [internal quotation marks omitted]). Here, the plaintiffs’ reliance on the doctrine of spoliation is misplaced as the law firm was never in possession or control of the restaurant, its lighting system, or its renovation (see Burbige v. Siben & Ferber, 115 A.D.3d 632, 633, 981 N.Y.S.2d 537). Moreover, to the extent that the plaintiffs assert an independent cause of action for negligent spoliation, it is without merit as no such tort is recognized in New York law (see Vargas v. Crown Container Co., Inc., 114 A.D.3d 762, 764, 980 N.Y.S.2d 500; Hillman v. Sinha, 77 A.D.3d 887, 888, 910 N.Y.S.2d 116).


Richard A. Klass, Esq.
Your Court Street Lawyer

#CourtStreetLawyer #LegalMalpractice #litigation

Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.comcreate new email with any questions.

Prior results do not guarantee a similar outcome.

© 2021 Richard A. Klass

Scales of justice

Caveat Emptor: “All Houses Wherein Men Have Lived and Died Are Haunted Houses.”

person in exercise clothing looking through magnifying glass at damage in home. Illustrating article by Richard A. Klass about Caveat Emptor

The buyer of a Brooklyn building sued the seller for fraud and breach of contract after the closing of title. The buyer made several claims against the seller, including that the roof was leaking, it wasn’t new, and the construction and renovations performed on the building were shoddy and done only to quickly “flip” the property. The buyer also claimed that the tenant’s signed estoppel certificate was false. The buyer’s attorney claimed that no ordinary amount of due diligence would have revealed that the roof was leaking; only destructive testing done prior to closing would have shown water intrusion or mold. The seller’s position was that any alleged defects in connection with the sale of the building could have been raised before the closing of title. Once the closing took place, any alleged defects were waived; the representations in the contract of sale merged with the transfer of title.

Disclaimers in the Contract of Sale

In the contract of sale between the seller and buyer, there were numerous clauses that contained specific disclaimers.[1] Among these disclaimers was the following one (which is fairly typical in real estate contracts):

The Purchaser acknowledges that they have physically inspected the Premises prior to signing this Contract and are aware of the physical condition of the Premises and agree to take the Premises in “AS IS CONDITION” in its present physical condition. Purchaser acknowledges that the Seller has made no representation or warranties and concerning the physical condition of the Premises other than those that are specifically set forth herein.

Doctrine of Caveat Emptor – Buyer Beware!

The seller retained Richard A. Klass, Esq., Your Court Street Lawyer, to defend the lawsuit brought by the buyer. A motion to dismiss the case was filed based on several legal arguments, first and foremost being the defense of caveat emptor (meaning that the buyer was responsible for checking the quality of his purchase).

New York adheres to the caveat emptor doctrine and imposes no duty on the seller to disclose any information concerning the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller which constitutes active concealment. Platzman v. Morris, 283 AD2d 561 [2 Dept. 2001]. As held by the Second Department in London v. Courduff, 141 AD2d 803 [2d Dept. 1988], “The buyer has the duty to satisfy himself as to the quality of his bargain pursuant to the doctrine of caveat emptor, which in New York State still applies to real estate transactions.”

As held in Simone v Homecheck Real Estate Services, Inc., 42 AD3d 518, 521 [2d Dept 2007], “Where the contract specifically disclaims the existence of warranties or representations, a cause of action alleging breach of contract based on such a warranty or representation cannot be maintained (see Bedowitz v Farrell Dev. Co., 289 AD2d 432 [2001]). Here, the contract of sale specifically provided that the premises had been inspected by the buyer and was being sold ‘as is’ without warranty as to condition, express or implied. Furthermore, a specific merger clause is contained in the rider to the contract and precludes the buyer from claiming that he relied on any of the sellers’ alleged misrepresentations (see London v Courduff, supra). In addition, because title to the property had closed and the deed was delivered, the doctrine of merger extinguished any claim the buyer may have had regarding the contract of sale (see Ka Foon Lo v Curis, 29 AD3d 525 [2006]). Hence, the cause of action to recover for breach of contract cannot be maintained and should have been dismissed pursuant to CPLR 3211 (a) (7).”

Where the contract of sale, as in this case, contains a provision that the plaintiff is fully aware of the condition of the premises based upon his own inspection and is not relying upon any representations of the seller, any subsequent action for fraud is barred. Daly v. Kochanowicz, 67 AD3d 78 [2 Dept. 2009]; Platzman v. Morris, 283 AD2d 561, 563 [2 Dept. 2001] (“Since the contract contained a provision that the plaintiffs were fully aware of the condition of the premises based upon their own inspection and investigation, and not based upon any information or representations, written or oral, made by the sellers, the plaintiffs cannot claim fraud.”).

No ‘latent defect’ exception to the merger doctrine

The buyer argued in opposition to the motion that the merger doctrine did not apply to latent defects (which may only be discovered after occupancy of the premises). He incorrectly cited Fehling v Wicks, 179 Misc 2d 1041 [App Term 1999] as being a decision from the Second Department. It is actually a decision of the Appellate Term, Second Department. More importantly, the Fehling v Wicks decision has been rejected by the Appellate Divisions.

In Arnold v Wilkins, 61 AD3d 1236, 1237 [3d Dept 2009], the court held: “Plaintiffs alternatively contend that the merger doctrine does not apply here because the faulty sewage system was a ‘latent defect.’ In support, they rely on Fehling v. Wicks, 179 Misc.2d 1041, 687 N.Y.S.2d 868 [1999] for the proposition that ‘where the purchaser discovers latent defects which are discoverable only after the purchaser occupies the premises,’ the merger doctrine is inapplicable (id. at 1042, 687 N.Y.S.2d 868). Importantly, however, the purported ‘latent defect’ exception to the merger doctrine has not been adopted by the Appellate Divisions or the Court of Appeals in these circumstances.”

In TIAA Glob. Investments, LLC v One Astoria Sq. LLC, 127 AD3d 75, 85 [1st Dept 2015], the court held (emphasis added):

The merger doctrine in a real estate transaction provides that once the deed is delivered, its terms are all that survive and the purchaser is barred from prosecuting any claims arising out of the contract (Ka Foon Lo v. Curis, 29 A.D.3d 525, 526, 815 N.Y.S.2d 131 [2d Dept.2006] ). The only exception to this rule is where the parties clearly intended that the particular provision of the contract supporting the claim would survive the delivery of the deed (id.). Further, an “as is” clause in a contract to sell real property will ordinarily bar a claim for breach of contract (see Board of Mgrs. of the Chelsea 19 Condominium v. Chelsea 19 Assoc., 73 A.D.3d 581, 581, 905 N.Y.S.2d 8 [1st Dept.2010] ). Plaintiff argues that the merger doctrine does not apply here because of the latent nature of the defects at issue. It further contends that its allegations of deceptive behavior on Seller’s part to mask the true condition of the building render the “as is” clause inoperable.

Although plaintiff cites trial court opinions identifying a latency exception to the merger doctrine, the concept has not been adopted by any of the Appellate Divisions or by the Court of Appeals (see Arnold v. Wilkins, 61 A.D.3d 1236, 1237, 876 N.Y.S.2d 780 [3d Dept.2009]), and we are not adopting it here.

It was urged that the seller was bound to the decisions of the Appellate Divisions, as the Second Department has not opined on the issue yet. See, Summit Const. Services Group, Inc. v Act Abatement, LLC, 34 Misc 3d 823, 831 [Sup Ct 2011] (“The general rule is that trial courts must follow applicable decisions of the Appellate Division in their Department. If there is no decision from the Appellate Division in the Department in which the trial court is located, the trial court must follow the decision of another Department. This is because the Appellate Division is a single statewide court divided into departments for administrative convenience.”)

Seller did not engage in active concealment

The buyer’s attorney also argued that there was active concealment of defects by the seller. The complaint failed to make any allegation that the buyer was somehow thwarted by the seller from conducting any inspections or due diligence which could have discovered the purported defects. It was necessary for the buyer to allege material facts as essential allegations that the seller thwarted any efforts on his part to perform his due diligence. See, Jablonski v Rapalje, 14 AD3d 484, 485 [2d Dept 2005] (“To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his responsibilities fixed by the doctrine of caveat emptor.”)

In Laxer v Edelman, 75 AD3d 584, 586 [2d Dept 2010], the Second Department held:

New York adheres to the doctrine of caveat emptor and imposes no liability on a seller [or the seller’s agent] for failing to disclose information regarding the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller[‘s agent] which constitutes active concealment” of a defective condition (Simone v Homecheck Real Estate Servs., Inc., 42 AD3d 518, 520 [2007]; see Daly v Kochanowicz, 67 AD3d 78, 87 [2009]; cf. Real Property Law §§ 462, 465). Moreover, even proof of active concealment will not suffice when the plaintiff should have known of the defect (see Richardson v United Funding, Inc., 16 AD3d 570, 571 [2005]). A plaintiff seeking to recover damages for active concealment must show that the defendant “thwarted” the plaintiff’s efforts to fulfill his or her responsibilities imposed by the doctrine of caveat emptor (Kerusa Co. LLC v W10Z/515 Real Estate Ltd. Partnership, 12 NY3d 236, 245 [2009] [internal quotation marks omitted]; see Rozen v 7 Calf Cr., LLC, 52 AD3d 590, 593 [2008]).

Based on the arguments presented, the judge granted the motion to dismiss. The judge held that the “defendants have established that the merger doctrine bars any claims arising out of the contract, requiring dismissal of the plaintiff’s cause of action for breach of contract. In a real estate transaction, the merger doctrine provides that, once title to the property closed and the deed was delivered, any claims that the plaintiff might have had arising from the contract of sale were extinguished.”


End Notes

[1] Section 11(c) stated: Except as otherwise expressly set forth in this contract, none of Seller’s covenants, representations, warranties or other obligations contained in this contract shall survive Closing.

Section 12 stated: Condition of Property. Purchaser acknowledges and represents that Purchaser is fully aware of the physical condition and state of repair of the Premises and of all property included in this sale, based on Purchaser’s own inspection and investigation and not upon any information, data, statements or representations, written or oral, as to the physical condition, state of repair, use, cost or operation or any other matter related to the Premises or the other property included in the sale, given or made by Seller or its representatives, and shall accept the same “as is” except as set forth herein in their present condition and state of repair; subject to reasonable use, wear, tear and natural deterioration between the date hereof and the date of Closing (except as otherwise set forth in paragraph 16(f), without any reduction in the purchase price or claim of any kind for any change in such condition by reason thereof subsequent to the date of this contract. Purchaser and its authorized representatives shall have the right, at reasonable times and upon reasonable notice (by telephone or otherwise) to Seller, to inspect the Premises before Closing.

Section 28 stated: Miscellaneous. (a) All prior understandings, agreements, representations and warranties, oral or written, between Seller and Purchaser are merged in this contract; it completely expresses their full agreement and has been entered into after full investigation, neither party relying upon any statement made by anyone else that is not set forth in this contract.

Rider at Section 12 stated: Tenancies. The purchaser herein agrees to take title to the Premises, SUBJECT TO the following tenancies: NONE. PURCHASER SHALL RECEIVE A CREDIT OF $5,000 FROM SELLER FOR THE LOWER RENT AMOUNTS & SECURITY DEPOSITS.

Rider at Section 15 stated: No representations by Seller. Seller makes no warranties or representations concerning the physical condition, work repairs, renovations, or improvements, if any, income, expenses for operation, taxes or fitness of the Premises except as specifically set forth herein. The Purchaser acknowledges that they have physically inspected the Premises prior to signing this Contract and are aware of the physical condition of the Premises and agree to take the Premises in “AS IS CONDITION” in its present physical condition. Purchaser acknowledges that the Seller has made no representation or warranties and concerning the physical condition of the Premises other than those that are specifically set forth herein. The Seller shall not be bound by or liable for any representations, oral or written, pertaining to the Premises, furnished or made by any real estate broker or salesperson, agent or employee, servant or other, unless same is specifically set forth herein. Notwithstanding, none of the representations, warranties, covenants or other obligations of SELLERS hereunder shall survive the CLOSING, except as expressly provided herein. Acceptance of the deed by PURCHASERS shall be deemed full and complete performance and discharge of every agreement and obligation of SELLERS hereunder, except those, if any, which expressly are stated herein to survive the CLOSING.

Rider at Section 22 stated: Delivery and Acceptance of the Deed. The delivery and acceptance of the deed at closing by the Purchaser shall constitute full compliance by the Seller of all of the terms and conditions of this Contract, and none of the terms and conditions of this Contract shall survive the delivery of the deed unless specifically stated otherwise.

Rider at Section 32 stated: Entire Understanding. This agreement constitutes the entire Contract between the parties. It may not be modified orally or in any other manner except by an agreement in writing signed by the parties hereto.

Rider at Section 38 stated: Property Condition Disclosure Credit. Seller will not provide to the Purchaser the Property Condition Disclosure Statement under Article 14 of the New York Real Property Law. The Purchaser agrees to the $500.00 monetary credit as set forth in section 465(a) of the Property Condition Disclosure Act. By the acceptance of a $500.00 credit, the purchaser waives any failure or misrepresentation whether of not knowing or willful on the part of the Seller. The purchase price reflected herein is net of the $500.00 given by Seller to Purchaser as a credit in lieu of Purchasers receiving a property condition disclosure statement from Sellers.

Richard A. Klass, Esq.
Your Court Street Lawyer

#caveatemptor, #buyerbeware, #realestatelaw

Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.comcreate new email with any questions.

Prior results do not guarantee a similar outcome.

© 2021 Richard A. Klass

Scales of justice

New video: Foundations of Bankruptcy

Video: Foundations of Bankruptcy

with Richard A. Klass, Esq. (October, 2020)

From the Brooklyn Bar Association Access to Justice Task Force‘s Webinar Series Know Your Rights!
from Jen Bryan on Vimeo.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #accesstojustice #BrooklynBar #Vimeo #JenBryan

Scales of justice

Rehabilitation Center: Arguing with a nursing home administrator is like wrestling with a pig in the mud: After a few minutes, you realize the pig likes it.

Woman with white hair and pink smock holding hands in front of face, illustrating article by Richard Klass about nursing homes and rehabilitation centers

She had to convalesce in a rehabilitation center for comprehensive (sub-acute) in-patient care following illness. Upon admission, the resident was presented with the facility’s admission agreement for her to sign. The agreement provided that, in exchange for payment through Medicaid, Medicare, insurance or direct pay, the facility would provide all of the patient’s basic and routine services, including lodging and boarding and professional nursing care.

The agreement specified that the resident anticipated paying the costs of care through her managed care organization (MCO) (which contracts through a network or group for the delivery of health care). However, the agreement left the section for private payment rates for daily charges blank.

Motion to Dismiss the Facility’s Case

Post-discharge, the rehabilitation facility brought an action against the former resident, alleging that she obligated herself to pay for the room, board, nursing and health care services but failed to made payment. To mount the best defense possible, the former resident retained Richard A. Klass, Esq., Your Court Street Lawyer, who immediately moved to dismiss the case.

In the Complaint, the facility alleged that it was a corporation duly organized and existing under and by virtue of the laws of the State of New York. Based upon a search of the New York State Department of State online records, there was no corporation with the plaintiff’s name registered to do business in New York State. Business Corporation Law § 301(a)(1) specifies that the name of a domestic or foreign corporation “shall contain the word ‘corporation’, ‘incorporated’ or ‘limited’, or an abbreviation of one of such words; or, in the case of a foreign corporation, it shall, for use in this state, add at the end of its name one of such words or an abbreviation thereof.” There was no such designation in its name in the Summons or Complaint. To the extent that the facility may have claimed it was suing under an assumed name, General Business Law § 130(1) provides that there are certain requirements to be met.

Consumer credit transaction

The pending motion to dismiss set up settlement discussions about the procedural and substantive defenses to the facility’s case. As to the procedural aspect, the next line of defense was to threaten dismissal of the lawsuit on jurisdictional grounds.

The Summons failed to prominently display at the top the words “Consumer Credit Transaction.” CPLR 305(a) specifies that the Summons must have those words on the top where the court held that the debt on an obligation of a consumer to pay money arising out of a transaction in which the services which are the subject of the transaction are primarily for personal, family or household purposes. In Jack Mailman & Leonard Flug DDS, PC v. Whaley, 2002 WL 31988623 [Civil Court, Richmond Co. 2002], the court held that medical debts were deemed consumer debts.

Residential Care Facilities – Residents’ Rights

Nursing facilities, including nursing homes and rehabilitation centers

Nursing facilities, including nursing homes and rehabilitation centers, that accept residents whose charges will be paid in whole or in part by Medicaid are governed by the federal Nursing Home Reform Act (42 USC §1396r) and federal and state regulations (42 CFR §483; and 10 NYCRR §415).

Through these enactments, there was the creation of a so-called residential care patient’s “Bill of Rights.” These “Rights” include the rights to freedom from abuse, mistreatment and neglect; privacy; accommodation for mental, physical, psychological and emotional needs; treatment with dignity; and being fully informed and participating in one’s care.[1]

Financial obligation rights

Among residents’ rights are those relating to financial obligations to the facility, including informing the resident of those services and items that the facility offers for which the resident may be charged. 10 NYCRR §415(h). These laws and regulations govern nursing facility admission agreements. See, Prospect Park Nursing Home v. Goutier, 824 NYS2d 770 [Civil Court, Kings Co. 2006].

The resident did not read or write in the English language. The admission agreement was not translated for her. The resident alleged that when she asked what she was signing, she was told that her MCO would be paying the costs, not her. The “Anticipated Payor” section indicated that an insurer would be paying. The “Private Payment” section (including costs per day) was left blank. The resident alleged that she was never informed of the rates or charges. It was claimed that the facility’s representatives engaged in wrongful conduct and misrepresentation concerning the execution of the agreement. See, Nerey v. Greenpoint Mortgage Funding, Inc., 144 AD3d 646 (2d Dept. 2016).

Rehabilitation Center

Quality of Life: The right to adequate and appropriate care

The regulations emphasize that a resident has the right to receive from the facility “the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, consistent with the resident’s comprehensive assessment and plan of care.” 42 CFR §483.24.

The resident alleged she received inadequate care at the facility, including that she had to wait many hours for the bedpan to be changed; lack of bathing; unavailability of staff when needed and for necessary help and activities. In light of the vigorous defense advocated by Your Court Street Lawyer, the facility agreed to significantly reduce the bill for rehabilitation services and settle the case with the former resident on very favorable terms.

[1] https://www.aarp.org/home-garden/livable-communities/info-2001/the_1987_nursing_home_reform_act.html

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #NYNHCARE #Rehabilitation
keywords: Nursing facility, nursing home, rehabilitation center

Scales of justice

Retainer agreements should set forth scope of lawyer’s representation.

Portus Singapore PTE LTD v Kenyon & Kenyon LLP, 449 F Supp 3d 402, 411-15 [SDNY 2020] serves as a reminder that the scope of the lawyer’s representation should be set forth in the retainer agreement. As the federal court held:

In order to demonstrate that a lawyer was negligent “a plaintiff must show that an 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 professional duty caused the plaintiff’s actual damages.” McCoy v. Feinman, 99 N.Y.2d 295, 755 N.Y.S.2d 693, 785 N.E.2d 714, 718-19 (2002) (internal quotation marks and citations omitted). “What constitutes ordinary and reasonable skill and knowledge cannot be fixed with precision, but should be measured at the time of representation.” Darby & Darby, P.C. v. VSI Intern., Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378, 739 N.E.2d 744, 747 (2000). Generally, “ordinary and reasonable skill” is determined by looking to standards of legal practice in the State of New York. See, e.g., Sokol, 468 F. Supp. 2d at 637 (discussing New York law practice commentary). Moreover, “[a]n attorney may not be held liable for failing to act outside the scope of a retainer.” *412 Attallah v. Milbank, Tweed, Hadley & McCloy, LLP, 168 A.D.3d 1026, 93 N.Y.S.3d 353, 356 (2019).

In AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705, 866 N.E.2d 1033, 1035 (2007), following the liquidation of its parent company, the plaintiff corporation AmBase assumed primary liability for the parent corporation’s federal income taxes and secondary liability for all other liabilities. Following liquidation, the Internal Revenue Service (“IRS”) found the parent company liable for six years’ worth of withholding taxes, which would be imputed to AmBase under the liquidation agreement. Id. AmBase retained Davis Polk “to represent [it] as agent for [the parent corporation] to resolve the tax issues currently before” the IRS. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Davis Polk then successfully challenged in the Tax Court the IRS’s determination that AmBase was liable. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1035. AmBase then turned around and sued Davis Polk for legal malpractice on the ground that Davis Polk had failed to advise AmBase that AmBase was only secondarily liable for payment of taxes. Id. AmBase alleged that although it ultimately prevailed in the Tax Court, Davis Polk’s negligence forced AmBase to maintain a multi-million-dollar loss on its books, thereby creating an appearance of insolvency that resulted in lost business opportunities. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1036.

The New York Court of Appeals noted that the plain language of the retainer agreement “indicates that Davis Polk was retained to litigate the amount of tax liability and not to determine whether the tax liability could be allocated to another entity.” Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Noting that “the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation,” the court held that the “defendants exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession when they focused their efforts on the controversy between AmBase and the IRS – the subject of the retainer agreement – resulting in a most favorable outcome, which was publicly praised by AmBase principals.” Id.

Similarly, in Milbank, Tweed, the law firm agreed in its engagement letter to represent the plaintiff “to investigate and consider options that may be available to urge administrative reconsideration” of the plaintiff’s expulsion from the New York College of Osteopathic Medicine. 93 N.Y.S.3d at 355. The Appellate Division of the Supreme Court affirmed the dismissal of the plaintiff’s complaint that had alleged malpractice on the ground that Milbank, Tweed did not actually negotiate the plaintiff’s readmission to the school. Id. at 356. The court reasoned that an attorney cannot be held liable for failing to act outside the scope of a retainer and that negotiation with the school went beyond the stated scope of the agreement letter. Id.

Davis Polk and Milbank, Tweed stand for the proposition that the failure by a lawyer to take actions outside the scope of that lawyer’s representation of a client cannot form the basis of a legal malpractice suit.

This case is substantially similar to Davis Polk and Milbank, Tweed. The parties do not point to any formal retainer or contract that spelled out the engagement between Kenyon and Portus. Rather, the “scope” of the engagement between Portus and Kenyon was set out in the communications between Kenyon and Portus’s agent, Mr. Treloar. Mr. Treloar’s communication, faxed to Kenyon on June 15, 2001, instructed Kenyon “to enter the National Phase in United States on behalf of our client and in accordance with the *413 details shown on the attached sheet.” McCoy Decl., Ex. A-14.7 Mr. Treloar instructed Kenyon to file the application by June 17, 2001 and alerted Kenyon that this due date was “URGENT.” Id. Mr. Treloar further stated that “[i]n the absence of our specific instructions please keep this application in force.” Id. (emphasis added).

The scope of Kenyon’s initial engagement in 2001 was thus limited to the narrow task of “enter[ing] the National Phase in United States” of the international patent application and to keep the application in place absent further instructions from Portus.8 Acting on these instructions, Kenyon then filed an application for the national stage of the international patent application under 35 U.S.C. § 371 on that same day, June 15, 2001, two days before the deadline to file an application with the USPTO in connection with Portus’s international patent.

Portus’s claim of malpractice against Kenyon fails because Kenyon did exactly what it was required to do in its engagement: Kenyon filed an application pursuant to 35 U.S.C. § 371 within two days and Kenyon kept the application in force and prosecuted the application until it was granted in December 2014.

Portus argues that Kenyon committed malpractice because Kenyon failed to advise Portus in June 2001 that Portus would benefit if Kenyon filed an application under 35 U.S.C. § 111 rather than under 35 U.S.C. § 371 in the event that the USPTO extensively delayed consideration of the application by more than three years. If such a delay occurred, Portus would then be eligible for a patent term adjustment under the AIPA. However, this advantage was entirely speculative and dependent on the subsequent extensive delay by the USPTO of more than three years between the filing of the application in June 2001 and the initial non-final action in January 2005. Nevertheless, Portus claims that Kenyon’s failure to advise Portus of the possible advantage of a 35 U.S.C. § 111 filing in June 2001 was malpractice.

The only advantage that Portus points to from filing a 35 U.S.C. § 111 application rather than a 35 U.S.C. § 371 application in June 2001 is the extended patent term if the USPTO delayed in approving the patent application by more than three years. But that advantage was entirely theoretical in June 2001 before any application had been filed. Portus points to no comparable case where an attorney was required to go beyond the limits of an engagement and advise a client about theoretical advantages of another course of action that were based on unknown future contingencies.

Portus’s argument fails because there was nothing about the June 2001 *414 engagement that required Kenyon to advise Portus about the theoretical advantages of another application, advantages that would accrue to Portus only in the event, which was entirely speculative in June 2001, that the USPTO delayed consideration of the patent application by more than three years. While it is true that a lawyer can be held liable for withholding facts that are “relevant to the client’s decision to pursue a given course of action,” Spector v. Mermelstein, 361 F. Supp. 30, 39-40 (S.D.N.Y. 1972), aff’d, 485 F.2d 474 (2d Cir. 1973), it is also true that “an attorney is not held to a standard of ‘infallibility’ and the ‘perfect vision of hindsight’ is an unreliable test for determining the past existence of legal malpractice.” Nomura Asset Capital Corp. v. Cadwalader, Wickersham & Taft LLP, 889 N.Y.S.2d 506 (Table), at *11 (Sup. Ct. 2009) (internal citations omitted).

Kenyon carried out its representation of Portus as requested by Portus and successfully prosecuted the patent after the non-final and final action by the USPTO until the USPTO eventually granted Portus a patent in December 2014. Just as in Davis Polk and Milbank, Tweed, the scope of the agreement between the parties in this case did not impose upon the defendant an obligation to advise the plaintiff about matters outside the scope of that representation. In particular, Kenyon had no free-standing obligation separate and apart from the scope of the engagement to advise Portus about the drawbacks and advantages associated with a continuation bypass application and a national stage application in June 2001 when Portus retained Kenyon. Portus retained Kenyon for the very narrow purpose of entering the national phase in the United States of Portus’s international application and keeping that application in force until instructed otherwise. See Davis Polk, 834 N.Y.S.2d 705, 866 N.E.2d at 1037 (“Thus, the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation.”).

The cases that Portus cites in support of its contention that Kenyon was negligent in failing to advise Portus adequately after being contacted on June 15, 2001 prior to filing a patent application with the USPTO are inapposite.

In French v. Hogan, 210 A.D.2d 658, 619 N.Y.S.2d 406, 407 (1994), the plaintiff had entered into a contract to purchase a residence and employed the defendant attorney to represent her in connection with the transaction. In affirming the denial of summary judgment to the defendant, the court noted that “there remains an unresolved factual issue as to whether, if timely advised of the existence of the restrictive covenant, plaintiff could have avoided at least a significant portion of her alleged damages” incurred when she converted the property from a residence to a bed and breakfast following her purchase. Id.

In French, the plaintiff did not receive everything that she sought under the engagement with her attorney because the building she purchased had a covenant preventing her from putting the building towards her intended use. In this case, unlike in French, it is undisputed that Portus received what it requested of Kenyon in June 2001, namely that Kenyon enter the national phase of Portus’s application by filing an application under 35 U.S.C. § 371 and that Kenyon keep the application in place unless Portus told Kenyon to do otherwise. Kenyon performed as requested, leading to the successful prosecution of the patent application when it was granted in December 2014.

In the other case cited by Portus, *415 Estate of Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 259 A.D.2d 282, 686 N.Y.S.2d 404 (1999), the plaintiff corporation Sculptotek was created upon the advice of the defendant lawyer for the purposes of organizing the financial affairs of a famous sculptor, Louise Nevelson. After Nevelson’s death, the IRS determined that the corporation was a sham entity and that the corporate assets should be part of the sculptor’s estate. The determination was based in part on the lack of compensation to Nevelson for her artwork. The Appellate Division found that the attorney could be liable for malpractice for failing to advise their clients of the adverse consequences under the plan they recommended.

In Nevelson, the defendants failed to advise the plaintiffs on a central aspect of the plan that the defendants were retained to implement, namely the construction of a corporate structure that would survive an IRS audit. In this case, unlike in Nevelson, Kenyon did everything that Portus asked it to do in June 2001.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #legalmalpractice #retaineragreement

Scales of justice

Brooklyn Bar Association helps attorneys improve their resumes during COVID-19

Richard Klass in white shirt speaking at Brooklyn Bar Association, helping attorneys dealing with unemployment during COVID-19 pandemic.
Richard Klass (pictured), second vice president of the Brooklyn Bar Association, moderated the panel, which included attorney Andrea Bonina and retired attorney David Sarnoff. Screenshots via Zoom

Reported by Rob Abruzzese, Legal Editor
opens in a new windowBrooklyn Daily Eagle
May 26, 2020

“More than two million New Yorkers have filed for unemployment since the COVID-19 pandemic started, and lawyers are not immune. To help laid-off attorneys and people who are simply looking for a new job, the Brooklyn Bar Association held a continuing legal education seminar to help ensure that lawyers are putting their best foot forward.

“On Monday, May 18, Richard Klass, second vice president of the Brooklyn Bar Association, moderated a two-hour CLE entitled, “Resume Building and Interview Skills” along with panelists Andrea Bonina and David Sarnoff….”

#COVID19 #BklynEagle #BrooklynBarAssoc #CourtStreetLawyer


R. A. Klass
Your Court Street Lawyer

Next post
Previous post

Scales of justice

When Clients Don’t Pay Their Lawyers

Red text reading "Always the Last to Know" with blue text "Be Paid" superimposed over the word "know" illustrating article about legal fees.

The crisis has been averted. The lawyer did a great job for his client. The lawyer sent his client the final bill for services rendered. Unfortunately, the client now had other bills to pay and the legal problem the lawyer dealt with was starting to appear very small in the rearview mirror.

The lawyer came to Richard A. Klass, Your Court Street Lawyer, to sue the client to collect on the outstanding bill.

Complaint for Legal Fees Filed against Client

The lawyer commenced an action against his client alleging several causes of action in the complaint, including:

Breach of contract: A written retainer agreement with an attorney is an enforceable contract. As held in Jacobson v Sassower, 66 NY2d 991, 993 [1985], “as a matter of public policy, courts pay particular attention to fee arrangements between attorneys and their clients. An attorney has the burden of showing that a fee contract is fair, reasonable, and fully known and understood by the client.”

Assuming that the fee arrangements were fair to the client, the lawyer may establish his prima facie entitlement to judgment as a matter of law against the client on the cause of action alleging breach of contract by submitting evidence of the existence of a contract, the lawyer’s performance under the contract, the client’s breach of the contract, and resulting damages. See, Joseph W. Ryan, Jr., P.C. v Faibish, 136 AD3d 984 [2d Dept 2016].

Account Stated: Many times, an attorney is able to prove that he sent his client monthly invoices and the client never said one word about fees; then, when the bill comes due, the client ‘wakes up’ and starts objecting to all of the attorney’s charges.

An attorney can make out a prima facie showing of his entitlement to summary judgment on an “account stated” claim by providing documentary evidence of the invoices, and an affidavit stating that he sent the invoices on a monthly basis to defendant, and that defendant received the invoices and failed to object to the invoices until this litigation. See, Glassman v Weinberg, 154 AD3d 407 [1st Dept 2017].

Quantum Meruit: This Latin phrase basically means that one should be paid the reasonable value of services rendered on behalf of another.

If the terms of a retainer agreement are not established, or if a client discharges an attorney without cause, the attorney may recover only in quantum meruit to the extent that the fair and reasonable value of legal services can be established. See, Seth Rubenstein, P.C. v Ganea, 41 AD3d 54 [2d Dept 2007]. A cause of action for quantum meruit requires a showing of “a plaintiff’s performance of services in good faith, acceptance of those services by a defendant, an expectation of compensation and proof of the reasonable value of the services provided.” See, Hyman v Schwartz, 127 AD3d 1281, 1282 [3d Dept 2015].

Pre-litigation Considerations

Before an attorney files a lawsuit to recover legal fees, there are a number of considerations as to whether it is worth doing. The commencement of a lawsuit by an attorney against his client ought to be the last resort after an attempt to resolve nonpayment. While not exhaustive, some questions to ask before suing a client may be:

  • Did the attorney achieve a favorable result? While not necessarily a defense, the client in unsuccessful litigation may perceive that the attorney provided no value.
  • Is the client judgment-proof? Will any judgment actually be collectible?
  • Is there a written retainer agreement? It may be required by Uniform Rules of Court Part 1215.
  • Were contemporaneous time records kept?
  • Was the client sent detailed bills at regular intervals?
  • Has the client threatened to sue for legal malpractice? An estimated 40% to 50% of legal malpractice cases emanate from an attorney’s collection case.
  • Is the amount of unpaid fees large enough to justify bringing an action?
  • Is there a requirement for service of a notice of the availability of fee dispute arbitration under Uniform Rules of Court Part 137.
  • Is there the possibility of pursuing a charging lien on the case, or a retaining lien on the file?
  • How long has the clock been ticking on the dispute? The statutes of limitations are three years for the client to sue for legal malpractice and six years for the attorney to sue the client to collect his fees.

– Richard A. Klass, Esq.


Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.comcreate new email with any questions.

Prior results do not guarantee a similar outcome.

© 2020 Richard A. Klass
Credits:
Image at top of page: Richard A. Klass

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

Scales of justice

Attorneys: finding jobs during the pandemic. CLE hosted by Brooklyn Bar Association.

Brooklyn Bar Association to host CLE to help attorneys find jobs during the pandemic

The Brooklyn Bar Association understands that younger and more inexperienced attorneys can struggle to find a good job even in the best of times, but things are especially tricky now that the COVID-19 pandemic has put severe restrictions on going out and building a network that can lead to a job.

That’s why three attorneys, past President Andrea Bonina, second Vice President Richard Klass, along with David Sarnoff, are planning to host a continuing legal education seminar that will live-stream via Zoom on Monday, May 18 entitled, “Resume Building and Interview Skills,” where they will share specific strategies that can help during the pandemic and beyond.

In a two-hour CLE, the three panelists will start with a deep dive into resume construction with suggestions for how attorneys should address gaps, and ways to be concise and be specific with their language when it comes to specific skills. They will also discuss ways to network during the quarantine and will specifically go over routines that will work even after the pandemic is over.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

Scales of justice

Liable for failing to take actions outside the scope of representation?

In Portus Singapore PTE LTD v Kenyon & Kenyon LLP, 16CV6865 (JGK), 2020 WL 1501886, at *5-6 [SDNY Mar. 30, 2020], the court dealt with the issue of whether the attorney can be held liable to his client for failing to take actions outside the scope of his representation. The court held:

In order to demonstrate that a lawyer was negligent “a plaintiff must show that an 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 professional duty caused the plaintiff’s actual damages.” McCoy v. Feinman, 99 N.Y.2d 295, 755 N.Y.S.2d 693, 785 N.E.2d 714, 718-19 (2002) (internal quotation marks and citations omitted). “What constitutes ordinary and reasonable skill and knowledge cannot be fixed with precision, but should be measured at the time of representation.” Darby & Darby, P.C. v. VSI Intern., Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378, 739 N.E.2d 744, 747 (2000). Generally, “ordinary and reasonable skill” is determined by looking to standards of legal practice in the State of New York. See, e.g., Sokol, 468 F. Supp. 2d at 637 (discussing New York law practice commentary). Moreover, “[a]n attorney may not be held liable for failing to act outside the scope of a retainer.” Attallah v. Milbank, Tweed, Hadley & McCloy, LLP, 168 A.D.3d 1026, 93 N.Y.S.3d 353, 356 (2019).

In AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705, 866 N.E.2d 1033, 1035 (2007), following the liquidation of its parent company, the plaintiff corporation AmBase assumed primary liability for the parent corporation’s federal income taxes and secondary liability for all other liabilities. Following liquidation, the Internal Revenue Service (“IRS”) found the parent company liable for six years’ worth of withholding taxes, which would be imputed to AmBase under the liquidation agreement. Id. AmBase retained Davis Polk “to represent [it] as agent for [the parent corporation] to resolve the tax issues currently before” the IRS. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Davis Polk then successfully challenged in the Tax Court the IRS’s determination that AmBase was liable. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1035. AmBase then turned around and sued Davis Polk for legal malpractice on the ground that Davis Polk had failed to advise AmBase that AmBase was only secondarily liable for payment of taxes. Id. AmBase alleged that although it ultimately prevailed in the Tax Court, Davis Polk’s negligence forced AmBase to maintain a multi-million-dollar loss on its books, thereby creating an appearance of insolvency that resulted in lost business opportunities. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1036.

The New York Court of Appeals noted that the plain language of the retainer agreement “indicates that Davis Polk was retained to litigate the amount of tax liability and not to determine whether the tax liability could be allocated to another entity.” Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Noting that “the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation,” the court held that the “defendants exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession when they focused their efforts on the controversy between AmBase and the IRS – the subject of the retainer agreement – resulting in a most favorable outcome, which was publicly praised by AmBase principals.” Id.

Similarly, in Milbank, Tweed, the law firm agreed in its engagement letter to represent the plaintiff “to investigate and consider options that may be available to urge administrative reconsideration” of the plaintiff’s expulsion from the New York College of Osteopathic Medicine. 93 N.Y.S.3d at 355. The Appellate Division of the Supreme Court affirmed the dismissal of the plaintiff’s complaint that had alleged malpractice on the ground that Milbank, Tweed did not actually negotiate the plaintiff’s readmission to the school. Id. at 356. The court reasoned that an attorney cannot be held liable for failing to act outside the scope of a retainer and that negotiation with the school went beyond the stated scope of the agreement letter. Id.

Davis Polk and Milbank, Tweed stand for the proposition that the failure by a lawyer to take actions outside the scope of that lawyer’s representation of a client cannot form the basis of a legal malpractice suit.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

Scales of justice

Breach of contract action against an attorney

The court in Judd Burstein, P.C. v Long, 797 Fed Appx 585, 587-88 [2d Cir 2019] recited the law regarding certain damages in the context of a breach of contract action against an attorney: Under New York law, it is well established that where “[a]ttorney’s services” are “the substance of the action alleging a breach of the retainer agreement,” such as here, “the costs of obtaining substituted services [are] … consequential damages.” Hinman, Straub, Pigors & Manning, P.C. v. Broder, 89 A.D.2d 278, 456 N.Y.S.2d 834, 836 (1982); accord *588 Affiliated Credit Adjustors, Inc. v. Carlucci & Legum, 139 A.D.2d 611, 527 N.Y.S.2d 426, 428 (1988) (stating, in the context of an action for legal malpractice, that legal fees “allegedly incurred in retaining alternate counsel to perform the services for which the defendants were originally retained … [are] not merely an incident of litigation but, instead, constitute[ ] consequential damages which may be recoverable”). Such damages “may include litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney’s wrongful conduct.” Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 443, 835 N.Y.S.2d 534, 867 N.E.2d 385 (2007) (internal quotation marks and citations omitted).

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

Scales of justice