A motion to dismiss based upon documentary evidence should be conclusive.

The decision in Bianco v Law Offices of Yuri Prakhin, 189 AD3d 1326, 1327-29 [2d Dept 2020] serves as a good reminder that a motion to dismiss an action based upon documentary evidence should be conclusive; otherwise, the motion will be denied:

On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction (see CPLR 3026). The facts as alleged in the complaint are accepted as true, the plaintiff is afforded the benefit of every possible favorable inference, and the court determines only whether the facts as alleged fit within any cognizable legal theory (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]). Under CPLR 3211 (a) (1), a *1328 dismissal is warranted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; Leon v Martinez, 84 NY2d at 88). In order for evidence to qualify as documentary, it must be unambiguous, authentic, and undeniable (see Granada Condominium III Assn. v Palomino, 78 AD3d 996, 996-997 [2010]; Fontanetta v John Doe 1, 73 AD3d 78, 86 [2010]). “[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case” (Fontanetta v John Doe 1, 73 AD3d at 84-85 [internal quotation marks omitted]; see First Choice Plumbing Corp. v Miller Law Offs., PLLC, 164 AD3d 756, 758 [2018]). Neither affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a) (1) (see Fox Paine & Co., LLC v Houston Cas. Co., 153 AD3d 673, 678 [2017]; Granada Condominium III Assn. v Palomino, 78 AD3d at 997). Accordingly, the hearing transcripts, affirmation, and affidavit relied upon by the Kletzkin defendants and the Schneider defendants in support of their respective motions do not constitute documentary evidence for the purposes of CPLR 3211 (a) (1). Additionally, the trial counsel agreement between the Schneider defendants and the Kletzkin defendants, which does constitute documentary evidence, did not utterly refute the factual allegations of the complaint and did not conclusively establish a defense to the claims as a matter of law.

On a motion made pursuant to CPLR 3211 (a) (7), the burden never shifts to the nonmoving party to rebut a defense asserted by the moving party (see Sokol v Leader, 74 AD3d 1180, 1181 [2010]). “Unless the motion is converted into one for summary judgment pursuant to CPLR 3211 (c), ‘affidavits may be received for a limited purpose only, serving normally to remedy defects in the complaint,’ and such affidavits ‘are not to be examined for the purpose of determining whether there is evidentiary support for the pleading’ ” (Sokol v Leader, 74 AD3d at 1181, quoting Rovello v Orofino Realty Co., 40 NY2d 633, 635, 636 [1976]; see Nonnon v City of New York, 9 NY3d 825, 827 [2007]). Affidavits submitted by a defendant “will almost never warrant dismissal under CPLR 3211 unless they establish conclusively that [the plaintiff] has no . . . cause of action” (Lawrence v Graubard Miller, 11 NY3d 588, 595 [2008] [emphasis and internal quotation marks omitted]; see Sokol v Leader, 74 AD3d at 1182). “[U]nless it has been shown that a *1329 material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, again dismissal should not eventuate” (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). “Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss” (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; see Carlson v American Intl. Group, Inc., 30 NY3d 288, 298 [2017]; AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591 [2005]).

Here, the plaintiff adequately pleaded the cause of action alleging legal malpractice against the Kletzkin defendants and the Schneider defendants. Contrary to the contentions of those defendants, neither conclusively established that an application for leave to serve a late notice of **3 claim or to deem the late notice of claim timely served upon the NYCTA nunc pro tunc would have been futile (see generally Matter of Newcomb v Middle Country Cent. Sch. Dist., 28 NY3d 455, 465 [2016]; Davis v Isaacson, Robustelli, Fox, Fine, Greco & Fogelgaren, 284 AD2d 104, 105 [2001]).

Contrary to the Kletzkin defendants’ contention, the complaint adequately states a cause of action to recover damages for violation of Judiciary Law § 487. Contrary to the Schneider defendants’ contention, the cause of action alleging violation of Judiciary Law § 487 is not duplicative of the cause of action alleging legal malpractice. “A violation of Judiciary Law § 487 requires an intent to deceive (see Judiciary Law § 487), whereas a legal malpractice claim is based on negligent conduct” (Moormann v Perini & Hoerger, 65 AD3d 1106, 1108 [2009]; see Bill Birds, Inc. v Stein Law Firm, P.C., 164 AD3d 635, 637 [2018], affd 35 NY3d 173 [2020]).

R. A. Klass
Your Court Street Lawyer

.
Previous post

#CourtStreetLawyer #LegalMalpractice

Scales of justice

Party bringing a lawsuit must be prepared to produce discovery responses in a timely fashion.

Allstar Elecs., Inc. v DeLuca, 188 AD3d 1121 [2d Dept 2020] is a good reminder that, even in the context of a legal malpractice case, the party bringing the lawsuit must be prepared to produce all discovery responses to the other side in a timely fashion or risk the complaint being dismissed. The court held:

“The nature and degree of the penalty to be imposed pursuant to CPLR 3126 against a party who refuses to comply with court-ordered discovery is a matter within the discretion of the court” (Smookler v. Dicerbo, 166 A.D.3d 838, 839, 88 N.Y.S.3d 235; seePastore v. Utilimaster Corp., 165 A.D.3d 685, 686, 84 N.Y.S.3d 547; Quinones v. Long Is. Jewish Med. Ctr., 90 A.D.3d 632, 933 N.Y.S.2d 907). The striking of a pleading may be appropriate where there is a clear showing that the failure to comply with discovery demands or court-ordered discovery was the result of willful and contumacious conduct (seeOzeri v. Ozeri, 135 A.D.3d 838, 839, 23 N.Y.S.3d 363; McArthur v. New York City Hous. Auth., 48 A.D.3d 431, 851 N.Y.S.2d 271). “The willful and contumacious character of a party’s conduct can be inferred from the party’s repeated failure to respond to demands or to comply with discovery orders, and the absence of any reasonable excuse for these failures” (Tos v. Jackson Hgts. Care Ctr., LLC, 91 A.D.3d 943, 943–944, 937 N.Y.S.2d 629; seeSmookler v. Dicerbo, 166 A.D.3d at 839, 88 N.Y.S.3d 235; Commisso v. Orshan, 85 A.D.3d 845, 925 N.Y.S.2d 612).

Here, contrary to the plaintiff’s contention, the willful and contumacious character of its conduct could properly be inferred from its repeated failures, without an adequate excuse, to timely respond to discovery demands and to comply with the Supreme Court’s orders to provide outstanding discovery and set a date for the plaintiff’s deposition (seeMarino v. Armogan, 179 A.D.3d 664, 666, 113 N.Y.S.3d 613; Broccoli v. Kohl’s Dept. Stores, Inc., 171 A.D.3d 846, 847–848, 97 N.Y.S.3d 660; Smookler v. Dicerbo, 166 A.D.3d at 839–840, 88 N.Y.S.3d 235; Montemurro v. Memorial Sloan–Kettering Cancer Ctr., 94 A.D.3d 1066, 1066–1067, 942 N.Y.S.2d 623).

Scales of justice

A client must be cognizant of the strict bar under the statute of limitations for suing his attorney.

A client must be cognizant of the strict bar under the statute of limitations for suing his attorney. In Flintlock Constr. Services, LLC v Rubin, Fiorella & Friedman, LLP, 188 AD3d 530, 531 [1st Dept 2020], the court affirmed dismissal based on the statute of limitations, holding:

“On a motion to dismiss a cause of action pursuant to CPLR 3211 (a) (5) as barred by the applicable statute of limitations, a defendant must establish, prima facie, that the time within which to sue has expired. Once that showing has been made, the burden shifts to the plaintiff to raise a question of fact as to whether the statute of limitations has been tolled, an exception to the limitations period is applicable, or the plaintiff actually commenced the action within the applicable limitations period.” (Quinn v McCabe, Collins, McGeough & Fowler, LLP, 138 AD3d 1085, 1085-1086 [2d Dept 2016] [internal quotation marks omitted].)

“An action to recover damages for an attorney’s malpractice must be commenced within three years from accrual (see CPLR 214 [6]). A legal malpractice claim accrues when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court. In most cases, this accrual time is measured from the day an actionable injury occurs [or when the damages are sufficiently calculable], even if the aggrieved party is then ignorant of the wrong or injury.” (McCoy v Feinman, 99 NY2d 295, 301 [2002] [internal quotation marks and citation omitted]; King Tower Realty Corp. v G & G Funding Corp., 163 AD3d 541 [2d Dept 2018].) Any damages arising from defendant’s alleged malpractice were sufficiently calculable for pleading purposes when the jury rendered its verdict on July 29, 2013, and the action commenced on September 17, 2018 is time-barred.

R. A. Klass
Your Court Street Lawyer

.
Previous post

#CourtStreetLawyer #LegalMalpractice

Scales of justice

Joint Venture Agreements – I would do anything for [my partners] but I won’t do that…

Three business partners arguing to illustrate an article by Richard Klass about Joint Venture Agreements

Acrobat PDF Version

Two partners owned vacant lots in Manhattan and wanted to build on them. They found two developers who pitched building townhouses on the lots. The four of them entered into a joint venture agreement (“JVA”). [1] Essentially, the agreement was that, in return for the developers paying off debts owed on the lots, refinancing an existing mortgage and obtaining a new construction loan, the lot owners would transfer the property to a limited liability company (“LLC”) to be jointly owned by all four of them.

Joint Venture Agreement

According to the JVA, ownership of the new LLC would be equally divided among the four partners (25% each). The LLC was supposed to refinance the property. The funds from the refinance would first be utilized to satisfy the existing mortgage on the property and then finance all of the construction costs for three single-family townhouses. The developers were to use their best efforts to obtain a construction loan to perform the purpose of the joint venture, and the lot owners were to fully cooperate in these efforts.

Formation of the LLC

One of the developers formed an LLC into which title to the lots would be transferred. The LLC was initially formed with him as the sole member for convenience purposes until the prospective refinance and closing were to take place, at which time all four partners would constitute the members.

Lack of cooperation

In order to comply with the mortgage lender’s requests about the property, the developers needed certain back-up documentation from the lot owners concerning expenses. The lot owners did not provide the requested items. Ultimately, they stopped cooperating with the developers. The developers retained Richard A. Klass, Esq., Your Court Street Lawyer, to pursue their rights under the joint venture agreement, including suing for breach of contract and to enforce a constructive trust over the vacant lots.

In response to the developers’ claims, the lot owners contended that they properly rejected the demand to transfer title to the property to the new LLC. They claimed that they were never provided with an operating agreement that named all four of the partners as members. The lot owners declared, “There was no way it was either reasonable or pursuant to the terms of the JVA that we were going to transfer the property worth at least $4,000,000.00 to an LLC in which we had no ownership interest and no control.”

The developers asserted that this defense was pretext — the lot owners never intended on complying with the joint venture agreement from the start. As fully laid out before the arbitrator, both in testimony and documentary evidence, the developers established that this defense was unfounded based on several facts: (1) the transfer tax documents, prepared by the title company, reflected all four joint venturers’ names and respective 25% interests in the new LLC; [2] (2) One of the lot owners himself emailed the title company the names of all four people for the new LLC; (3) the developer emailed the mortgage lender that all four people were partners in the new LLC; (4) the developer informed the lot owner that the mortgage lender needed a draft of the operating agreement, Excel spreadsheet and all checks following; and (5) the developers made various, substantial payments in furtherance of their joint venture prior to any deed transfer.

The developers claimed that the lot owners wrongfully breached their fiduciary duty that was created when they entered into the joint venture.[3] As joint venturers, the developers asserted the lot owners owed them a fiduciary duty to supply financial information which was within their exclusive control and they breached their duty by intentionally failing to cooperate and disclose pertinent information. Cooperation on the part of both sides to a contract is implied in every contract. See, Madison Pictures, Inc. v Pictorial Films, Inc., 6 Misc 2d 302, 324-25 (Sup. Ct. 1956) (“Where a matter is particularly within the knowledge of one party, it is his duty to supply the information.”); see also Weeks v. Rector of Trinity Church in City of New York, 56 App.Div. 195, 67 N.Y.S. 670, 672 (1st Dept. l900) (“The rule of law is that, when the obligation of performance by one party to a contract presupposes the doing of another act by the other party prior thereto, there arises an implied obligation of the second party to do the act which the performance of the contract necessarily…”).

The arbitrator determined that the developers were entitled to compensation from the lot owners for their substantial investment of time and money into the project. The arbitrator awarded half of the value of the property along with reimbursement for all of their expenses.

[1] Under New York law, five elements are necessary to form a joint venture: “(1) two or more persons must enter into a specific agreement to carry on an enterprise for profit; (2) their agreement must evidence their intent to be joint venturers; (3) each must make a contribution of property, financing, skill, knowledge or effort; (4) each must have some degree of joint control over the venture; and (5) there must be a provision for the sharing of both profits and losses.” Dinaco, Inc. v. Time Warner Inc., 346 F.3d 64, 67-68 (2d Cir. 2003).

[2] It was noted that both the Joint Venture Agreement and the NYC Real Property Transfer (RPT) Tax Return served as documentary evidence of the respective LLC ownership interests of the parties. As held in Matter of Pappas v Corfian Enterprises, Ltd., 22 Misc 3d 1113(A) [Sup Ct 2009], affd, 76 AD3d 679 [2d Dept 2010]: “In the real world, particularly that in which close corporations operate, clear evidence of share ownership is often not found in the corporate books and records, for any number of reasons. Other evidence must be found, and the lodestar for admissibility and probative value must be the contractual foundation for shareholder status. A court may consider the intent of the parties, particularly evidence of an agreement to form a corporation. (See Matter of Estate of Purnell v. LH Radiologists, 90 N.Y.2d at 530, 664 N.Y.S.2d 238, 686 N.E.2d 1332; Blank v. Blank, 256 A.D.2d at 689, 681 N.Y.S.2d 377.) * * *

Documentary evidence may be particularly probative when the documents were created under circumstances in which there was no incentive to fabricate. Among the types of documents that courts have considered, and that have been proffered in this case, are corporate and personal tax returns, bank loan documents, and financial statements. (See Matter of Capizola v. Vantage International, Ltd., 2 A.D.3d at 845, 770 N.Y.S.2d 395; Blank v. Blank, 256 A.D.2d at 694, 681 N.Y.S.2d 377; Hunt v. Hunt, 222 A.D.2d at 761, 634 N.Y.S.2d 804.

[3] It is well settled that joint venturers are governed by the same good-faith requirements as co-partners and the creation of a joint venture “imposes a fiduciary relationship, and not a simple contract.” Learning Annex Holdings, LLC v Whitney Educ. Group, Inc., 765 F Supp 2d 403, 412 [SDNY 2011]. In order to demonstrate a breach of fiduciary duty, there must be: “(i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and (iii) damages resulting therefrom.” N. Shipping Funds I, LLC v Icon Capital Corp., 921 F Supp 2d 94, 101 (S.D.N.Y. 2013)(Citing Johnson v. Nextel Communications, Inc., 660 F.3d 131, 138 (2d Cir. 2011)).

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

keywords:
#joint-venture-agreement

Scales of justice

Klass to Speak at the 2021 New York State Bar Association Annual Meeting

Richard A. Klass, Esq. is scheduled to speak about “Obtaining Surplus Funds in Foreclosure Proceedings” on opening day of the New York State Bar Association’s 2021 Annual Meeting. This is a two-week virtual conference, running from January 19th to the 29th.

Obtaining Surplus Funds in Foreclosure Proceedings

At 12:50pm, on Jan. 19, Klass will speak in the General Practice Section on the topic “Tips for Obtaining Surplus Funds in Foreclosure Proceedings during the Age of COVID-19.

This talk will be moderated by Sarah E. Gold, Esq., of the Gold Law Firm in Albany, NY.

Several more luminaries of the New York State legal community are also scheduled to speak that day. The day’s schedule includes the following topics and speakers.

General Practice Section Welcome

Presenters

  • Domenick Napoletano, Esq. | Law Office of Domenick Napoletano, Brooklyn, NY
  • Elisa S. Rosenthal, Esq. | Of Counsel, Franchina Law Group, LLC., Garden City, NY

Update on Cannabis Law

This program will discuss the history and background of the cannabis law, its legalization status nationwide, hemp vs. MJ, legal ethics, notable litigation, and consultants to licensed operators. It will also provide practical knowledge for attorneys regarding the cannabis industry, and cannabis business strategy. In addition, hot topic issues like advertising, M&A, and ethics all within the cannabis industry will be discussed.

Speakers

  • John Nichols, Esq. | Counsel, Barclay Damon, LLP., Syracuse, NY
  • Shanita Penny M.B.A. | CEO, Founder and Principal, Budding Solutions; Immediate Past President, Minority Cannabis Business Association (MCBA), Baltimore, MD

Committee on Professional Discipline Welcome and Introductions

Speakers

  • Richard M. Maltz, Esq. | Frankfurt Kurnit Klein & Selz, PC., New York, NY
  • Martin Minkowitz, Esq. | Stroock & Stroock & Lavan, LLP., New York, NY

Ethics of Accepting a Frivolous or Questionable Representation

This distinguished panel will address the specific ethical obligations that attorneys face when confronted with a frivolous or questionable representation, along with many issues that arise in daily business. We will examine thorny ethical issues that are not expressly addressed by any model or state code of ethics, with an aim to impart user-friendly advice that will ultimately strengthen the ethical footing of your firm and your client.

Moderator

  • Joel Cohen, Esq. | Stroock & Stroock & Lavan, LLP., New York, NY

Panelists

  • Andrea Bonina, Esq. | Chair, Grievance Committee for the Second, Eleventh and Thirteenth Judicial Districts; Partner, Bonina & Bonina P.C., Brooklyn, New York
  • Michael S. Ross, Esq. | Law Offices of Michael S. Ross, New York, NY
  • Douglas H. Wigdor, Esq. | Founding Partner Wigdor Law, LLP.

CPLR Update: What’s New in New York Civil Practice Law and Rules

Burt Lipshie provides his indispensable review of changes to the New York Civil Practice. Widely regarded as an expert on New York procedure, Burt has served as an educator to, and an advocate on behalf of, the New York State Court System. This program is essential for all litigators.

Speaker

  • Burton N. Lipshie, Esq. | Stroock & Stroock & Lavan, LLP., New York, NY

Tips for Obtaining Surplus Fund in Foreclosure Proceedings during the Age of COVID-19

In the age of COVID-19 and the many financial uncertainties being faced, Richard A. Klass, Esq., a former Chair of the General Practice Section shares his knowledge and expertise on how to navigate the obstacles presented by the pandemic in obtaining surplus funds in foreclosure proceedings.

Moderator

  • Sarah E. Gold, Esq. | Gold Law Firm, Albany, NY

Speaker

Virtual Notary During the Pandemic

Faced with the challenges of having Wills, Health Care Proxies, Deeds and like instruments notarized during these difficult and trying times, you will learn how to navigate the waters and service your clients during a time they needed us the most.

Speaker

  • Michael Markowitz, Esq. | Michael A. Markowitz, PC., Hewlett, NY

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #COVID19 #nysba

Scales of justice

Attorney retainer agreement should state matters for which the attorney is NOT retained.

It is important for a retainer agreement to lay out not only the matters that the attorney will represent the client on but also those that the attorney will not provide representation. The client defeated the motion to dismiss in Katz v Siano, 187 AD3d 639, 640 [1st Dept 2020], as the court held:

Plaintiff adequately plead that defendant, who was retained to represent him in a criminal matter, owed him a duty of care with respect to legal advice he allegedly offered in connection with a pending civil action (see Jane St. Co. v Rosenberg & Estis, 192 AD2d 451 [1st Dept 1993], lv denied 82 NY2d 654 [1993]). While the parties entered into a written retainer agreement stating that the legal representation was for the criminal matter, on this motion to dismiss the written retainer does not eliminate any possibility that defendant owed plaintiff a duty of care in connection with legal advice he had given and was continuing to give regarding the separate civil matter, insofar as plaintiff relied upon it within that matter rather than in the criminal matter (see Genesis Merchant Partners, L.P. v Gilbride, Tusa, Last & Spellane, LLC, 157 AD3d 479, 482 [1st Dept 2018]). Accordingly, there is no documentary evidence here sufficient to require dismissal of the legal malpractice claim pursuant to CPLR 3211 (a) (1) (see IMO Indus. v Anderson Kill & Olick, 267 AD2d 10 [1st Dept 1999]). Issues of fact precluding dismissal exist as to whether defendant’s legal malpractice was the proximate cause of any damages suffered by plaintiff in the civil matter and as to whether plaintiff suffered cognizable damages in that matter.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #LegalMalpractice

Scales of justice

Complaint failed to adequately allege actual, ascertainable damages.

In Katsoris v Bodnar & Milone, LLP, 186 AD3d 1504 [2d Dept 2020], the court affirmed dismissal of the case, holding that:

Here, the complaint failed to adequately allege actual, ascertainable damages. The general allegations that, as a result of the alleged acts of malpractice, the plaintiff was caused to incur “additional legal fees,” and caused to suffer “financial damages and expense,” “adverse financial consequences,” and “direct financial damage,” were all conclusory and inadequate to constitute “actual, ascertainable damages” (Dempster v. Liotti, 86 A.D.3d at 177, 924 N.Y.S.2d 484). To the extent that the complaint addressed the plaintiff’s settlement, the complaint alleged that the defendant’s negligence in its handling of the divorce action caused the plaintiff to suffer “direct prejudice … in both trial and/or settlement,” and that, but for such negligence, the plaintiff “would have fared far better at trial and/or in settlement of the Divorce Action.” These allegations are conclusory and lack any factual support, and they are inadequate to sufficiently allege that the stipulation of settlement that the plaintiff entered into with his former wife was “effectively compelled” by the mistakes of counsel (Rau v. Borenkoff, 262 A.D.2d 388, 389, 691 N.Y.S.2d 140; seeBenishai v. Epstein, 116 A.D.3d 726, 728, 983 N.Y.S.2d 618). “The fact that the plaintiff subsequently was unhappy with the settlement [he] obtained … does not rise to the level of legal malpractice” (Holschauer v. Fisher, 5 A.D.3d 553, 554, 772 N.Y.S.2d 836). “Moreover, the plaintiff failed to plead specific factual allegations showing that, had he not settled, he would have obtained a more favorable outcome” (Schiller v. Bender, Burrows & Rosenthal, LLP, 116 A.D.3d 756, 758, 983 N.Y.S.2d 594; seeKeness v. Feldman, Kramer & Monaco, P.C., 105 A.D.3d at 813, 963 N.Y.S.2d 313; Tortura v. Sullivan Papain Block McGrath & Cannavo, P.C., 21 A.D.3d at 1083, 803 N.Y.S.2d 571; Dweck Law Firm v. Mann, 283 A.D.2d 292, 293, 727 N.Y.S.2d 58; Rau v. Borenkoff, 262 A.D.2d at 389, 691 N.Y.S.2d 140). Accordingly, we agree with the Supreme Court’s determination to grant that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the first cause of action, alleging legal malpractice.

R. A. Klass
Your Court Street Lawyer

Next post
Previous post

#CourtStreetLawyer #damages

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. SeeDavis 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