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Current Developments in the Commercial Divisions of the
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Posted: July 12, 2014

Claims Dismissed for Failure to Present Evidence of Proximate Causation

On June 30, 2014, Justice Sherwood of the New York County Commercial Division issued a decision in Mizrahi v. Adler, 2014 NY Slip Op. 31701(U), granting defendants summary judgment dismissing the complaint because the plaintiff could not show that the defendants’ misconduct caused his damages.

In Mizrahi, the plaintiff asserted legal malpractice, fraud and other claims against the defendants in connection with a real estate investment into which the defendants allegedly induced the plaintiff to enter.  In granting the defendants’ motion for summary judgment, the court held, among other things, that the claims against them failed because the plaintiff failed to show that his damages were proximately caused by the defendants, explaining:

Plaintiff’s action fails on the question of proximate cause. While the issue of proximate cause can often be a jury question, the court may always determine whether there are questions of fact. In Laub v Faessel, dealing with claims for fraud, negligent misrepresentation and breach of fiduciary duty, the court, discussing proximate cause, distinguished between a misrepresentation which induces a plaintiff to engage in a transaction (“transaction causation”), and misrepresentations which directly cause the loss to plaintiff (“loss causation”). Loss causation is the fundamental core of the common-law concept of proximate cause: An essential element of the plaintiffs cause of action for negligence, or for any tort, is that there be some reasonable connection between the act or omission of the defendant and the damage which the plaintiff has suffered. Transaction causation is often synonymous with but for causation.

In the present context of a legal malpractice claim, plaintiff alleges transaction causation, because he says that he would not have entered into the agreements had he known that they bore any risk. That is, but for Adler’s representations, there would have been no transaction. However, even assuming that the representations are a basis for finding transaction causation, plaintiff cannot establish loss causation, because many factors led to the failure to close on Unit 6401, or any other unit in the Trump Towers. Plaintiff’s losses were caused by the precipitious drop in real estate prices, and the value of the Trump Towers units in 2008; the Joss of his job; and plaintiff’s failure to obtain financing. . . . As a result, plaintiff has failed to plead proximate cause.

(Internal quotations and citations omitted) (emphasis added).

This decision shows how the artificial, if necessary, line drawing needed to do causation analysis can leave a plaintiff that has been damaged without a claim because of its inability to tie the defendants tightly enough to the injury.

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