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Posted: April 9, 2017

Fraud Claim Based on Same Facts as Legal Malpractice Claim Dismissed

On March 28, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in Brean, Murray, Carrett & Co. v. Morrison & Foerster LLP, 2017 NY Slip Op. 30602(U), dismissing a fraud claim based on the same facts as a legal malpractice claim, explaining:

Brean’s fraud claim must also be dismissed. Brean’s fraud claim alleges that Morrison made misrepresentations in the opinion letter, in affirmatively representing to Plaintiff that the firm had completed the work necessary in order to form its opinion when in fact, it was issued with actual or constructive knowledge of its falsity, and by withdrawing as counsel without revealing its professional misconduct. While the fraud claim timely falls within the six year statute of limitations period, Brean’s allegations of fraud are insufficient to state a cause of action.

First, it is well settled that concealment by a professional, or failure to disclose his or her own malpractice, does not give rise to a cause of action in fraud or deceit separate and different from the customary malpractice action, thereby entitling the plaintiff to bring his action within the longer period limited for such claims. Here, Brean filed its malpractice complaint, and only after Morrison moved to dismiss the complaint on statute of limitations grounds, did Brean file an amended complaint alleging fraud. Brean’s allegation of Morrison’s concealment of its malpractice by resigning as counsel does not give rise to a claim for fraud.

Further, the remaining basis for the fraud claim is duplicative of the legal malpractice claim because it arose from the same underlying facts and alleged similar damages. The key to determining whether a claim is duplicative of one for malpractice is discerning the essence of each claim. In the remaining basis for its fraud claim, Brean alleges that Morrison made misrepresentations in the opinion letter, in affirmatively representing to Plaintiff that the firm had completed the work necessary in order to form its opinion when in fact, it was issued with actual or constructive knowledge of its falsity. Its malpractice claim states that Morrison was negligent in conducting its due diligence and in issuing its opinion letter without discovering Puda’s true ownership in Zhanxi. The allegations in both of those claims arise from the same underlying facts and allege similar damages.

(Internal quotations and citations omitted).

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