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Current Developments in the Commercial Divisions of the
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Posted: January 10, 2018

Question of Fact Regarding Plaintiff’s Constructive Notice of Misrepresentation Precluded Dismissal

On January 9, 2018, the First Department issued a decision in Macquarie Capital (USA) Inc. v. Morrison & Foerster LLP, 2018 NY Slip Op. 00091, holding that questions of fact regarding the plaintiff’s constructive notice of misrepresentations it alleged that counsel negligently failed to uncover precluded dismissal of a malpractice claim, explaining:

Defendant’s argument that an investigative report gave plaintiff prior constructive notice of the material misrepresentations is unavailing. In Ableco, this Court granted the defendants’ motion for summary judgment, dismissing the plaintiff’s legal malpractice claim on the basis of information plaintiff indisputably possessed prior to the closing of the transaction at issue. Specifically, the plaintiff, the maker of commercial loans, received a press release that explicitly excluded certain property from the available inventory of a bankruptcy estate, and thus, the evidence refuted the plaintiff’s claim that it was unaware that it would not be getting a first priority lien on the entire inventory. Moreover, this Court’s determination was founded not only upon the plaintiff’s possession of the press release, but also on the clear and explicit presentation of the information such that counsel’s legal interpretation was not required. Here, on a pre-answer motion to dismiss, although plaintiff acknowledges that it had possession of the investigative report, the information contained in the report cannot, at this stage, be described as explicitly putting plaintiff on notice and not requiring counsel’s interpretation of the information. Defendant may not shift to the client the legal responsibility it was specifically hired to undertake.

(Internal quotations and citations omitted).

We both bring and defend legal malpractice claims and other claims relating to the duties of lawyers and other professionals. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of such claims.

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