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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: March 13, 2020

Appointment of Separate Counsel Intervening Cause Defeating Malpractice Claim

On February 25, 2020, the First Department issued a decision in Binn v. Muchnick, Golieb & Golieb, P.C., 2020 NY Slip Op. 01302, holding that the appointment of separate counsel was an intervening cause, cutting off a malpractice claim, explaining:

Plaintiffs allege that their long-time attorneys, defendants John Golieb, Esq. and Muchnick, Golieb & Golieb, P.C. (together, the Golieb defendants), gave poor advice in connection with a series of transactions in 2014, 2015 and 2016, resulting in the loss of plaintiffs’ majority interest and dilution of their interest in their airport spa business, XpresSpa Holdings, LLC (XpresSpa), as well as other damages. The motion court correctly concluded that documentary evidence, including emails and transaction documents, rendered it essentially undeniable that plaintiffs were advised of and/or otherwise understood the terms of the transactions they entered into in 2014 and 2015, as well as their alternative options, if any. Those documents conclusively establish a defense to the asserted claims as a matter of law.

The court correctly concluded that plaintiffs failed to establish that the Golieb defendants were the proximate cause of any damages in connection with the 2016 vote on the merger of XpresSpa and its acquisition by Form Holdings Corp. Documents show that plaintiff Moreton Binn voted in favor of the merger under protest, that he felt frozen out of the merger negotiations, and that he received inadequate information from Form Holdings — factors outside of the Golieb defendants’ control. Moreover, in connection with their execution of the Joinder Agreement relating to the merger, plaintiffs retained separate counsel to represent them and the minority shareholders in evaluating the voluminous merger and acquisition documents by reviewing the documents and summarizing their terms for the minority shareholders. Thus, separate counsel was an intervening and superseding cause of any damages.

(Internal quotations and citations omitted).

We both bring and defend professional malpractice claims and other claims relating to the duties of professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner Erik Groothuis at egroothuis@schlamstone.com if you have questions regarding such claims or appeals of such claims.

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