Commercial Division Blog

Posted: March 12, 2015 / Categories Commercial, Law Firms and Professional Ethics

No Malpractice Claim Against Counsel for Other Party in a Deal

On March 2, 2015, Justice Demarest of the Kings County Commercial Division issued a decision in Leser v. Multi Capital Group LLC, 2015 NY Slip Op. 50272(U), dismissing a legal malpractice claim where there was no relationship between the plaintiff and the defendant.

In Leser, the plaintiff "allege[d] that non-party Eli Verscheliser (Verscheliser), the principal of defendant mortgage broker, Multi Capital Group LLC (Multi), approached" him concerning two real estate investments. According to the plaintiff, he was promised that he had to make no investment nor assume any obligations other than "acting as the public persona of the project for underwriting purposes and for reassurance to other joint venture partners. In return for this role, plaintiff alleges that he was promised 20% of the eventual profits" When the projects were not successful, the plaintiff learned that he had signed documents guaranteeing certain loans (he subsequently lost an action contesting the guarantees and was found liable for $52,946,419.15. The plaintiff subsequently brought an action against both Multi and its lawyers ("defendant"). The defendant law firm moved to dismiss the claims against it. The court granted the motion, explaining, with respect to the plaintiff's legal malpractice claim:

A legal-malpractice plaintiff must show that the defendant 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 duty proximately caused plaintiff to sustain actual and ascertainable damages. In examining a legal-malpractice claim, however, a court must first look to the relationship of the parties. A plaintiff not in privity with the defendant attorney cannot maintain a legal-malpractice cause of action except in the event of fraud, collusion, malicious acts or other special circumstances.

. . .

Here, plaintiff essentially asserts that [the defendant's] failure to warn him about the presence of personal guaranties in the loan documents he signed constituted a breach of its duty to exercise reasonable knowledge and skill in representing him. He fails, however, to plead facts from which it could be inferred that an attorney-client relationship existed. Indeed, plaintiff states that he never had any communication or contact with [the defendant], and he admits that he was not aware of its identity until after he had signed the loan documents. Even if Verscheliser or Multi told plaintiff that its unidentified attorneys would review the loan documents for his benefit and that he need not hire his own attorney, such representations could not give rise to an attorney-client relationship between plaintiff and [the defendant]. Similarly, plaintiff's allegation that Multi retained [the defendant] to form entities naming plaintiff as owner or managing member does not establish any direct relationship between plaintiff and [the defendant].

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