Commercial Division Blog

Posted: December 14, 2016 / Categories Commercial, Statute of Limitations/Laches, Law Firms and Professional Ethics

Law Firm Equitably Estopped from Asserting Defense Against Former Client

On December 6, 2016, the First Department issued a decision in Deep Woods Holdings LLC v. Pryor Cashman LLP, 2016 NY Slip Op. 08156, holding that a law firm was equitably estopped from arguing that an assignment did not include tort claims, explaining:

[A]ccepting plaintiff's affidavit in opposition to defendants' motion as true, we find that plaintiff sufficiently pleaded that defendants should be equitably estopped from arguing that the assignment did not assign tort claims. Contrary to defendants' contention, estoppel can be based on silence as well as conduct. Under these circumstances, where defendants drafted the assignment at a time when it represented both Lichtenstein and plaintiff, and that interpreting the assignment to exclude tort claims would mean that neither the assignor nor plaintiff, the assignee, would be able to sue defendants for malpractice for failing to exercise the call option in a timely manner, we find that the special circumstances exception to the privity requirement applies. To do otherwise might insulate defendants from liability for their alleged wrongdoing.

(Internal quotations and citations omitted).