Commercial Division Blog

Posted: May 19, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Fiduciary Duties

Legal Malpractice Claim Dismissed Where Failure to Submit Documents Was Not Proximate Cause of Adverse Arbitration Award

On February 9, 2022, in All Vision LLC v. Paduano & Weintraub LLP, Index No. 653605/2021, Justice Andrew Borrok of the New York County Commercial Division dismissed plaintiff’s claims for legal malpractice and breach of fiduciary duty for failure of its counsel to submit a termination letter and certain financial statements in an arbitration arguing that had they been submitted, the documents would have served as a defense to the claims asserted against them or resulted in a substantially reduced award. The Court explained:

To state a cause of action for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of [*7] the legal profession and that the attorney's breach of that duty proximately cause actual and ascertainable damages (Aur v Manhattan Greenpoint Ltd., 132 AD3d 595, 595, 20 N.Y.S.3d 6 [1st Dept [2015]). To state a cause of action for breach of fiduciary duty, a plaintiff must allege that a defendant owed them a fiduciary duty, that a defendant committed misconduct, and that plaintiff suffered damages caused by that misconduct (Burry v Madison Park Owner LLC, 84 AD3d 699, 699-700, 924 N.Y.S.2d 77 [1st Dept 2011]).

The failure to submit the November 2016 Termination Letter and the 2017 Statements to the Arbitrator is insufficient to maintain a cause of action for legal malpractice. Even accepting these allegations as true as the court must at this stage of the proceedings, the documents either could not have served as a defense to Mr. Andel's claims or otherwise substantially reduced the amount All Vision was required to pay, or the failure to submit the documents was not the proximate cause of the All Vision's alleged injury The breach of fiduciary duty claim was squarely in front of Judge Scheindlin, and demonstrated by her finding that Mr. Andel's actions were intentional, not negligent. However, the November 2016 Termination Letter could not [**6] have changed her decision that All Vision failed to provide Mr. Andel notice and an opportunity to cure [*8] as required under the Contractor Agreement, that there was no breach of the Severance Agreement because All Vision was aware of Mr. Andel's conduct and may have condoned or otherwise benefitted from it, and that there was no breach of fiduciary duty because All Vision could not establish that Mr. Andel personally benefited. Judge Scheindlin considered these issues, and none of the alleged bases for legal malpractice could have changed her decision. (NYSCEF Doc. No. 2, ¶¶ 228-231). The Defendants’ [sic] are correct that dismissal is required because there is a lack of causation as to the failure to submit the 2017 Statements. The record is bereft as to any reason why Littler Mendelson as replacement counsel made zero attempt to submit the 2017 Statements when they replaced the Defendants as counsel for All Vision after the Original Interim Award was issued and before the Final Award had been issued. Although, as the Defendants acknowledge (NYSCEF Doc. No. 34, at 20), Littler Mendelson would only have been permitted to do so if the evidentiary rules were relaxed, All Vision and Littler Mendelson did not even try. All Vision and Littler Mendelson's inaction was an intervening act, and All Vision [*9] cannot now claim that the Defendants were a proximate cause as Judge Scheindlin may well have permitted the 2017 Statements to be admitted.

The Defendants are also entitled to dismissal of the breach of fiduciary duty cause of action as duplicative of the legal malpractice cause of action which fails for the reasons set forth above (Courtney, 176 AD3d at 645- 646).

The attorneys at Schlam Stone & Dolan frequently litigate professional malpractice claims. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.