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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: April 30, 2020

Legal Malpractice and Breach of Fiduciary Duty Claims Found Not Duplicative

On April 16, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Harpia Asset Mgt. LLC v. Shanbaum, 2020 NY Slip Op. 30953(U), holding that the plaintiff’s breach of fiduciary duty and legal malpractice claims were not duplicative, explaining:

The Shanbaum Defendants argue that the breach of fiduciary duty claim must be dismissed as it is not pled with specificity and because it is duplicative of the legal malpractice claim because both arise from the same facts. Both arguments are unavailing.

The elements of a claim for breach of fiduciary duty are that (1) defendant owed plaintiff a fiduciary duty, (2) defendant committed misconduct, and (3) plaintiff suffered damages caused by that misconduct. Here, the Plaintiffs allege that they were owed a fiduciary duty by the Shanbaum Defendants, including a duty of loyalty and honesty. The Plaintiffs’ further allege that the Shanbaum Defendants breached their fiduciary duty by (i) disclosing the Plaintiffs’ confidential and privileged information to other clients, including Mr. Broyn, (ii) assisting Mr. Broyn with purchasing the Property, and (iii) representing both Mr. Broyn and the Plaintiffs in the potential sale of the Property from Mr. Broyn to the Plaintiffs after the Auction. The Plaintiffs have also alleged damages. Taking the Plaintiffs allegations as true as this court must on a motion to dismiss, the Plaintiffs sufficiently state a claim for breach of fiduciary duty with the requisite particularity pursuant to CPLR §3016(b).

Dismissal is also not required because the Plaintiffs’ breach of fiduciary duty claim does not arise from the same set of facts that underlie the legal malpractice claim. Here, as discussed above, the Plaintiffs allege, among other things, that the Shanbaum Defendants breached their duty of loyalty by assisting Mr. Broyn with the purchase of the Property while at the same time representing the Plaintiffs in having the Auction stayed. By contrast, the Plaintiffs’ ground their legal malpractice claim on the Shanbaum Defendants’ alleged failure to (i) timely file a motion to vacate the Foreclosure Judgment and/or stay the Foreclosure Action before the Auction, (ii) advise the Plaintiffs that the Auction would proceed on April 18, 2019, (iii) make any attempt to reschedule the Auction, and (iv) include the relevant information in the Plaintiffs’ motion to vacate the Auction. Under these circumstances, the breach of fiduciary claim arises from a different set of facts than the legal malpractice claim such that both may be sustained. Accordingly, that branch of the Shanbaum Defendants’ motion to dismiss the second cause of action for breach of fiduciary duty must be denied.

(Internal 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 us if you have questions regarding such claims or appeals of such claims.

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