Legal Malpractice

More Examples of Breach of Fiduciary Duty and Legal Malpractice

By (Andrew Lavoott Bluestone)

This week brings a decision in SHEEHY,v. NEW CENTURY MORTGAGE CORP., ET AL., No. 08-CV-377 (JFB) (MLO);UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK;2010 U.S. Dist. LEXIS 15201,  We have noted a trend in legal malpractice cases involving allegaions of breach of fiduciary duty.  Here is another one.
 From the decision:

"Breach of Fiduciary Duty

Under New York law, the elements of a breach of fiduciary duty claim are (1) that a fiduciary duty existed between plaintiff and defendant, (2) that defendant breached that duty, and (3) damages as a result of the breach. Meisel v. Grunberg, 651 F. Supp. 2d 98, 114 (S.D.N.Y. 2009) (citing Whitney v. Citibank, N.A., 782 F.2d 1106, 1115 (2d Cir. 1986) and Regions Bank v. Wieder & Mastroianni, P.C., 423 F. Supp. 2d 265, 270 (S.D.N.Y. 2006), remanded on other grounds by 253 Fed. Appx. 52 (2d Cir. 2007)).

Halpern does not--and cannot--dispute that, by serving as plaintiff's attorney, she had a fiduciary relationship with plaintiff. (See Halpern Mem. of Law at 17); see also Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112, 653 N.E.2d 1179, 1182, 629 N.Y.S.2d 1009 (N.Y. 1995) ("[A]n attorney stands in a fiduciary relation to the client.").

Instead, Halpern argues that plaintiff cannot establish a breach of fiduciary duty occurred because plaintiff has not submitted any expert testimony. (See id. at 17-18.) In support of this argument, Halpern cites the fact that New York courts generally require expert testimony to establish the standard of care in legal malpractice [*24] cases. See, e.g., D'Jamoos v. Griffith, No. 00 CV 1361, 2001 U.S. Dist. LEXIS 17595, 2001 WL 1328592, at *6 (E.D.N.Y. Aug. 1, 2001). Typically, in these cases, expert testimony is used to establish the reasonableness of discretionary decisions made by an attorney, such as a decision to question a witness, raise a particular argument, or make a particular motion. See, e.g., Kranis v. Scott, 178 F. Supp. 2d 330, 335 (E.D.N.Y. 2002) (requiring expert testimony where malpractice claim involved, inter alia, questions of the reasonableness of failure to raise a particular defense); Hatfield v. Herz, 109 F. Supp. 2d 174, 179-80 (S.D.N.Y. 2000) (granting summary judgment to defendant where plaintiff failed to provided expert testimony on malpractice claim that concerned, inter alia, defendant's failure to request a jury trial, failure to prepare adequately for trial, failure to call certain witnesses, and failure to file and litigate certain pre-trial motions); Greene v. Payne, Wood and Littlejohn, 197 A.D.2d 664, 602 N.Y.S.2d 883, 885 (App. Div. 1993) (requiring expert testimony to address "the question of whether the defendants were negligent in failing to separately plead the pendent State claim at the time they instituted the Federal [*25] suit"). However, there are exceptions to the rule requiring expert testimony. Expert testimony is not required in legal malpractice cases if "'the ordinary experience of the fact-finder provides sufficient basis for judging the adequacy of the professional service . . . , or the attorney's conduct falls below any standard of due care . . . ." Greene, 602 N.Y.S.2d at 885; see also Stonewell Corp. v. Conestoga Title Ins. Co., No. 04 CV 9867 (KMW) (GWG), F. Supp. 2d , 2010 U.S. Dist. LEXIS 1107, 2010 WL 46015, at *5 (S.D.N.Y. Jan. 7, 2010) ("[E]xpert testimony may be deemed unnecessary [in legal malpractice cases] where the ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service." (internal quotations and citations omitted)).

Here, plaintiff asserts a breach of fiduciary duty claim against Halpern, not a legal malpractice claim. However, the Court will assume, arguendo, that the rule regarding expert testimony applies to breach of fiduciary duty claims against an attorney as well as legal malpractice claims because these causes of action are closely related under New York law. For example, the Appellate Division, First Department, has described breach [*26] of fiduciary duty and legal malpractice claims as "co-extensive," 11 and, when a plaintiff asserts both a legal malpractice claim and a breach of fiduciary duty claim against an attorney, New York courts typically dismiss the breach of fiduciary duty claim as duplicative of the malpractice claim. See, e.g., Joyce v. Thompson Wigdor & Gilly, LLP, No. 06 Civ. 15315 (RLC) (GWG), 2008 U.S. Dist. LEXIS 43210, 2008 WL 2329227 (S.D.N.Y. June 3, 2008) ("Under New York law, where claims of negligence, breach of contract, breach of fiduciary duty, negligent misrepresentation, or fraudulent misrepresentation are premised on the same facts and seek identical relief as a claim for legal malpractice, those claims are duplicative and must be dismissed."); Amadasu v. Ngati, No. 05 CV 2585 (JFB) (LB), 2006 U.S. Dist. LEXIS 19654, 2006 WL 842456, at *9 (E.D.N.Y. Mar. 27, 2006) (collecting cases); Fashion Boutique of Short Hills, 780 N.Y.S.2d at 596; Schweizer v. Mulvehill, 93 F. Supp. 2d 376, 400 & n.29 (S.D.N.Y. 2000) ("New York law clearly provides . . . that where breach-of-fiduciary duty claims mirror allegations of malpractice, they must be dismissed.").

FOOTNOTES

11 Weil, Gotshal, & Manges v. Fashion Boutique of Short Hills, 10 A.D.3d 267, 780 N.Y.S.2d 593, 596 (App. Div. 2004); [*27] see also Kirk v. Heppt, 532 F. Supp. 2d 586, 591 (S.D.N.Y. 2008) (construing pro se plaintiff's claim for breach of fiduciary duty as a claim for legal malpractice).

In any event, plaintiff need not provide expert testimony to survive summary judgment because both above-referenced exceptions to the rule apply here. Typically, the exceptions apply in cases where the attorney's alleged conduct is so egregious that the reasonableness of the conduct is not at issue. See, e.g., Northrop v. Thorsen, 46 A.D.3d 780, 848 N.Y.S.2d 304, 308 (App. Div. 2007) (stating that expert testimony not required because attorney's disregard of "clearly defined and firmly established" rule set forth in New York Worker's Compensation law "fell below any permissible standard of due care"); Shapiro v. Butler, 273 A.D.2d 657, 709 N.Y.S.2d 687, 689 (App. Div. 2000) (expert testimony not required to establish that lawyer who failed to file an answer, which led to a default judgment against client, acted negligently); S & D Petroleum Co. v. Tamsett, 144 A.D.2d 849, 534 N.Y.S.2d 800, 802 (App. Div. 1988) (expert testimony not required to establish that lawyer retained to secure a debt rendered inadequate professional service by failing to file a security agreement [*28] necessary to secure the debt). The allegations in this case clearly fall within the exceptions to the requirement of expert testimony. The gravamen of plaintiff's breach of fiduciary duty claim is that Halpern lied to her and had conflicting loyalties. Specifically, plaintiff claims that Halpern provided false assurances and made material omissions during the October 10, 2006 meeting--which included, among other things, allegedly lying to plaintiff by telling her that Adlerstein was also going to be on the mortgage--and thereby convinced plaintiff to close on 111 Berkley Street and that, by doing so, Halpern furthered Adlerstein's interests at plaintiff's expense. (See Pl. Mem. of Law (Halpern) at 10; see also, e.g., Pl. Dep. 112:6-22; 114:10-115:20.) Additionally, plaintiff has submitted evidence that Halpern knew about the $ 21,567.52 payment to Adlerstein (see DeRossi Dec. Ex. N) and that she failed to disclose this payment to plaintiff.

False statements or material omissions by an attorney to a client clearly breach the attorney's fiduciary duties, particularly where those false statements and omissions further conflicting interests. See, e.g., Summit Rovins & Feldesman v. Fonar Corp., 213 A.D.2d 201, 623 N.Y.S.2d 245, 246 (App. Div. 1995) [*29] (noting that attorney has fiduciary duty "to bring to the client's attention all relevant considerations" and denying defendant-attorney summary judgment because triable issues of fact existed regarding adequacy of attorney's disclosures about conflicts of interest). See generally Mermelstein v. Spector, 485 F.2d 474, 479 (2d Cir. 1973) (classifying, as a "recognized basic principle," the rule than an attorney who "negligently or willfully withholds from his client information material to the client's decision to pursue a given course of action, or to abstain therefrom, . . . is liable for the client's losses suffered as a result of action taken without benefit of the undisclosed material facts"); Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1, 865 N.Y.S.2d 14, 21 (App. Div. 2008) ("[A]ny act of disloyalty by counsel will also comprise a breach of the fiduciary duty owed to the client.") Assuming the jury credited plaintiff's version of events, it would not need expert testimony to find that a lawyer who allegedly violated basic requirements of the attorney-client relationship--candor and loyalty -- by engaging in, among other things, outright fraud (as is alleged here) [*30] failed to provide "adequa[te] professional service" and "fell [] below any standard of due care." Therefore, where, as here, the issue is whether an attorney breached her fiduciary duty by engaging in outright fraud in connection with a real estate transaction, plaintiff need not provide expert testimony to survive summary judgment on this claim."

Full post as published by New York Attorney Malpractice Blog on February 25, 2010 (boomark / email).