Legal Malpractice

The "Sophisticated" Client in Legal Malpractice

By (Andrew Lavoott Bluestone)

There is no lack of irony in legal malpractice litigation.  Because of the structure of the "case within a case" defendant attorney often takes on the defenses available in the underlying case.  So, plaintiff's attorney sees defendant attorney loudly and heatedly making the very same arguments that were made in the underlying action with absolutely no cognitive dissonance.

Here is an example in SF Holdings Group, Inc. v Kramer Levin Naftalis & Frankel LLP ;
2008 NY Slip Op 08520 ; Decided on November 13, 2008 ; Appellate Division, First Department .
 

This was a fairly complicated transaction in which a plant in St. Thomas was left off the table.  Legal malpractice litigation ensued, and one defense was that plaintiff, a sophisticated business, knew that the plant was not part of the transaction.

Here is the interesting part.  The court held that being sophisticated, yet relying on the attorney is proper, and will not amount to a full defense to legal malpractice.  The attorney would argue that there can be no legal malpractice when the client understands the risks and the nature of the transaction.

The court held that such argument amounts to potential mitigation only. "Given the procedural context, the motion court correctly rejected Kramer Levin's argument that plaintiffs, as a matter of law, were aware that St. Thomas was not working capital based on the merger agreement itself. Kramer Levin did not conclusively establish, for the purposes of plaintiffs' alleged awareness, that the merger agreement on its face discloses that the St. Thomas facility was not included under the definition of working capital (see Held v Kaufman, 91 NY2d 425, 431-432 [1998]). Further, to the extent that Mehiel, a sophisticated businessman, executed the merger agreement on behalf of plaintiffs with full knowledge of its terms, "[a]ny negligence on the part of [the client] in reviewing the agreement is merely a factor to be assessed in mitigation of damages" (Mandel, Resnik & Kaiser, P.C. v E.I. Electronics, Inc., 41 AD3d 386, 388 [2007]

Full post as published by New York Attorney Malpractice Blog on November 20, 2008 (boomark / email).