Complaint failed to adequately allege actual, ascertainable damages.

In Katsoris v Bodnar & Milone, LLP, 186 AD3d 1504 [2d Dept 2020], the court affirmed dismissal of the case, holding that:

Here, the complaint failed to adequately allege actual, ascertainable damages. The general allegations that, as a result of the alleged acts of malpractice, the plaintiff was caused to incur “additional legal fees,” and caused to suffer “financial damages and expense,” “adverse financial consequences,” and “direct financial damage,” were all conclusory and inadequate to constitute “actual, ascertainable damages” (Dempster v. Liotti, 86 A.D.3d at 177, 924 N.Y.S.2d 484). To the extent that the complaint addressed the plaintiff’s settlement, the complaint alleged that the defendant’s negligence in its handling of the divorce action caused the plaintiff to suffer “direct prejudice … in both trial and/or settlement,” and that, but for such negligence, the plaintiff “would have fared far better at trial and/or in settlement of the Divorce Action.” These allegations are conclusory and lack any factual support, and they are inadequate to sufficiently allege that the stipulation of settlement that the plaintiff entered into with his former wife was “effectively compelled” by the mistakes of counsel (Rau v. Borenkoff, 262 A.D.2d 388, 389, 691 N.Y.S.2d 140; see Benishai v. Epstein, 116 A.D.3d 726, 728, 983 N.Y.S.2d 618). “The fact that the plaintiff subsequently was unhappy with the settlement [he] obtained … does not rise to the level of legal malpractice” (Holschauer v. Fisher, 5 A.D.3d 553, 554, 772 N.Y.S.2d 836). “Moreover, the plaintiff failed to plead specific factual allegations showing that, had he not settled, he would have obtained a more favorable outcome” (Schiller v. Bender, Burrows & Rosenthal, LLP, 116 A.D.3d 756, 758, 983 N.Y.S.2d 594; see Keness v. Feldman, Kramer & Monaco, P.C., 105 A.D.3d at 813, 963 N.Y.S.2d 313; Tortura v. Sullivan Papain Block McGrath & Cannavo, P.C., 21 A.D.3d at 1083, 803 N.Y.S.2d 571; Dweck Law Firm v. Mann, 283 A.D.2d 292, 293, 727 N.Y.S.2d 58; Rau v. Borenkoff, 262 A.D.2d at 389, 691 N.Y.S.2d 140). Accordingly, we agree with the Supreme Court’s determination to grant that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the first cause of action, alleging legal malpractice.

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Scales of justice illustrating article about legal malpractice.

Rehabilitation Center: Arguing with a nursing home administrator is like wrestling with a pig in the mud: After a few minutes, you realize the pig likes it.

Woman with white hair and pink smock holding hands in front of face, illustrating article by Richard Klass about nursing homes and rehabilitation centers

She had to convalesce in a rehabilitation center for comprehensive (sub-acute) in-patient care following illness. Upon admission, the resident was presented with the facility’s admission agreement for her to sign. The agreement provided that, in exchange for payment through Medicaid, Medicare, insurance or direct pay, the facility would provide all of the patient’s basic and routine services, including lodging and boarding and professional nursing care.

The agreement specified that the resident anticipated paying the costs of care through her managed care organization (MCO) (which contracts through a network or group for the delivery of health care). However, the agreement left the section for private payment rates for daily charges blank.

Motion to Dismiss the Facility’s Case

Post-discharge, the rehabilitation facility brought an action against the former resident, alleging that she obligated herself to pay for the room, board, nursing and health care services but failed to made payment. To mount the best defense possible, the former resident retained Richard A. Klass, Esq., Your Court Street Lawyer, who immediately moved to dismiss the case.

In the Complaint, the facility alleged that it was a corporation duly organized and existing under and by virtue of the laws of the State of New York. Based upon a search of the New York State Department of State online records, there was no corporation with the plaintiff’s name registered to do business in New York State. Business Corporation Law § 301(a)(1) specifies that the name of a domestic or foreign corporation “shall contain the word ‘corporation’, ‘incorporated’ or ‘limited’, or an abbreviation of one of such words; or, in the case of a foreign corporation, it shall, for use in this state, add at the end of its name one of such words or an abbreviation thereof.” There was no such designation in its name in the Summons or Complaint. To the extent that the facility may have claimed it was suing under an assumed name, General Business Law § 130(1) provides that there are certain requirements to be met.

Consumer credit transaction

The pending motion to dismiss set up settlement discussions about the procedural and substantive defenses to the facility’s case. As to the procedural aspect, the next line of defense was to threaten dismissal of the lawsuit on jurisdictional grounds.

The Summons failed to prominently display at the top the words “Consumer Credit Transaction.” CPLR 305(a) specifies that the Summons must have those words on the top where the court held that the debt on an obligation of a consumer to pay money arising out of a transaction in which the services which are the subject of the transaction are primarily for personal, family or household purposes. In Jack Mailman & Leonard Flug DDS, PC v. Whaley, 2002 WL 31988623 [Civil Court, Richmond Co. 2002], the court held that medical debts were deemed consumer debts.

Residential Care Facilities – Residents’ Rights

Nursing facilities, including nursing homes and rehabilitation centers

Nursing facilities, including nursing homes and rehabilitation centers, that accept residents whose charges will be paid in whole or in part by Medicaid are governed by the federal Nursing Home Reform Act (42  USC §1396r) and federal and state regulations (42 CFR §483; and 10 NYCRR §415).

Through these enactments, there was the creation of a so-called residential care patient’s “Bill of Rights.” These “Rights” include the rights to freedom from abuse, mistreatment and neglect; privacy; accommodation for mental, physical, psychological and emotional needs; treatment with dignity; and being fully informed and participating in one’s care.[1]

Financial obligation rights

Among residents’ rights are those relating to financial obligations to the facility, including informing the resident of those services and items that the facility offers for which the resident may be charged. 10 NYCRR §415(h). These laws and regulations govern nursing facility admission agreements. See, Prospect Park Nursing Home v. Goutier, 824 NYS2d 770 [Civil Court, Kings Co. 2006].

The resident did not read or write in the English language. The admission agreement was not translated for her. The resident alleged that when she asked what she was signing, she was told that her MCO would be paying the costs, not her. The “Anticipated Payor” section indicated that an insurer would be paying. The “Private Payment” section (including costs per day) was left blank. The resident alleged that she was never informed of the rates or charges. It was claimed that the facility’s representatives engaged in wrongful conduct and misrepresentation concerning the execution of the agreement. See, Nerey v. Greenpoint Mortgage Funding, Inc., 144 AD3d 646 (2d Dept. 2016).

Rehabilitation Center

Quality of Life: The right to adequate and appropriate care

The regulations emphasize that a resident has the right to receive from the facility “the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, consistent with the resident’s comprehensive assessment and plan of care.” 42 CFR §483.24.

The resident alleged she received inadequate care at the facility, including that she had to wait many hours for the bedpan to be changed; lack of bathing; unavailability of staff when needed and for necessary help and activities. In light of the vigorous defense advocated by Your Court Street Lawyer, the facility agreed to significantly reduce the bill for rehabilitation services and settle the case with the former resident on very favorable terms.

[1] https://www.aarp.org/home-garden/livable-communities/info-2001/the_1987_nursing_home_reform_act.html

 

 

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keywords: Nursing facility, nursing home, rehabilitation center

Scales of justice illustrating article about legal malpractice.

Retainer agreements should set forth scope of lawyer’s representation.

Portus Singapore PTE LTD v Kenyon & Kenyon LLP, 449 F Supp 3d 402, 411-15 [SDNY 2020] serves as a reminder that the scope of the lawyer’s representation should be set forth in the retainer agreement. As the federal court held:

In order to demonstrate that a lawyer was negligent “a plaintiff must show that an attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession” and that “the attorney’s breach of this professional duty caused the plaintiff’s actual damages.” McCoy v. Feinman, 99 N.Y.2d 295, 755 N.Y.S.2d 693, 785 N.E.2d 714, 718-19 (2002) (internal quotation marks and citations omitted). “What constitutes ordinary and reasonable skill and knowledge cannot be fixed with precision, but should be measured at the time of representation.” Darby & Darby, P.C. v. VSI Intern., Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378, 739 N.E.2d 744, 747 (2000). Generally, “ordinary and reasonable skill” is determined by looking to standards of legal practice in the State of New York. See, e.g.Sokol, 468 F. Supp. 2d at 637 (discussing New York law practice commentary). Moreover, “[a]n attorney may not be held liable for failing to act outside the scope of a retainer.” *412 Attallah v. Milbank, Tweed, Hadley & McCloy, LLP, 168 A.D.3d 1026, 93 N.Y.S.3d 353, 356 (2019).

In AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705, 866 N.E.2d 1033, 1035 (2007), following the liquidation of its parent company, the plaintiff corporation AmBase assumed primary liability for the parent corporation’s federal income taxes and secondary liability for all other liabilities. Following liquidation, the Internal Revenue Service (“IRS”) found the parent company liable for six years’ worth of withholding taxes, which would be imputed to AmBase under the liquidation agreement. Id. AmBase retained Davis Polk “to represent [it] as agent for [the parent corporation] to resolve the tax issues currently before” the IRS. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Davis Polk then successfully challenged in the Tax Court the IRS’s determination that AmBase was liable. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1035. AmBase then turned around and sued Davis Polk for legal malpractice on the ground that Davis Polk had failed to advise AmBase that AmBase was only secondarily liable for payment of taxes. Id. AmBase alleged that although it ultimately prevailed in the Tax Court, Davis Polk’s negligence forced AmBase to maintain a multi-million-dollar loss on its books, thereby creating an appearance of insolvency that resulted in lost business opportunities. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1036.

The New York Court of Appeals noted that the plain language of the retainer agreement “indicates that Davis Polk was retained to litigate the amount of tax liability and not to determine whether the tax liability could be allocated to another entity.” Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Noting that “the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation,” the court held that the “defendants exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession when they focused their efforts on the controversy between AmBase and the IRS – the subject of the retainer agreement – resulting in a most favorable outcome, which was publicly praised by AmBase principals.” Id.

Similarly, in Milbank, Tweed, the law firm agreed in its engagement letter to represent the plaintiff “to investigate and consider options that may be available to urge administrative reconsideration” of the plaintiff’s expulsion from the New York College of Osteopathic Medicine. 93 N.Y.S.3d at 355. The Appellate Division of the Supreme Court affirmed the dismissal of the plaintiff’s complaint that had alleged malpractice on the ground that Milbank, Tweed did not actually negotiate the plaintiff’s readmission to the school. Id. at 356. The court reasoned that an attorney cannot be held liable for failing to act outside the scope of a retainer and that negotiation with the school went beyond the stated scope of the agreement letter. Id.

Davis Polk and Milbank, Tweed stand for the proposition that the failure by a lawyer to take actions outside the scope of that lawyer’s representation of a client cannot form the basis of a legal malpractice suit.

This case is substantially similar to Davis Polk and Milbank, Tweed. The parties do not point to any formal retainer or contract that spelled out the engagement between Kenyon and Portus. Rather, the “scope” of the engagement between Portus and Kenyon was set out in the communications between Kenyon and Portus’s agent, Mr. Treloar. Mr. Treloar’s communication, faxed to Kenyon on June 15, 2001, instructed Kenyon “to enter the National Phase in United States on behalf of our client and in accordance with the *413 details shown on the attached sheet.” McCoy Decl., Ex. A-14.7 Mr. Treloar instructed Kenyon to file the application by June 17, 2001 and alerted Kenyon that this due date was “URGENT.” Id. Mr. Treloar further stated that “[i]n the absence of our specific instructions please keep this application in force.” Id. (emphasis added).

The scope of Kenyon’s initial engagement in 2001 was thus limited to the narrow task of “enter[ing] the National Phase in United States” of the international patent application and to keep the application in place absent further instructions from Portus.8 Acting on these instructions, Kenyon then filed an application for the national stage of the international patent application under 35 U.S.C. § 371 on that same day, June 15, 2001, two days before the deadline to file an application with the USPTO in connection with Portus’s international patent.

Portus’s claim of malpractice against Kenyon fails because Kenyon did exactly what it was required to do in its engagement: Kenyon filed an application pursuant to 35 U.S.C. § 371 within two days and Kenyon kept the application in force and prosecuted the application until it was granted in December 2014.

Portus argues that Kenyon committed malpractice because Kenyon failed to advise Portus in June 2001 that Portus would benefit if Kenyon filed an application under 35 U.S.C. § 111 rather than under 35 U.S.C. § 371 in the event that the USPTO extensively delayed consideration of the application by more than three years. If such a delay occurred, Portus would then be eligible for a patent term adjustment under the AIPA. However, this advantage was entirely speculative and dependent on the subsequent extensive delay by the USPTO of more than three years between the filing of the application in June 2001 and the initial non-final action in January 2005. Nevertheless, Portus claims that Kenyon’s failure to advise Portus of the possible advantage of a 35 U.S.C. § 111 filing in June 2001 was malpractice.

The only advantage that Portus points to from filing a 35 U.S.C. § 111 application rather than a 35 U.S.C. § 371 application in June 2001 is the extended patent term if the USPTO delayed in approving the patent application by more than three years. But that advantage was entirely theoretical in June 2001 before any application had been filed. Portus points to no comparable case where an attorney was required to go beyond the limits of an engagement and advise a client about theoretical advantages of another course of action that were based on unknown future contingencies.

Portus’s argument fails because there was nothing about the June 2001 *414 engagement that required Kenyon to advise Portus about the theoretical advantages of another application, advantages that would accrue to Portus only in the event, which was entirely speculative in June 2001, that the USPTO delayed consideration of the patent application by more than three years. While it is true that a lawyer can be held liable for withholding facts that are “relevant to the client’s decision to pursue a given course of action,” Spector v. Mermelstein, 361 F. Supp. 30, 39-40 (S.D.N.Y. 1972), aff’d, 485 F.2d 474 (2d Cir. 1973), it is also true that “an attorney is not held to a standard of ‘infallibility’ and the ‘perfect vision of hindsight’ is an unreliable test for determining the past existence of legal malpractice.” Nomura Asset Capital Corp. v. Cadwalader, Wickersham & Taft LLP, 889 N.Y.S.2d 506 (Table), at *11 (Sup. Ct. 2009) (internal citations omitted).

Kenyon carried out its representation of Portus as requested by Portus and successfully prosecuted the patent after the non-final and final action by the USPTO until the USPTO eventually granted Portus a patent in December 2014. Just as in Davis Polk and Milbank, Tweed, the scope of the agreement between the parties in this case did not impose upon the defendant an obligation to advise the plaintiff about matters outside the scope of that representation. In particular, Kenyon had no free-standing obligation separate and apart from the scope of the engagement to advise Portus about the drawbacks and advantages associated with a continuation bypass application and a national stage application in June 2001 when Portus retained Kenyon. Portus retained Kenyon for the very narrow purpose of entering the national phase in the United States of Portus’s international application and keeping that application in force until instructed otherwise. See Davis Polk, 834 N.Y.S.2d 705, 866 N.E.2d at 1037 (“Thus, the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation.”).

The cases that Portus cites in support of its contention that Kenyon was negligent in failing to advise Portus adequately after being contacted on June 15, 2001 prior to filing a patent application with the USPTO are inapposite.

In French v. Hogan, 210 A.D.2d 658, 619 N.Y.S.2d 406, 407 (1994), the plaintiff had entered into a contract to purchase a residence and employed the defendant attorney to represent her in connection with the transaction. In affirming the denial of summary judgment to the defendant, the court noted that “there remains an unresolved factual issue as to whether, if timely advised of the existence of the restrictive covenant, plaintiff could have avoided at least a significant portion of her alleged damages” incurred when she converted the property from a residence to a bed and breakfast following her purchase. Id.

In French, the plaintiff did not receive everything that she sought under the engagement with her attorney because the building she purchased had a covenant preventing her from putting the building towards her intended use. In this case, unlike in French, it is undisputed that Portus received what it requested of Kenyon in June 2001, namely that Kenyon enter the national phase of Portus’s application by filing an application under 35 U.S.C. § 371 and that Kenyon keep the application in place unless Portus told Kenyon to do otherwise. Kenyon performed as requested, leading to the successful prosecution of the patent application when it was granted in December 2014.

In the other case cited by Portus, *415 Estate of Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 259 A.D.2d 282, 686 N.Y.S.2d 404 (1999), the plaintiff corporation Sculptotek was created upon the advice of the defendant lawyer for the purposes of organizing the financial affairs of a famous sculptor, Louise Nevelson. After Nevelson’s death, the IRS determined that the corporation was a sham entity and that the corporate assets should be part of the sculptor’s estate. The determination was based in part on the lack of compensation to Nevelson for her artwork. The Appellate Division found that the attorney could be liable for malpractice for failing to advise their clients of the adverse consequences under the plan they recommended.

In Nevelson, the defendants failed to advise the plaintiffs on a central aspect of the plan that the defendants were retained to implement, namely the construction of a corporate structure that would survive an IRS audit. In this case, unlike in Nevelson, Kenyon did everything that Portus asked it to do in June 2001.

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Scales of justice illustrating article about legal malpractice.

Liable for failing to take actions outside the scope of representation?

In Portus Singapore PTE LTD v Kenyon & Kenyon LLP, 16CV6865 (JGK), 2020 WL 1501886, at *5-6 [SDNY Mar. 30, 2020], the court dealt with the issue of whether the attorney can be held liable to his client for failing to take actions outside the scope of his representation. The court held:

In order to demonstrate that a lawyer was negligent “a plaintiff must show that an attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession” and that “the attorney’s breach of this professional duty caused the plaintiff’s actual damages.” McCoy v. Feinman, 99 N.Y.2d 295, 755 N.Y.S.2d 693, 785 N.E.2d 714, 718-19 (2002) (internal quotation marks and citations omitted). “What constitutes ordinary and reasonable skill and knowledge cannot be fixed with precision, but should be measured at the time of representation.” Darby & Darby, P.C. v. VSI Intern., Inc., 95 N.Y.2d 308, 716 N.Y.S.2d 378, 739 N.E.2d 744, 747 (2000). Generally, “ordinary and reasonable skill” is determined by looking to standards of legal practice in the State of New York. See, e.g., Sokol, 468 F. Supp. 2d at 637 (discussing New York law practice commentary). Moreover, “[a]n attorney may not be held liable for failing to act outside the scope of a retainer.” Attallah v. Milbank, Tweed, Hadley & McCloy, LLP, 168 A.D.3d 1026, 93 N.Y.S.3d 353, 356 (2019).

In AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705, 866 N.E.2d 1033, 1035 (2007), following the liquidation of its parent company, the plaintiff corporation AmBase assumed primary liability for the parent corporation’s federal income taxes and secondary liability for all other liabilities. Following liquidation, the Internal Revenue Service (“IRS”) found the parent company liable for six years’ worth of withholding taxes, which would be imputed to AmBase under the liquidation agreement. Id. AmBase retained Davis Polk “to represent [it] as agent for [the parent corporation] to resolve the tax issues currently before” the IRS. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Davis Polk then successfully challenged in the Tax Court the IRS’s determination that AmBase was liable. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1035. AmBase then turned around and sued Davis Polk for legal malpractice on the ground that Davis Polk had failed to advise AmBase that AmBase was only secondarily liable for payment of taxes. Id. AmBase alleged that although it ultimately prevailed in the Tax Court, Davis Polk’s negligence forced AmBase to maintain a multi-million-dollar loss on its books, thereby creating an appearance of insolvency that resulted in lost business opportunities. Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1036.

The New York Court of Appeals noted that the plain language of the retainer agreement “indicates that Davis Polk was retained to litigate the amount of tax liability and not to determine whether the tax liability could be allocated to another entity.” Id., 834 N.Y.S.2d 705, 866 N.E.2d at 1037. Noting that “the issue whether plaintiff was primarily or secondarily liable for the subject tax liability was outside the scope of its representation,” the court held that the “defendants exercised the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession when they focused their efforts on the controversy between AmBase and the IRS – the subject of the retainer agreement – resulting in a most favorable outcome, which was publicly praised by AmBase principals.” Id.

Similarly, in Milbank, Tweed, the law firm agreed in its engagement letter to represent the plaintiff “to investigate and consider options that may be available to urge administrative reconsideration” of the plaintiff’s expulsion from the New York College of Osteopathic Medicine. 93 N.Y.S.3d at 355. The Appellate Division of the Supreme Court affirmed the dismissal of the plaintiff’s complaint that had alleged malpractice on the ground that Milbank, Tweed did not actually negotiate the plaintiff’s readmission to the school. Id. at 356. The court reasoned that an attorney cannot be held liable for failing to act outside the scope of a retainer and that negotiation with the school went beyond the stated scope of the agreement letter. Id.

Davis Polk and Milbank, Tweed stand for the proposition that the failure by a lawyer to take actions outside the scope of that lawyer’s representation of a client cannot form the basis of a legal malpractice suit.

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Breach of contract action against an attorney

In dismissing the plaintiff’s claim against an attorney for violating Judiciary Law Section 487, the New York State Court of Appeals held:

Here, viewing the facts in the light most favorable to plaintiffs (see De Lourdes Torres v Jones, 26 NY3d 742, 763 [2016]), defendants established prima facie entitlement to judgment as a matter of law on the Judiciary Law Section 487 (1) claim by demonstrating that plaintiffs failed to allege that defendants engaged in deceit or collusion during the course of the underlying federal intellectual property lawsuit against GM and EMI [FN2]. In response, plaintiffs failed to satisfy their burden to establish material, triable issues of fact (id.). The affidavits plaintiffs submitted in opposition to summary judgment did not allege that defendants committed any acts of deceit or collusion during the pendency of the underlying federal lawsuit. To the extent defendants were alleged to have made deceitful statements, plaintiffs’ allegation that defendants induced them to file a meritless lawsuit based on misleading legal advice preceding commencement of the lawsuit is not meaningfully distinguishable from the conduct we deemed insufficient to state a viable attorney deceit claim in Looff (97 NY at 482). The statute does not encompass the filing of a pleading or brief containing nonmeritorious legal arguments, as such statements cannot support a claim under the statute [FN3]. Similarly, even assuming it constituted deceit or collusion, defendants’ alleged months-long delay in informing plaintiffs that their federal lawsuit had been dismissed occurred after the litigation had ended and therefore falls outside the scope of Judiciary Law Section 487 (1). Thus, plaintiffs’ Judiciary Law Section 487 cause of action was properly dismissed.

Bill Birds, Inc. v Stein Law Firm, P.C. 2020 NY Slip Op 02125 Decided on March 31, 2020 Court of Appeals DiFiore, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law Section 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on March 31, 2020
No. 19

[*1]Bill Birds, Inc. et al., Appellants,
v
Stein Law Firm, P.C. et al., Respondents.

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