Winning at the blame game is difficult to do. This holds especially true where the “blame game” is actually a claim for legal malpractice.
In a recent decision, the First Department affirmed Justice Sherwood’s Orders, which granted defendants’ motions to dismiss the complaint against them. In Binn v. Muchnick, Golieb & Golieb, P.C., plaintiffs filed legal malpractice claims against multiple law firms and their attorneys, alleging that defendants provided plaintiffs with poor advice in connection with numerous business transactions by failing to inform plaintiffs of the necessary information relevant to each transaction and without performing due diligence.
After defendants moved to dismiss the complaint, the lower Court considered the parties’ numerous email communications as documentary evidence. After reviewing the email communications leading up to the transactions at issue, the Court determined that not only were plaintiffs fully informed as to the nature of each transaction, their conversations actually refuted the factual allegations which formed plaintiffs’ causes of action for legal malpractice. Furthermore, even if defendants improperly advised plaintiffs, the attorneys’ advice was not a proximate cause of the alleged harm where plaintiffs were unable to demonstrate their own likelihood of success absent the defendants’ advice. Lastly, one of plaintiffs’ four malpractice claims was barred by NY’s statute of limitations.
The lower Court noted that “a plaintiff alleging legal malpractice must allege ‘that counsel failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that ‘but for’ the attorney’s negligence the plaintiff would have prevailed in the matter or would have avoided damages” (Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker). In that respect, a plaintiff’s allegations must show that damages attributable to the attorney’s conduct can be reasonably inferred. However, even if an attorney improperly advised the plaintiff, if the client is, ultimately, unable to demonstrate its own likelihood of success absent the attorney’s advice, then the attorney’s advice is not the proximate cause of the harm.
Here, plaintiffs’ legal malpractice claims failed because their allegations that defendants failed to advise them as to parts of the transactions were refuted not only by the email communications between the parties but also by the expressly stated terms of the written agreements that plaintiffs executed. Plaintiffs contentions that their attorneys advised them to execute signature pages separate from the body of the agreements also did not pass muster as the Court noted that ABC Rug & Carpet Cleaning Serv. Inc. v. ABC Rug Cleaners, Inc. plaintiffs were required to read and know what they signed.
Further, plaintiffs’ argument that they relied on their attorney’s advice when they voted in favor of an acquisition which, ultimately, led to the devaluation and dilution of their investment was meritless because plaintiffs could not demonstrate that but for their attorney’s allegedly deficient representation, there would have been a more favorable outcome. Lastly, plaintiffs could not rely on tolling the statute of limitations based on the continuous representation doctrine where, even though defendants continued to provide plaintiffs with legal advice concerning their business, there was no mutual understanding on the need for further representation on the specific transactions underlying plaintiffs’ malpractice claims. Thus, the three-year statute of limitations began to run when the malpractice was committed, not when plaintiffs discovered it.
Takeaway: Counsel should be cognizant of the various nuances and possible repercussions of each transaction and ensure that their clients are properly advised with a record of such advisement, including email chains. Clients, on the other hand, should be mindful to read and understand what they sign and not rely blindly on their attorney’s assurances.