FKB Obtains Dismissal of Legal Malpractice/Underlying Commercial-Shareholder Dispute

04/5/2018

FKB’s Andrew Jones,  Shari Sckolnick and Aaron Baram obtained a favorable pre-answer dismissal of a legal malpractice case in New York Supreme Commercial Division on April 5, 2018.

The Insured law firm was retained to wind down a leading office furniture installation company in Manhattan, comprised of two main shareholders. The Insured law firm had allegedly previously represented one of the shareholders to form another corporation and had allegedly not fully disclosed that upon retention.  When Shareholder 1 sued Shareholder 2, the Insured law firm agreed to represent #1 through two years of complex litigation and arbitration. On the eve of the underlying trial, #2 raised “conflict of interest” and the law firm was disqualified. Judge Kornreisch (then the underlying Judge) ordered Shareholder #1 to reimburse the corporation the $300K in legal fees paid to the law firm.

The shareholders eventually settled the underlying case and as part of the underlying settlement assigned several claims against the Insured, with #2 attempting to reserve the right to sue for certain individual claims.

On FKB’s motion to dismiss shareholder #2’s claims, FKB argued that the underlying settlement agreement released “agents” which includes attorneys (FKB has won on that issue several times now). FKB also argued that the malpractice and fraud claims failed because the attorney for a corporation represents the corporation not the individual shareholders. FKB also successfully argued that Shareholder #2 could not prove proximately caused damages, which proved to be the issue that won the day.

Judge Kornreich (who was also assigned the legal malpractice case) issued a complete dismissal, with prejudice, from the bench.

If you have any questions about this decision, or the defense of attorneys in general, please contact Andrew Jones,  Shari Sckolnick or Aaron Baram

 

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