FKB successfully obtained CPLR § 3212 summary judgment dismissal in the Supreme Court, New York County of a legal malpractice counterclaim asserted in response to an action initiated by FKB’s client to recover outstanding legal fees.
In this matter, FKB’s client was retained by the defendant in 2005 to increase his long-term disability benefits as a result of suffering post-traumatic stress disorder (“PTSD”) from the 9/11 attacks at the World Trade Center. FKB’s client successfully pursued an Employee Retirement Income Security Act (ERISA) litigation, extending defendant’s benefits, which were set to expire in August 2006, for 11 years and almost doubling the monthly amount, thus increasing the amount defendant was set to receive from $81,200 to over $1.4 million.
After this successful result, the defendant then refused to pay FKB’s client the legal fees agreed-upon in their retainer agreement, the 1/3 of the increase in benefits, forcing FKB’s client to initiate a fee action. In response to the fee action, the defendant asserted counterclaims for legal malpractice, breach of contract, and breach of fiduciary duty, claiming that FKB’s client failed to provide proper tax advice by failing to notify him that the Internal Revenue Service (IRS) created a rule in 2002 mandating that disability benefits received for a “physical injury” suffered as a result of the 9/11 attacks were not subject to taxation under the Victims of Terrorism Relief Act (“VTRA”). As a result, defendant alleges that he paid unnecessary taxes on disability benefits for the years 2002, 2004, and 2005, totaling approximately $91,600. The defendant also asserted that the alleged malpractice is a sufficient basis to disgorge the attorneys’ fees owed to FKB’s client.
After some discovery, FKB’s client moved for summary judgment on his breach of contract claim and FKB moved for summary judgment dismissal on the counterclaims. In the motion, FKB argued that FKB’s client never agreed to provide the defendant with tax advice which was clearly outside of the scope of the retainer agreement. See AmBase Corp. v. Davis Polk, 8 N.Y.3d 428, 435 (2007). Even more so, FKB argued that the defendant cannot establish breach of the standard of care of an attorney because FKB’s client’s adversary in the underlying litigation, an experienced ERISA benefits litigator, testified that interpretation and application of tax publications are outside the scope of services that an attorney retained to handle ERISA benefits is expected to provide. Further, FKB argued that defendant could not establish proximate causation because (1) defendant retained three successive accountants who were responsible for providing the tax advice but failed to do so; (2) assuming arguendo that FKB’s client had some duty to provide the tax advice, defendant refused to provide FKB’s client with information necessary to provide the advice, and (3) defendant could not establish that the IRS would have deemed PTSD a qualifying “physical injury” for the refund. Finally, FKB argued that the remaining counterclaims were duplicative of the legal malpractice claim and should be dismissed.
On October 24, 2017, Justice Paul Wooten (who retained this motion after transferring to Kings County) granted both requests for summary judgment, finding defendant in breach of his contract with FKB’s client and dismissing the counterclaims. In his 23-page decision, Justice Wooten found that “[i]n reviewing defendant’s malpractice defense in its entirety, it appears to the Court that said defense seems crafted to avoid his obligation to pay his attorney fees for work performed on his behalf, and may even be a violation of Part 130 of the Rules of the Chief Administrator which allows this Court to impose sanctions upon an attorney or a party for engaging in frivolous conduct” (emphasis added).
Justice Wooten agreed with FKB’s argument that the tax advice was outside of the scope of W&H’s retention finding that “[l]ooking at the four corners of the [Retainer] Agreement, there is simply no basis for this Court to find that W&H was retained to give tax advice of analysis with regards to his tax returns.” The Court went on to note that “[e]ven assuming arguendo were the Court to consider extrinsic evidence to the Agreement, subsequent writings confirm that the scope of W&H’s retention was limited to the administrative appeal.”
The Court also found that the defendant would be unable to establish the negligence element of legal malpractice holding that “defendant cannot establish that W&H failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession.” Justice Wooten supported this determination with the testimony of FKB’s client’s adversary in the ERISA proceeding, who testified that FKB’s client “met the standard of good practice during the course of the litigation since he ‘prosecuted his client’s case with more rigor and more expertise and professionalism than often I would have encountered.’”
The Court also agreed with FKB that the defendant could not establish the remaining elements of legal malpractice, finding that FKB’s client was not the proximate cause of defendant’s injuries because “[t]he assertion that [defendant] has incurred monetary damages as a result of [FKB’s client’s] incorrect advice…is nothing more than speculative and insufficient to demonstrate ‘actual and ascertainable damages.’” Finally, the Court also dismissed the defendant’s counterclaims for breach of contract and breach of fiduciary duty as redundant from the malpractice claim since they do not allege distinct damages.