FKB’s Andrew Jones and Benjamin Oxenburg secured a decision from the Appellate Division, First Department, affirming the dismissal of a legal malpractice action on behalf of FKB’s client, a boutique real estate and litigation law firm.  The plaintiff, a sophisticated and experienced real estate investor and developer, agreed to loan $5 Million to three co-investors in exchange for various interests in two residential real estate development projects in Soho and Greenwich Village.  Two of the co-investors subsequently embezzled the loan proceeds and all three defaulted on their loan obligations to the plaintiff.  After FKB’s client obtained judgments against the co-investors in New York and California, plaintiff instituted an action alleging that the client’s advising and structuring of the transactions resulted in the loss of plaintiff’s investments.

Hon. Barbara Jaffe (Ret.) of New York County Supreme Court initially granted FKB’s pre-answer motion to dismiss in its entirety, ruling that plaintiff’s allegations of actual damages were utterly refuted by documentary evidence showing that the client successfully obtained valid and enforceable judgments on behalf of plaintiff.  The First Department unanimously affirmed the dismissal, and rejected the plaintiff’s argument that Justice Jaffe’s decision conflicted with First Department precedent holding that the collectability of a judgment is not an essential element of a legal malpractice claim.  The First Department went further, agreeing with FKB’s argument that dismissal was appropriate because “the allegations of proximate causation depend on multiple speculative allegations that a different result would have followed if a different deal could have been negotiated, with different events of default, and if defendants had acted more quickly.”  A copy of the First Department’s decision is available here.                       

If you have any questions about this decision, or the defense of attorneys in general, please contact Andrew Jones and Benjamin Oxenburg.