Sep 7th, 2018

FKB’s Andrew Kowlowitz and Shari Sckolnick Obtain Summary Judgment, Dismissing a Legal Malpractice Claim Stemming from a Shareholder Derivative Action


FKB’s Andrew Kowlowitz and Shari Sckolnick successfully obtained CPLR § 3212 summary judgment dismissing a legal malpractice complaint from Justice Loren Baily-Schiffman in Supreme Court, Kings County.

This legal malpractice action stemmed from a complex series of derivative claims, wherein an entity of which the plaintiff was the purported sole shareholder, claimed it was entitled to millions of dollars of damages caused by the purported mismanagement of real property. After the underlying derivative claims were dismissed, Plaintiff, individually, sued his former attorney, alleging the derivative claims were dismissed de to the attorney’s purported malpractice.

In FKB’s motion for summary judgment, FKB successfully argued that the plaintiff failed to establish that he could prove “but for” proximate causation, or suffered actual damages. In granting summary judgment, the Court agreed with FKB’s argument that the plaintiff, in his individual capacity, could not have successfully maintained, litigated or recovered for the underlying derivative claims.  FKB argued that even if the derivative claims were successful and corporate assets were recovered, those assets would have been returned to the entity of which the plaintiff was the sole shareholder, not the plaintiff, individually.

The Court also agreed with FKB’s argument there is no conceivable scenario that would have allowed the plaintiff to individually litigate and recover damages for the derivative claims because he did not acquire any shares of stock in the corporate entity until after the derivative claims were commenced. FKB argued that under the “Contemporaneous Ownership Rule” a plaintiff in a shareholder derivative action must not only have been a shareholder at the time of the transaction about which he complains but must maintain shareholder status throughout the pendency of the action or the action will abate.

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