Jan 31st, 2014

Andrew S. Kowlowitz wins appeal in the Second Circuit Court of Appeals, affirming dismissal of a legal malpractice action.

FKB’s Andrew S. Kowlowitz wins an appeal in the Second Circuit Court of Appeals affirming the dismissal of legal malpractice action against a New York law firm in connection with its legal representation of a condominium board and the individual unit owners in an action against the builder and developer of the condominium building. Following oral argument, FKB’s pre-answer motion to dismiss pursuant to Rule 12(b)(6) was originally granted by the Hon. Paul A. Engelmayer, Southern District of New York. Plaintiff appealed the dismissal to the Second Circuit Court of Appeals.

During the underlying litigation, the Plaintiff – one of the individual unit owners in the condominium – discharged the Firm and retained new counsel to represent her in connection with her claims for property damage in her penthouse apartment. The Firm continued to represent the condominium board and the remaining unit owners. The Board and other unit owners eventually voted to approve a settlement of the underlying litigation against the builder and developer. A condition of the settlement required the Board to indemnify the developer against any further claims by the unit owners. The Plaintiff, unhappy with the settlement, opted out of the settlement and elected to pursue her individual claims against the developer. As such, the Board and all unit owners, including the Plaintiff, were required to indemnify the developer and pay its defense costs. The Plaintiff brought suit against the Law Firm alleging that it breached its duty to Plaintiff, as a former client, and negotiated a settlement that was against her interests.

FKB moved to dismiss the complaint pursuant to Rule 12(b)(6) on the grounds that Plaintiff failed to sufficiently plead that FKB’s client breached a duty to Plaintiff, that the alleged negligence was the “but for” proximate cause of Plaintiff’s alleged damages and that Plaintiff did not sustain actual and ascertainable damages. Specifically, FKB argued that the retention of successor counsel and the vote by the unit owners and Board to approve the settlement were intervening acts that severed the chain of causation. Further, FKB argued that Plaintiff could not demonstrate actual and ascertainable damages, as the underlying litigation, as well as a separate lawsuit against the Board, were still ongoing.

The Second Circuit Court of Appeals affirmed Judge Engelmayer’s decision and agreed with Judge Engelmayer’s findings that Plaintiff’s Complaint failed to sufficiently plead any of the elements of a legal malpractice claim. Specifically, the Second Circuit held that the Plaintiff had failed to set forth allegations sufficient to allege that FKB’s client breached a duty to the Plaintiff or was the “but for” proximate cause of the Plaintiff’s alleged damages. Both the District and Circuit Courts adopted FKB’s reasoning and held that the retention of successor counsel as well as the vote of the unit owners to approve the settlement precluded Plaintiff from demonstrating proximate causation.

Should you have any questions concerning this decision, or the defense of legal professionals in general, please contact Andrew S. Kowlowitz.