Friday, June 20, 2014

Malpractice Award Affirmed

A $17.2 summary judgment for legal malpractice was affirmed by the New York Appellate Division for the First Judicial Department.

Plaintiff commenced this action for legal malpractice against defendant law firm based on the alleged negligent drafting of an agreement (Side Agreement) that was intended to memorialize an oral agreement between plaintiff and nonparty UBS Securities LLC (UBS) to cap at $2 million the amount of fees UBS was to receive for acting as plaintiff's exclusive financial advisor in its effort to acquire control of nonparty Six Flags, Inc., unless plaintiff acquired more than 51% of the voting shares of Six Flags. Prior to the instant lawsuit, UBS successfully sued plaintiff for $10 million in fees in connection with the Six Flags transaction. In the course of that lawsuit, we rejected plaintiff's argument that the Side Agreement, read in tandem with the main agreement (Engagement Agreement), capped UBS's fee at $2 million (UBS Sec. LLC v Red Zone LLC, 77 AD3d 575 [1st Dept 2010], lv denied 17 NY3d 706 [2011]) (UBS Decision)...

The motion court properly concluded that the continuous representation doctrine applies to toll the statute of limitations on plaintiff's legal malpractice claim. Although defendant drafted the Side Agreement in 2005, it provided legal advice throughout the UBS litigation from 2007 through late 2010. Although plaintiff was represented by other counsel in the UBS litigation, plaintiff and its trial counsel continued to confer with defendant and share privileged documents regarding its defense strategy. In doing so, defendant apparently sought to rectify its earlier alleged malpractice, namely to prevent UBS from demanding more than $2 million when the Side Agreement was intended to limit UBS's fee. In such cases, the continuous representation doctrine applies. There is no basis to find that the earlier "gap" in representation from roughly 2005 to 2007 ended defendant's prior representation. There was simply no need to consult defendant during that time, and defendant never communicated to plaintiff that its prior representation had ended.

Plaintiff's motion for summary judgment on its legal malpractice claim was also properly granted. Notably, defendant does not dispute that the Side Agreement was intended to cap UBS's fees at $2 million. Given our prior finding in the UBS litigation that the Side Agreement failed to do just that (UBS Sec. LLC, 77 AD3d 575), summary judgment is warranted. Accordingly, no expert opinion evidence was necessary before granting the motion. There are no triable issues as to whether defendant, as opposed to plaintiff or its trial counsel in the UBS litigation, caused plaintiff's injuries. But for defendant's drafting of the Side Agreement, UBS would not have prevailed in its lawsuit seeking $10 million. (citations omitted)

(Mike Frisch)

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