Ellenoff Grossman & Schole LLP v APF Group, Inc.
Annotate this CaseDecided on November 17, 2009
Supreme Court, New York County
Ellenoff Grossman & Schole LLP, Plaintiff,
against
APF Group, Inc., Defendant.
111573/06
Emily Jane Goodman, J.
Plaintiff (EGS), a law firm, seeks summary judgment on its action for legal fees of $69,104.18 and moves to dismiss Defendant's counterclaims for legal malpractice and breach of fiduciary duty.[FN1] Defendant (APF/client) opposes the motion.
The underlying circumstances regarding the alleged malpractice involved Plaintiff's role in Defendant's commercial agreement with a non-party, Thomas Delspina. It appears that the agreement was initially prepared by APF's principal (a client of EGS) and Delspina (the Agreement). EGS, however, agreed, at the client's request, to bolster the contract by providing "certain boilerplate legal phrases concerning binding arbitration, events of termination, and the non-exclusivity of the Agreement" and "language that confirmed that the Agreement constituted an independent contractor relationship" between APF and Delspina. APF contends that the draft agreement, after being typed by EGS personnel, was submitted to EGS for its review. EGS has not disputed this but maintains that it is not liable for the contents or omissions in the Agreement because the firm did not fully draft it, but merely provided the referenced language. No written evidence is produced regarding EGS's purported limited role.
EGS, who represented APF at the arbitration, concedes that APF lost the arbitration because the arbitrator found that the parties orally terminated the Agreement, after it was signed. Although APF maintains that it was malpractice for EGS not to include a standard merger clause in the Agreement, EGS maintains that even if that clause was part of the Agreement, the outcome would have been the same. EGS argues that the outcome would not have changed because Delspina claimed at the arbitration that he was fraudulently induced to enter into the Agreement, after being told that he could orally terminate it. Accordingly, EGS maintains that the arbitrator would have considered Delspina's testimony that he could orally terminate the Agreement, whether or not it contained a merger clause. Moreover, EGS correctly notes that arbitrators are not confined by rules of evidence, which the courts must follow.
APF opposes the motion, based on its contention that (1) there was no retainer regarding [*2]the Agreement and the legal fees are unreasonable, (2) an allegedly inexperience associate at EGS worked on the Agreement instead of Barry Grossman, who APF requested review the agreement, (3) there was no basis for EGS to retract a price discount of $8,310.50 because although remaining invoices were not paid, the flat fee was timely paid.
The primary question is whether EGS' assistance in the drafting and reviewing of the
agreement for the client is negligent and, if so, did that lead to the unsuccessful outcome and
damages. In other words, was it malpractice? An action for legal malpractice requires proof of
three essential elements: (1) the negligence of the attorney, i.e., that the attorney failed to
exercise that degree of care, skill and diligence commonly possessed by a member of the legal
profession; (2) that the negligence was a proximate cause of the loss sustained; and (3) actual
damages (see Gray v Wallman & Kramer, 184 AD2d 409 [1st Dept 1992]).
It is undisputed that an attorney-client relationship existed, and that after the
preparation of the agreement, EGS appeared as counsel at the arbitration, where the
document partially written by the client and "improved" by the law firm was introduced. EGS's
argument, that it could not have committed malpractice, based on its limited role, is unsupported
by written evidence, and is disputed by APF (see Campbell v. Fine, Olin & Anderson,
P.C., 168 Misc 2d 305 [Supreme Court, New York County 1996] [when representing a
client, the attorney has the affirmative duty to ensure that the client understands any limitations
imposed by the attorney on the scope of representation]; see also 1994 Opns NY St Bar
Assoc Comm on Prof Ethics No 604 [a lawyer may limit the scope of services as long as the
lawyer makes full disclosure to the client of the effects of such limitation]). Further, the email
attached to the Affidavit in Opposition suggests that EGS's role was far broader than it contends,
as the email states, in relevant part, that "After review, here are some additional concepts that
Barry felt should be included in the agreement with Mr. Delspina." Further, even if EGS's role
was as limited as it contends, and the client was so informed, the omission of a boilerplate
merger clause is directly related to the work EGS admittedly agreed to provide. The email
suggests that the Agreement provide for several grounds pursuant to which APF may terminate
it, but is silent on whether, and how, Delspina may terminate the Agreement.
EGS also maintains that it is entitled to summary judgment and dismissal of the malpractice counterclaim because APF cannot demonstrate that but for the alleged negligence, APF would have prevailed in the arbitration. EGS contends that the arbitrator "could still have considered Delspina's evidence that he was fraudulently induced into signing the Agreement." Therefore, EGS maintains that even if the Agreement contained a merger clause, the result would have been the same. APF states that at the arbitration, it was questioned about the absence of a merger clause by Delspina's attorney and, after all testimony was concluded, by the arbitrator. APF also points out that the Agreement provides that it is effective immediately and will terminate on the 5th anniversary of the date of the Agreement. Given that EGS has moved for summary judgment, it is EGS's burden to demonstrate that APF could not have prevailed at arbitration, even if the merger clause was included in the Agreement, and not vice versa. EGS has not met its burden, as a matter of law (see e.g., Huffner v Ziff, 55 AD3d 1009 [3d Dept 2008] [law firm's motion for summary judgment on malpractice claim denied because law firm, whose only proof was an attorney's affidavit, did not establish that but for its alleged malpractice in reviewing a disability insurance policy, containing exclusions for pre-existing conditions, it could [*3]not have caused plaintiff's damages because it was unlikely that the insurer would have issued a policy, without such exclusions]).
EGS is also not entitled to summary judgment in light of the issues of fact regarding the amount owed and whether EGS had a basis to retract its discount based on late payment. Although EGS moves for summary judgment based on account stated (as well as breach of contract), no proof has been submitted regarding when, and what bills, were sent to APF.
It is hereby
ORDERED that the motion is granted only as to dismissal of the counterclaim for breach of fiduciary duty, as duplicative of the counterclaim for malpractice, and is otherwise denied; and it is further
ORDERED that the parties will be contacted for a date for a discovery conference, but should discuss settlement in the interim.
This constitutes the Decision and Order of the Court.
Dated: November 17, 2009
ENTER:
______________________
J.S.C.
Footnotes
Footnote 1:EGS correctly notes that the
counterclaim for breach of fiduciary duty should be dismissed as duplicative of the counterclaim
for malpractice (see e.g., Garten v
Shearman & Sterling LLP., 52 AD3d 207 [1st Dept 2008]).
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
