FKB wins motion to dismiss legal malpractice claim against real estate firm in New York County.2/11/09

Hon. Walter B. Tolub, J.S.C. of New York County Supreme Court granted FKB's motion to dismiss a legal malpractice action against our client, a real estate law firm, who represented the plaintiff in connection with his sale of a cooperative apartment.

The plaintiff undertook to accomplish the sale as a "like-kind" exchange pursuant to Section 1031 of the Internal Revenue Code. Accordingly, prior to retaining FKB's client, the plaintiff's real estate attorneys, the plaintiff retained another law firm (which was a co-defendant in the legal malpractice action) for the purpose of implementing the Section 1031 exchange. While the defendant real estate firm did not have a written retainer agreement with the plaintiff, the co-defendant law firm did. The co-defendant law firm's written retainer set forth that it was responsible for facilitating the transaction as a Section 1031 exchange, including advising the plaintiff with respect to the selection of a qualified intermediary for the exchange. After the closing, it was discovered that the qualified intermediary misappropriated the plaintiff's funds. The plaintiff subsequently brought a legal malpractice action, alleging that the real estate firm, along with the co-defendant law firm, was responsible for the damages sustained from the qualified intermediary's misappropriation of the funds.

FKB made a pre-answer motion to dismiss the legal malpractice action on the ground that the plaintiff did not plead and could not prove that our client was the proximate cause of his damages. In granting FKB's motion and dismissing the legal malpractice action in its entirety, Justice Tolub fully agreed with FKB's arguments that arguments that: 1) due to the limited scope of our client's retention as plaintiff's real estate counsel, our client was not responsible for ensuring that the qualified intermediary properly handled plaintiff's funds; and 2) even assuming our client were negligent, the qualified intermediary's intervening act of absconding with plaintiff's funds was the sole proximate cause of the plaintiff's injuries.

FKB's Joshua Sandberg prepared the winning motion papers.

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