Furman Kornfeld & Brennan LLP's Andrew S. Kowlowitz obtains dismissal of a legal malpractice action on behalf of a commercial litigation law firm arising from the handling of an underlying complex collections action.2/28/11

FKB's client is a commercial litigation law firm located in Manhattan. The Law Firm was retained by a client to pursue collection of an Israeli judgment in the amount of $1.3 million, which was domesticated and filed with the Kings County Supreme Court. The judgment debtor, along with his wife, were shareholders of corporations which owned real property located in Brooklyn and Queens, New York. The Law Firm sought to seize the real property in satisfaction of the judgment. However, the collection efforts proved to be considerably more complex than anticipated for reasons beyond the control of the Law Firm.

First, the judgment debtor's wife filed for divorce, and contested the validity of the underlying judgment, claiming the judgment was the product of fraud. Substantial litigation occurred in the Kings and Queens County Supreme Court, including injunctions and an appeal. The Law Firm ultimately prevailed, as the New York Court recognized the validity of the judgment. Immediately following the conclusion of the state court litigation, the judgment debtor's ex-wife then filed for Chapter 11 bankruptcy. Again, the validity of the judgment was challenged through the bankruptcy proceedings. Yet again, the Law Firm prevailed in establishing the validity of the judgment. After the bankruptcy proceedings concluded, the judgment debtor's ex-wife passed away. Collection efforts were then necessarily conducted through the probate court. The Law Firm represented its client in the collection action for a period of seven (7) years, in multiple lawsuits and appeals – all arising from its efforts to enforce the judgment.

In 2006, the client terminated its relationship with the Law Firm, and filed a legal malpractice action in the U.S. District Court, Southern District of New York. The client alleged the Law Firm was negligent in the prosecution of the collection action, permitted the judgment debtor's ex-wife to dissipate assets and failed to take certain unspecified steps which would have prevented the judgment debtor's ex-wife from evading seizure of the collateral properties.

FKB filed a pre-answer motion to dismiss the Complaint pursuant to Federal Rule 12 (b) (6). FKB argued that the plaintiff/former client could not plead and prove actual and ascertainable damages, as the underlying collection action is ongoing. Plaintiff may, in fact, ultimately prevail in the collection action and recover the full amount of the judgment with interest. On this basis, FKB argued that legal malpractice action was "unripe," and to permit the plaintiff to proceed with the legal malpractice action prematurely could result in a "double recovery". In other words, if the client were to prevail in the legal malpractice action, and then subsequently prevail with his collection efforts and seize the judgment debtor's properties, plaintiff would, in that instance, obtain a recovery in excess of the judgment.

FKB also argued that plaintiff's claims were grounded in speculation and, therefore, beyond legal proof. FKB argued that plaintiff could not establish that "but for" the alleged conduct of the Law Firm, he would have achieved a more favorable result in the underlying collection litigation.

On February 23, 2011, after hearing oral argument on the motion to dismiss, Honorable Paul A. Crotty granted the Law Firm's motion to dismiss, dismissing the complaint for legal malpractice in its entirety. Judge Crotty found that the claim for legal malpractice was unsustainable, as plaintiff could not plead or prove the element of actual and ascertainable damages. Judge Crotty also ruled that the claims for legal malpractice were grounded in speculation, and subject to dismissal on this basis as well.

Should you have any questions concerning this decision, or the defense of legal professionals in general, please contact
Andrew S. Kowlowitz at 212-867-4100 or email him at akowlowitz@fkblaw.com

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