Kimso v Ghandi

This appeal addresses a party’s ability to amend a pleading following trial and the full presentation of proof by both parties. Counterclaim plaintiff, Mahesh Gandhi and his two associates formed and held equal one-third interests in three corporations. The corporations were given a twenty million dollar loan from the U.S. Dept. of Housing and Urban Development (“HUD”), nine million dollars of that loan was loaned to the three associates as a shareholder loan—each associate made regular interest payments on that loan. Gandhi was removed as the corporations’ manager due to suspected misappropriation of funds. Gandhi filed a state action seeking to compel arbitration and the corporations filed a federal claim alleging multiple counts. Eventually, the parties reached a Settlement Agreement (“Agreement”) agreeing to end all actions and Gandhi sold his one-third interest, but no provision explicitly rid of Gandhi’s shareholder loan obligation.

The corporations stopped making payments to Gandhi after making twenty-three monthly payments during which Gandhi did not pay shareholder loan payments. The corporations filed an action seeking declaratory judgment to “offset the remaining amount they owed Gandhi under the Settlement Agreement against the money Gandhi owed the corporations on the shareholder loan notes.” Litigation continued, but both parties’ amended their pleadings. In the corporations’ amendment, they admitted they were “’joint and severally liable for the amounts due’. . .and ‘if Plaintiffs fail to make the full payments to Defendant as specified under Settlement Agreement, Defendant may allege that Plaintiffs are in default of the Settlement Agreement and that Defendant would be entitled to all his remedies.’” One month prior to trial, corporations filed motions to preclude Gandhi from presenting evidence/claiming payments due to him. The trial court deferred, but at trial allowed evidence about the agreement and back payments owed. Gandhi moved to conform the pleadings to align to the proof at trial, seeking to assert a counterclaim. The supreme court granted his motion, the corporations appealed and the appellate division reversed the trial court’s ruling—finding, the late amendment prejudiced the corporations. Gandhi appealed.

Here, the Court found that pursuant to N.Y. C.P.L.R. 3025, a party is permitted to amend a pleading “‘at any time by leave of court . . . before or after judgment to conform [the pleading] to the evidence.’” Furthermore, the Court found that where there is no prejudice to the party opposing the amendment, the court should grant leave to amend. The court has great latitude in exercising discretion over applications to amend pleadings and may only be reversed where there is an abuse of discretion. Here, the court found the appellate division did abuse its discretion because there was no prejudice to the corporations that would support a denial of Gandhi’s request to amend. The Court found that because the corporations had stated in their amended complaint that the sum of money they owed should be reduced by the money Gandhi owed them—explicitly addressing potential back payments—they were not permitted to allege prejudice from Gandhi’s demand for payments due to him. This is because “facts admitted in a party’s pleadings constitute . . .admission, and are conclusive . . .” Furthermore, the Court found that the corporations had elicited evidence that was the basis of Gandhi’s claim.

The Court reversed and remitted the case to the appellate division.

998 N.Y.S.2d 740 (N.Y. 2014)

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Town of Amherst v. Weiss

This appeal addresses the tolling of the statute of limitations in a legal malpractice action under the continuous representation doctrine. This appeal also considers whether an attorney who was hired by the Defendant-attorney to assist in the matter leading to the alleged malpractice had sufficient privity of contract with the client to be amenable to suit for legal malpractice as well. The Plaintiff, the Town of Amherst (the “Town”), hired the Defendant-attorney, Weiss, to investigate bringing disciplinary charges against one of the Town’s employees. Weiss then hired Gladl (together, “Defendants”), another attorney, to assist in bringing the charges. The two attorneys did work for the Town, including drafting the charges against the employee and presenting evidence on behalf of the Town at a disciplinary hearing before the Town Board. The hearing resulted in the termination of the employee, and the Defendants drafted the Town Board’s resolution to terminate the employee.

The employee challenged the termination, alleging that the Town Board had not properly appointed the hearing officer. The resolution and the first hearing were annulled, and a second hearing was required. The Town again retained the Defendants to represent the Town in the second hearing in order to, as stated by the court, “correct the legal error resulting in the need to nullify the first hearing and initial . . . terminat[ion of] the employee.” Town of Amherst v. Weiss, 120 A.D.3d 1550, 993 N.Y.S.2d 396, 399 (4th Dep’t. 2013). The Defendants prosecuted the employee at the second hearing and drafted another resolution. The employee challenged the second termination as well, and the Town again retained the Defendants to represent the Town and defend its decision to terminate the employee in a proceeding the Town expected the employee to initiate.

The Town sued the Defendants to recover the costs and expenses relating to the first annulled hearing, alleging that the Defendants were negligent in not advising the Town regarding proper appointment of the hearing officer. Defendant Weiss moved for summary judgment to dismiss the complaint, arguing that the action was time-barred by the three year statute of limitations for legal malpractice. Defendant Gladl moved to dismiss for the same reason, and also argued that he did not have sufficient privity of contract with the Town to be amenable to suit for legal malpractice. The Supreme Court granted Defendants’ motions for summary judgment. The Town appealed, and the Appellate Division, Fourth Department, reversed, holding that triable issues of fact existed as to whether the statute of limitations was tolled by continuing representation of the Town by the Defendants.

The court held that the Defendants’ doing work for the Town relating to the second hearing and resolution raised triable issues of fact as to whether that representation “‘pertain[ed] specifically to the matter in which [Defendants] committed the alleged malpractice[,]’” and therefore whether there existed continuous representation, tolling the statute of limitations. Weiss, 993 N.Y.S.3d at 399 (quoting Shumsky v. Eisenstein, 726 N.Y.S.2d 365, 369 (2001)). Had representation relating to the initial matter ceased after the first hearing, the statute of limitations would have run since the alleged malpractice was committed on the date of the improper first hearing. However, the court held that it could not say, as a matter of law, that the Defendants’ subsequent acts were not so interrelated to the initial matter as to constitute continuing and interconnected representation related to terminating the employee. Therefore, triable issues of fact existed as to whether the separate retainer agreements pertained to separate and distinct matters, or whether they pertained to the ongoing initial matter. Since questions existed on the issue, the court held that summary judgment was improper.

The court also held that the Town submitted enough evidence to raise a triable issue of fact as to whether there was actual privity of contract (or a relationship close enough to actual privity) between Gladl and the town to make Gladl amenable to suit, and that summary judgment on that ground was also improper.

993 N.Y.S.2d 396 (4th Dep’t. 2014)

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Grace v. Law

This appeal addresses whether a client’s failure to appeal the underlying action bars the client’s legal malpractice claim, an issue of first impression for the court. In October 2002, the plaintiff, John W. Grace began receiving treatment from Dr. Shoba Boghani for an eye condition at the Veteran’s Administration Rochester Outpatient Clinic. After Dr. Boghani cancelled the plaintiff’s July 2003 appointment, he was diagnosed with neovascular glaucoma during the next appointment, which was not until approximately one year later. This condition resulted in blindness in his left eye. After learning that the blindness may have been prevented if diagnosed sooner, the plaintiff hired defendants Robert L. Brenna, Jr. and Brenna, Brenna & Boyce, PLLC (the Brenna defendants) and initiated an administrative proceeding against the VA for its failure to reschedule an appointment sooner.

Delays in the proceeding led the Brenna defendants to recommend plaintiff retain Michael R. Law and Phillips Lytle LLP (the Law defendants) to pursue a medical malpractice action against the VA, but soon after the Law defendants initiated the action in federal court, they discovered a conflict of interest: Dr. Boghani was primarily employed by the University of Rochester, one of the their existing clients. Thereafter the plaintiff returned to the Brenna defendants for representation. The plaintiff added Dr. Boghani and the University of Rochester to the existing claim against the VA, but the United States District Court found that the action was time-barred and granted defendant’s motion for summary judgment. The court also found that since Dr. Boghani was an independent contractor, there was no jurisdiction for plaintiff’s claim that the VA Clinic was liable for the Dr.’s actions. The only surviving claim was that the VA was liable for medical malpractice for failing to reschedule the plaintiff’s appointment sooner.

After the Brenna defendant’s informed the plaintiff that success on this claim was unlikely, the plaintiff retained other counsel and brought an action in state court against the Brenna and Law defendants for legal malpractice for failing to bring suit against Dr. Boghani and the University in a timely fashion.

Here, the Court adopted the plaintiff’s “likely to succeed” standard in determining whether his claim was barred because of his failure to pursue an appeal for the underlying medical malpractice claim over the defendants “nonfrivolous or meritorious” standard, which would bar a legal malpractice claim when the plaintiff failed to pursue any appeal that a reasonable attorney would pursue. The Court held that the “likely to succeed” standard would require a plaintiff to, prior to commencing a legal malpractice claim, bring an appeal for the underlying action if he or she is likely to succeed on that claim; if not likely to succeed, the plaintiff would be free to pursue a legal malpractice claim without appealing the underlying action. Under this standard, the Court held that the defendants failed to meet their summary judgment burden, that the plaintiff raised a triable issue of fact regarding the statute of limitations, and affirmed the Appellate Division’s decision to deny the defendant’s motion for summary judgment.

997 N.Y.S.2d 334 (N.Y. 2014)

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