Nicke v. Schwartzapfel Partners, P.C.
51 N.Y.S.3d 121
| N.Y. App. Div. | 2017Background
- May 2004: Theresa Nicke (injured plaintiff) allegedly injured in automobile accident; she and husband filed Chapter 13 bankruptcy in Aug 2004 and did not list the personal‑injury claim in schedules.
- May 2005: Schwartzapfel law firm filed a personal‑injury action in Nicke’s name; defendants moved to dismiss for lack of capacity; Supreme Court (Suffolk) dismissed in Feb 2008; plaintiffs did not appeal.
- May 2008: Law firm refiled the personal‑injury suit in the name of the bankruptcy trustee; case proceeded to trial in May 2011, producing a verdict and a $500,000 high‑low settlement; bankruptcy case closed in July 2011.
- Sept 2013: Plaintiffs sued the law firm, Steven Schwartzapfel, and Dr. Michael Shapiro for legal malpractice and fraud arising from alleged alteration of a medical report and related trial testimony in the trustee’s action.
- March 27, 2014: Supreme Court (Nassau) granted defendants’ CPLR 3211(a)(3) motions and dismissed the complaint against them for lack of capacity/standing. Plaintiffs appealed.
- Appellate court reversed as to capacity/standing, holding Chapter 13 debtors retained capacity/standing to bring these malpractice/fraud claims in their own names under the circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Capacity/standing to sue after Chapter 13 filing | Nicke retained capacity/standing as a Chapter 13 debtor to sue for malpractice/fraud arising from the trustee’s trial | Plaintiffs lost capacity/standing when trustee prosecuted the personal‑injury claim; only trustee may sue | Reversed: Chapter 13 debtors have capacity/standing here to maintain these claims |
| Preclusive effect of prior dismissal (issue preclusion) | Prior dismissal of 2005 action on capacity does not preclude later malpractice/fraud claims based on different facts/time | The 2008 capacity ruling bars plaintiffs from relitigating capacity/standing | Rejected: issue preclusion inapplicable because later claims arise from different facts and times |
| Judicial estoppel / privity exception for Chapter 13 debtors | Chapter 13 structure and debtor’s continuing interest create at least a near‑privity exception allowing suit by debtors | Plaintiffs’ claims belong to the trustee because trustee prosecuted the trunk personal‑injury case; no attorney‑client privity with plaintiffs in trustee’s action | Majority: plaintiffs not barred; Chapter 13 debtors retain sufficient interest; dissent: plaintiffs relinquished standing to trustee |
| Effect of bankruptcy timing (whether bankruptcy still open during trial) | Plaintiffs argue Chapter 13 debtors retain interests and foreseeable harm was to them | Defendants emphasize trustee remained prosecuting plaintiff until final decree (July 2011), so only trustee had standing | Court: majority views Chapter 13 debtors’ ongoing property interest as supporting standing; dissent emphasizes case‑specific timing and prior order favoring trustee |
Key Cases Cited
- Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148 (capacity to sue concerns power to bring grievance)
- Giovinco v. Goldman, 276 A.D.2d 469 (Chapter 13 debtors retain capacity to maintain certain suits)
- Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513 (Chapter 13 debtors’ retained interests discussed re: capacity/standing)
- Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343 (elements of collateral estoppel/issue preclusion)
- Baer v. Broder, 86 A.D.2d 881 (discussion of exceptions to privity principles in malpractice contexts)