848 N.Y.S.2d 663 | N.Y. App. Div. | 2007
Lead Opinion
OPINION OF THE COURT
The issue to be decided on this appeal is whether the defendants-attorneys committed legal malpractice in their representation of the plaintiffs in the negotiation and closing of a lease and purchase option agreement concerning certain commercial property. The plaintiffs sought the property for the purpose of manufacturing barbecue sauce. Approximately two years prior to the signing of the agreement, the subject property was classified as an inactive hazardous waste disposal site. The defendants knew that there were environmental violations concerning the property that had to be dealt with and wrote to the relevant enforcement agencies asking for details. Despite the fact that those letters were never responded to, the defendants advised the plaintiffs to enter into the agreement at issue on an “as is” basis. The defendants never informed the plaintiffs of the environmental violations or the consequence of the “as is” clause of the agreement until two years later. We find the jury’s determination that the plaintiffs were entitled to such information before entering into the agreement, and that the defendants committed malpractice by failing to advise the plaintiffs about the violations and the effect of the “as is” clause, was reached on a fair interpretation of the evidence.
The relevant evidence adduced at trial may be summarized as follows: in November 1992 the plaintiffs retained the defendant Jeffrey Schwartz and the defendant law firm to provide legal services in connection with a lease and purchase option agreement concerning certain commercial property in Freeport for the disclosed purpose of manufacturing barbecue sauce. In December 1992, upon the advice and counsel of the defendants, the plaintiffs entered into an “as is” lease for the property with an option to buy (hereinafter the agreement). Approximately two years earlier, in 1990, the New York State Department of Environmental Conservation (hereinafter the DEC) had classified the property a level 2A inactive hazardous waste disposal site due to the activities of a prior tenant, Raneo Wiping Cloth, Inc. (hereinafter Raneo). Raneo had collected rags from the printing industry soaked with solvent, ink, and oil, and leakage from storage barrels had collected in a storm drain on the property. The plaintiff Ted Barnett (hereinafter Barnett) testified that the plaintiffs were never advised and were otherwise un
Schwartz testified that the landlord/owner’s attorney had informed him in 1992 that a previous tenant of the property was a rag cleaning business, and that he had informed the plaintiffs of that fact. Further, he asserted, he had discussed with the plaintiffs the letters and the option of having an environmental analysis of the property performed, and the plaintiffs had decided against an environmental analysis due to the cost. Indeed, he testified, the plaintiffs signed the agreement prior to receiving responses to the letters because both they and the landlord/owner were anxious to complete the transaction. Schwartz asserted that he discussed every term of the agreement with the plaintiffs, including the “as is” clause. Further, he testified, he tried to insert an indemnification clause in the agreement regarding prior uses of the property, but the attorney for the landlord/owner refused. Consequently, he asserted, he explained to the plaintiffs that there was no way of knowing whether there were environmental problems with the property, and that the landlord/owner would not indemnify them if there were. Schwartz testified that the plaintiffs remained interested in purchasing the property even after learning of its environmental status and, consequently, he continued to seek information on the property, to discuss options with the plaintiffs, and to negotiate with the landlord/owner. Concerning his comments to the plaintiffs’ daughter, Schwartz asserted that no matter how many times he explained the lack of legal options against the landlord/owner, the plaintiffs and their daughter continued to question why they couldn’t sue. Schwartz admitted that he stated, “What do you want me to say? That a mistake was made? . . . Okay, we made a mistake.” However, he asserted, what he meant was that, in retrospect, the plaintiffs
The jury found in favor of the plaintiffs and awarded damages. We modify only to award the plaintiffs prejudgment interest.
On appeal, the defendants argue, inter alia, that the verdict should be set aside as against the weight of the evidence. The defendants assert, among other things, that they were not negligent in advising the plaintiffs concerning the agreement because there were no definitive standards for environmental assessments in 1992. Indeed, they argue, the plaintiffs found the property and negotiated the terms of the agreement prior to retaining them, and signed the agreement with the “as is” clause. In any event, the defendants assert, even if they were negligent, there was no causal nexus to the plaintiffs’ damages because the plaintiffs made the “independent business decision to await the environmental clean-up of the [property] and to renegotiate and extend the agreement”. Indeed, the defendants argue, after the cleanup was completed there was no statutory or regulatory prohibition against using the property for the manufacture of barbecue sauce, and the plaintiffs’ true motivation for vacating the property was their decision to have the sauce manufactured by an established company. Finally, the defendants assert, the Supreme Court gave an erroneous jury charge on causation and permitted the jury to consider a theory of liability neither pleaded nor argued. However, to the extent that these arguments are preserved for appellate review, they lack merit.
The defendants’ argument concerning causation has an impact upon the analysis of other issues raised. Thus, it will be discussed first.
The defendants argue that the Supreme Court erred when it charged the jury that the plaintiffs needed to prove only that
The elements to be proved in a legal malpractice action have been subjected to various formulations. Thus, while it is clear that a plaintiff-client must prove negligence (i.e., that the defendant-attorney failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by members of the legal community), some cases hold that the negligence must be “the” proximate cause of damages (Britt v Legal Aid Socy., 95 NY2d 443, 446 [2000]; see e.g. Kleeman v Rheingold, 81 NY2d 270 [1993]; Caruso, Caruso & Branda, P.C. v Hirsch, 41 AD3d 407 [2007]; Cohen v Wallace & Minchenberg, 39 AD3d 691 [2007]; Cummings v Donovan, 36 AD3d 648 [2007]; Kotzian v McCarthy, 36 AD3d 863 [2007]), while others hold that it must be “a” proximate cause of damages (Bauza v Livington, 40 AD3d 791, 793 [2007]; see e.g. Moran v McCarthy, Safrath & Carbone, P.C., 31 AD3d 725 [2006]; Teño v Spodek, 25 AD3d 781 [2006]; Pistilli v Gandin, 10 AD3d 353 [2004]). There are also cases from this Court requiring the damages to be a “direct result” of the negligence (Caruso, Caruso & Branda, P.C. v Hirsch, 41 AD3d 407, 409 [2007]; Kotzian v McCarthy, 36 AD3d 863 [2007]; Moran v McCarthy, Safrath & Carbone, P.C., 31 AD3d 725 [2006] ). In the main, the cases from the Court of Appeals, including the most recent, do not expressly require that the negligence be either “the” or “a” proximate cause of damages, but require proof that, “but for” the negligence of the defendant-attorney, the plaintiff-client would have prevailed in the underlying action (in a classic lawsuit-within-a-lawsuit scenario) or would not have incurred damages (in an action alleging negligent advice, etc.) (see e.g. Leder v Spiegel, 9 NY3d 836 [2007] ; Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438 [2007]; AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428 [2007]; Davis v Klein, 88 NY2d 1008 [1996]; Carmel v Lunney, 70 NY2d 169 [1987]). The defendants here, while not expressly describing the difference between proximate and “but for” causation, argue that the latter requires a greater, more direct degree of causation. However, we find no substantive
First, the parties have not cited, and research has not revealed, any case from the Court of Appeals or any other court expressly holding that “but for” causation is synonymous with sole proximate cause, or that requires a degree of causation in legal malpractice cases greater than proximate cause, i.e., greater than that which must be typically proved as against any other professional or lay defendant in a negligence action. Similarly, the parties have not cited, and research has not revealed, any case discussing or identifying any basis for singling out attorneys for special treatment on the issue of causation. The Pattern Jury Instruction on legal malpractice, which focuses upon the lawsuit-within-a-lawsuit scenario, does not expressly use either the phrase “but for” or “proximate cause” in its formulation (PJI 2:152). However, the comments to the instruction, while noting the “but for” formulation, provide that a defendant-attorney’s negligence need only be “a” proximate cause of damages and refer the reader to the general Pattern Jury Instruction on proximate cause (1 NY PJI3d 2:152, at 872, 880 [2008]; PJI 2:70). Moreover, our reading of the case law does not reveal that a heightened standard for causation is actually being applied in legal malpractice cases. Rather, all results can be explained by application of general principles of proximate cause. For example, in the lawsuit-within-a-lawsuit scenario, the plaintiff-client must prove that but for the defendant-attorney’s negligence they would have prevailed in the underlying action. Stated otherwise, if the plaintiff-client cannot prove that it would have prevailed in the underlying action, the defendant-attorney’s negligence was not a proximate cause of any damages arising from the loss of the same. Further, there are several decisions from this Court requiring the plaintiff-client to prove both that the defendant-attorney’s negligence was “a” proximate cause of damages, and that “but for” such negligence it would have prevailed in the underlying action or would not have incurred damages (see e.g. Moran v McCarthy, Safrath & Carbone, P.C., 31 AD3d 725 [2006]; Terio v Spodek, 25 AD3d 781 [2006]). Clearly, these decisions do not provide for two different measures of causation in the same standard. Indeed, it would appear that the “but for” language, which grew out of the lawsuit-within-a-lawsuit scenario (see
A jury verdict should not be set aside as against the weight of the evidence unless the evidence at trial so preponderated in favor of the appealing party that the verdict could not have been reached on any fair interpretation of the evidence (see Lolik v Big V Supermarkets, 86 NY2d 744 [1995]; Tapia v Dattco, Inc., 32 AD3d 842 [2006]; Nicastro v Park, 113 AD2d 129 [1985]). Where the verdict can be reconciled with a reasonable view of the evidence, the successful party is entitled to the presumption that the jury adopted that view (see Tapia v Dattco, Inc., 32 AD3d 842 [2006]; Torres v Esaian, 5 AD3d 670 [2004]). Here, a fair interpretation of the evidence supports the jury’s conclusion that the defendants failed to exercise the care, skill, and diligence commonly possessed and exercised by a member of the legal profession in advising the plaintiffs concerning the agreement, and that but for such negligence the plaintiffs would not have incurred the damages awarded (see Edwards v Haas, Greenstein, Samson, Cohen & Gerstein, P.C., 17 AD3d 517 [2005]). The plaintiffs did not receive the benefit which they sought from the agreement, and which they retained the defendants to help them achieve, i.e., the lease/purchase of
The defendants also raise two challenges to the damages award. First, they argue, the plaintiffs’ “principal alleged damages (i.e. lost profits from their barbecue sauce business) are entirely speculative.” However, the plaintiffs did not seek damages for lost profits. Further, the court’s charge to the jury expressly limited the potential damages to rent paid, the cost of renovations (not including equipment), and legal fees. Second, the defendants argue, the plaintiffs should not have been awarded damages for rent paid because the agreement provided that such rent would be refunded only if the plaintiffs exercised the option to purchase the property, which they did not, despite the lack of any impediment to doing so. However, the plaintiffs were not limited to seeking the return of rent paid pursuant to the terms of the agreement. Further, they did not pursue such a theory of recovery. Rather, the plaintiffs sought the return of rent paid as damages arising from the negligence of the defendants. Here, a fair interpretation of the evidence supports the jury’s conclusion that, but for the defendants’ negligence, the plaintiffs would not have incurred rent payments on prop
The plaintiffs are entitled to an award of prejudgment interest. “CPLR 5001 operates to permit an award of prejudgment interest from the date of the accrual of the malpractice action in actions seeking damages for attorney malpractice” (Horstmann v Nicholas J. Grasso, P.C., 210 AD2d 671, 673 [1994]; see also Rudolfo Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d at 444 n 3; Meyer v Glynn, 278 AD2d 291 [2000]; Butler v Brown, 180 AD2d 406 [1992]). In relevant part, CPLR 5001 (b) provides:
“[I]nterest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.”
Here, the earliest ascertainable date that the plaintiffs’ legal malpractice cause of action existed is December 21, 1992, the date that the agreement was entered into (see McCoy v Feinman, 99 NY2d 295 [2002]; Town of Wallkill v Rosenstein, 40 AD3d 972 [2007]). Thus, interest is to be computed from the dates that the damages were incurred (i.e., the dates that the plaintiffs paid the amounts awarded as damages for rent, renovations, and legal fees) or, if impractical, from a single reasonable intermediate date.
The defendants’ remaining contention concerning the court’s charge to the jury is unpreserved for appellate review (see CPLR 5501 [a] [3]) and, in any event, without merit.
Therefore, the judgment is modified, on the law, by adding thereto a provision awarding the plaintiffs prejudgment interest; as so modified, the judgment is affirmed, with costs to the
Dissenting Opinion
On November 4, 1992, the plaintiffs retained the defendant Jeffrey L. Schwartz, a member of the defendant law firm. Schwartz counseled the plaintiffs to enter into an “as is” lease for property at 409 Main Street in Free-port (hereinafter the premises) with a rent of $2,400 per month and an option to buy, exercisable prior to December 1, 1994, for the sum of $240,000 less credits for rent paid. The term of the lease was for two years, beginning on January 1, 1993, and expiring on December 31, 1994. The complaint alleged that Schwartz never conducted any due diligence concerning the premises, its history, or prior uses. As a result, the plaintiffs were allegedly unaware, when they executed the lease on December 21, 1992, that the premises had been classified by the New York State Department of Environmental Conservation (hereinafter the DEC) as a level 2A inactive hazardous waste disposal site.
According to the plaintiff Ted Barnett (hereinafter Barnett), after executing the lease the plaintiffs began renovating the premises for its intended use, to wit, the manufacture of barbecue sauce. Barnett claimed that he did not learn of the status of the premises as an environmentally-impaired site until February of 1994. He informed Schwartz, who advised him to continue paying rent while he obtained an extension of the option to buy until December 31, 1995, during which time he would get the landlord to remedy the condition. Additional extensions of the option were granted over the next few years. In August 2001 the plaintiffs received a letter from Schwartz advising them that the condition had been remedied and that, in order to exercise the option to buy, they had to obtain financing. Instead, the plaintiffs opted to have their sauce manufactured by a third party and failed to obtain the financing for the purchase of the premises.
The proof at trial demonstrated, without contradiction, the following additional facts. The plaintiffs stopped paying rent and taxes in October 1995 and remained in possession until 2001 without making any payments. The site was officially delisted as a hazardous waste site by the DEC on December 15, 2000. Until 2001, the plaintiffs continued to tell Schwartz that they were interested in purchasing the property. Thereafter,
At trial the defendants called an expert who testified that during the time period in question the failure to condition a lease on a phase one environmental assessment would not be a breach of the then-prevailing standards of legal representation. The defendants’ expert maintained that environmental assessment would not be done in the context of a lease and might only be warranted in the context of a purchase because the cost of such assessment was prohibitive and would only be justified in the context of a purchase. The defendants’ expert also testified that the presence of an “as is” clause would not necessarily be a red flag and is present in almost every similar transaction. The plaintiffs’ expert agreed that an “as is” clause is not uncommon, but asserted that, in the context of this lease/option to purchase transaction and the facts known to the defendants, additional steps should have been taken to insure that the site was not environmentally impaired.
As part of the jury charge the court stated that the plaintiffs were required to establish “that the defendant’s negligence was a substantial factor in causing actual damages to the plaintiffs.” Consistent with that charge, the verdict sheet instructed the jury to answer the following questions: “Was the defendant Jeffrey Schwartz’s negligent conduct in connection with the lease and purchase agreement a substantial contributing cause of actual financial damages to . . . the plaintiffs?” The defense took vigorous exception to the “substantial contributing cause” language in both the charge and the verdict sheet.
In an action to recover damages for legal malpractice, the plaintiff must prove the following three essential elements: (1) the negligence of the attorney; (2) that such “negligence was the proximate cause of the loss sustained” (Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 170 AD2d 108, 114, affd 80 NY2d 377 [1992] [emphasis added]), and (3) that the plaintiff sustained damages as a result of the attorney’s action or inaction (id.; see Bauza v Livington, 40 AD3d 791 [2007]). Legal malpractice must be demonstrated by proof sufficient to show that the attorney failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by a member of the legal community (see Bauza v Livington, 40 AD3d 791 [2007]). To establish the elements of proximate cause and
Under New York law, “ ‘unless the ordinary experience of the fact-finder provides sufficient basis for judging the adequacy of the professional service, or the attorney’s conduct falls below any standard of due care, expert testimony will be necessary to establish that the attorney breached a standard of professional care and skill’ ” (Estate of Ginor v Landsberg, 960 F Supp 661, 672 [1996], affd 159 F3d 1346 [1998], quoting Greene v Payne, Wood & Littlejohn, 197 AD2d 664, 666 [1993]; see also O’Brien v Spuck, 99 AD2d 910 [1984]).
Applying these basic principles to the facts adduced at this trial, I conclude that the judgment must be reversed and that the defendants’ motion for a directed verdict should have been granted. Based on this record no reasonable view of the evidence can sustain the verdict reached by the jury. Both the plaintiffs’ and the defendants’ experts testified that in representing a tenant, an “as is” lease is not uncommon. Moreover, on cross-examination, the plaintiffs’ expert conceded that there was no statutory or regulatory prohibitions which would have prevented the plaintiffs from using the premises for the purpose intended in 1992 to 1994 notwithstanding its listing as a possible inactive hazardous waste site. Thus, whether viewed as a lease or a prospective purchase of property in toto, the alleged environmental status of the premises did not impair the intended use of the premises by the plaintiffs. The marketability of the premises is not at issue since the plaintiffs were not obligated to purchase the premises.
Even if that were not the case, insofar as the alleged malpractice entailed Schwartz’s failure to ascertain the status of the premises or his advice to the plaintiffs to enter into the lease despite the “as is” clause without further due diligence on their part, the plaintiffs’ proof did not establish that had Schwartz insisted on something other than the “as is” clause the landlord would have acquiesced to such efforts, and that absent such an alternative provision in the lease the plaintiffs would not have
To the extent that the alleged malpractice was predicated on Schwartz’s advice to see the deal through, there is no proof that such advice constituted malpractice or resulted in any damages to the plaintiffs. As we have consistently held, the mere dissatisfaction with a strategic choice of counsel is not malpractice (see Magnacoustics, Inc. v Ostrolenk, Faber, Gerb & Soffen, 303 AD2d 561 [2003]). On the contrary, had the plaintiffs followed that advice, they would have had the use of the premises without rent for the entire period beyond October of 1995 and, upon its sale (i.e., if they were disposed to sell), would have realized a sum in excess of the option price. In other words, the plaintiffs would have sustained no damages had they followed their attorney’s advice to consummate the transaction.
Accordingly, I feel there were no facts upon which the jury could render a finding of legal malpractice. Even if that were not the case, the question submitted to the jury was, in any event, not proper, as the jury was required to determine if the defendants’ alleged acts of malpractice were the proximate cause (i.e., direct, primary, or sole cause) of the plaintiffs’ damages (see Carmel v Lunney, 70 NY2d 169 [1987]). The footnote cited in Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Mill-stein, Felder & Steiner (96 NY2d 300, 305 n 2 [2001]), citing
While I concede that in sustaining their burden in satisfying the “but for” requirement of the legal malpractice cause of action, the plaintiffs need not show that the defendants’ conduct was the only or sole factor resulting in the plaintiffs’ damages, nonetheless, the plaintiff must still conclusively demonstrate that such conduct was the primary, direct, or predominant cause of the loss sustained (see 7A CJS, Attorney and Client § 302). I believe that to prevail in a legal malpractice action the plaintiff is required to prove something more than that which was charged to the jury herein (to wit, that the jury need only find that the attorneys’ neglect was a proximate cause of the plaintiffs’ damages—i.e., one of several possible causes, including the plaintiffs’ own culpable conduct). Whether intended or not, the trial court’s employment of the phraseology in question and the majority’s approval thereof will inevitably be construed by future plaintiffs as a diminishment of what heretofore had been a very rigorous standard of proof. I cannot in good conscience join in an opinion which will diminish the burden of proof to be met by plaintiffs in legal malpractice cases, and which is not in accordance with our precedent.
In my view, the judgment under appeal should be reversed and that branch of the defendants’ motion which was pursuant to CPLR 4404 to set aside the jury verdict and for judgment as a matter of law should have been granted. Alternatively, the matter should be remitted for a new trial to determine if the plaintiffs met their burden with respect to establishing the “but for” requirement of a legal malpractice action. I, therefore, respectfully dissent.
Crane, J.P., and Balkin, J., concur with Ritter, J.; Lifson, J., dissents and votes to reverse the judgment in a separate opinion.