APPEAL by the defendants, in an action to recover damages for legal malpractice, (1) from stated portions of an order of the Supreme Court (Ira B. Warshawsky, J.), entered October 3, 2007, in Nassau County, which, inter alia, granted their motion for summary judgment dismissing the complaint, and (2), as limited by their brief, from so much of an order of the same court dated April 21, 2008, as granted that branch of the plaintiffs' motion which was for leave to reargue and, upon reargument, in effect, vacated so much of the order entered October 3, 2007, as granted the defendants' motion for summary judgment dismissing the complaint, and thereupon denied the defendants' motion for summary judgment dismissing the complaint.
The opinion of the court was delivered by: Chambers, J.
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
REINALDO E. RIVERA, J.P., ANITA R. FLORIO, THOMAS A. DICKERSON and CHERYL E. CHAMBERS, JJ.
We are asked in this case to decide whether the defendants are entitled to summary judgment dismissing the plaintiffs' causes of action which are based upon allegations of legal malpractice allegedly occurring during the defendants' representation of the plaintiff debtors in bankruptcy proceedings.
The plaintiff Breslin Realty Development Corp. (hereinafter Breslin Realty) is a real estate developer, and the plaintiff Wilbur F. Breslin (hereinafter Breslin), is an officer, director, and shareholder of Breslin Realty. Breslin, along with the plaintiffs Easa Easa and Jack Easa, are principals in one or more of the plaintiff debtors. The plaintiffs Bay Harbour Associates, L.P. (hereinafter Bay Harbour), Huntington Square Associates, L.P. (hereinafter Huntington Square), Busy Bee Associates, L.P. (hereinafter Busy Bee), Rochester Associates, L.P. (hereinafter Rochester), Riverwood La Place Associates, LLC (hereinafter Riverwood), and Verleye & Jericho Associates, L.P. (hereinafter Verleye), are debtors that owned several shopping centers. The debtors filed bankruptcy petitions pursuant to chapter 11 (see 11 USC § 1110 et seq.) in the United States Bankruptcy Court for the Eastern District of New York (hereinafter the Bankruptcy Court). They were represented in the bankruptcy proceedings by the individual defendants, J. Stanley Shaw and John H. Hall, a/k/a John H. Hall, Jr., of the defendant law firm, Shaw, Licitra, Gulotta, Esernio & Schwartz, P.C. (hereinafter referred to collectively as Shaw).
Owing to the illness of J. Stanley Shaw, the law firm of Dollinger, Gonski & Grossman (hereinafter the Dollinger firm) was appointed special counsel for Bay Harbour, Huntington Square, Rochester, and Verleye to handle adversary proceedings conducted in the summer of 2000. Matthew Dollinger, a member of the Dollinger firm, stated in an affidavit that since he was actually engaged in another trial at the time of the confirmation hearing, the Dollinger firm did not participate in the confirmation hearing, which was instead handled by Shaw.
In a verified complaint dated March 18, 2005, the plaintiff alleged three causes of action. The first cause of action alleged acts of legal malpractice with respect to the so-called Leucadia agreement entered into in July 1999 between the debtors and Leucadia, Inc. (hereinafter Leucadia). Pursuant to this agreement, Leucadia, through its entity Luk-Shop, Inc., purchased mortgages on property owned by the debtors in exchange for entering into joint venture agreements with the debtors. The agreement set a deadline of December 15, 1999, by which date the debtors were required to obtain financing for restructuring. When Breslin was unable to obtain financing by that date and demanded "consensual foreclosure" and conveyance to the appropriate joint venture, Leucadia exercised its rights under the agreement to foreclose the mortgages for its own benefit.
The second cause of action alleged that in the summer of 2000, in adversary proceedings before the Bankruptcy Court, Shaw failed to assert that the mortgages held by Leucadia were non-recourse loans which could be asserted against the mortgaged properties only, and not against other assets of the debtors. The plaintiffs asserted that as a result of Shaw's failure to assert that the mortgages were non-recourse loans, "Leucadia not only took title to the Premises, but took all assets of the Breslin entities." The plaintiffs further alleged that Shaw failed to submit updated appraisals of the properties involved.*fn1
In their third cause of action, the plaintiffs argued that Shaw breached a fiduciary duty to the plaintiffs by engaging in these acts of legal malpractice. This cause of action stands or falls with the causes of action sounding in legal malpractice (see Adamski v Lama, 56 AD3d 1071; Weil, ...