United States District Court, S.D. New York
OPINION AND ORDER
A. ENGELMAYER, DISTRICT JUDGE
decision resolves defendant Nicholas W. Kowalchyn's
motion in limine seeking to limit, at trial, the
amount of damages at issue in this legal malpractice suit. At
an August 22, 2017 conference, the Court directed Kowalchyn
to "set forth the bases for why the damages in this
lawsuit are limited to the settlement amount, $52, 500,
reached in the underlying personal injury action in New York
State Supreme Court, Bronx County (the "Bronx
Action"), and/or that sum less attorneys' fees and
costs." Dkt. 78. Upon review of Kowalchyn's motion
and the plaintiffs' brief in opposition, the Court denies
the motion, I. Background
Rolando Chaparro and Yelena Chaparro (the
"Chaparros") bring this legal malpractice claim
against their former attorney, Kowalchyn, alleging that
Kowalchyn settled their personal injury case in the Bronx
Action for "far less than the reasonable settlement
value of that action." Dkt.*0 ("PI. Br.") at
2; see Dkt 1 ("Complaint") at ¶ 68.
They also contend that Kowalchyn failed to inform them of two
liens against them-a Social Services Lien and a Workers'
Compensation Lien-and failed to explain to them that the
consequence of those liens would be that they would not
personally recover anything from the settlement. PL Br. at 2;
see Complaint at ¶ 75. They also complain that
Kowalchyn failed to negotiate with the lienholders
"before settling the Bronx Supreme Court action or
within a reasonable time thereafter." PI. Br. at 2;
see Complaint ¶ 79. Kowalchyn has asserted
third-party claims against Fredric Lewis alleging that, Lewis
is liable, or at least jointly liable, for any malpractice.
See Dkt. 11.
January 6, 2016, Kowalchyn moved for summary judgment, Dkt.
32, and on January 8, 2016, Lewis also so moved. Dkt. 43. In
an August 22, 2016 Order, the Honorable Analisa Torres,
United States District Judge, then presiding over this
matter, instructed the parties that their summary judgment
briefs were deficient and directed that they resubmit their
pleadings. Dkt. 57. After the parties resubmitted their
summary judgment briefs, the case was re-assigned to this
February 17, 2017 Opinion, this Court denied both motions for
summary judgment. Dkt. 67. The Court held the three-year
statute of limitations did not bar the Chaparros' claim
against Kowalchyn because record evidence supported a finding
that Kowalchyn's representation lasted until at least
August 12, 2013, within three years of the filing of the
Chaparros' complaint. Id. at 6-7. The Court also
rejected Lewis's argument that Lewis could not be held
liable; the Court noted that Lewis, despite not being
directly involved in the settlement conference, was, at the
time of the settlement, the Chaparros' attorney of
record. Id. at 7. And, the Court held, there is
evidence supporting the inference that Lewis was
Kowalchyn's supervisor. Id. The Court also
rejected Lewis' argument that he was improperly joined as
a third-party defendant, holding that Lewis waived his
objection to any improper joinder, and that, in any event,
Kowalchyn filed his third-party complaint within the 14 days
in which he was permitted to interplead Lewis as of right.
Id. at 7-8.
the Court directed the parties to submit a joint pretrial
order by March 10, 2017. Dkt. 67. On August 22, 2017, the
Court held a pretrial conference, at which the Court
explained that it would entertain a motion from the
defendants that sought to limit damages to the amount of the
settlement. See Dkt. 78.
September 7, 2017, as directed, Kowalchyn filed his motion,
memorandum, and exhibits attached thereto. Dkt. 79
("Def. Br."). On September 25, 2017, the Chaparros
filed their memorandum in opposition and declaration in
support thereof. Dkts. 80-81. Lewis has not submitted
briefing on this motion.
damages at issue in Chaparros' malpractice claims against
Kowalchyn are not limited to the amount for which the
Chaparros settled the Bronx Action. Were the Chaparros'
claim here simply that Kowalchyn had, but breached, a duty to
notify them that the Social Services Lienholder and the
Workers' Compensation Lienholder would have first claims
on their recovery in the Bronx Action, that claim would be
properly limited to the value of the settlement. Such a
malpractice claim would be best understood as based on a
failure by counsel to communicate to the Chaparros
who would benefit from the settlement-the Chaparros
or their lien creditors. By its nature, such a claim would
therefore implicate only the amount for which the Chaparros
actually agreed to-and did-settle.
Chaparros' claims against Kowalchyn, as formulated in the
Complaint, are not so limited. The Complaint enumerates three
separate bases for legal-malpractice liability stemming from
Kowalchyn's representation in the Bronx Action. The
second of those theories does, indeed, turn on
Kowalchyn's duty to inform them of the liens.
See Complaint ¶ 75. But the first and third
theories describe other species of malpractice that, if
proven, could support greater damages.
the Chaparros' Complaint alleges that Kowalchyn settled
their claims for far less than they were reasonably worth.
The Complaint alleges: "Kowalchyn acted negligently to
the extent that he settled the underlying action for far less
than it was worth." Complaint ¶ 68. And the
Complaint alleges facts supporting this theory. As the
Complaint details, see Id. ¶¶ 19-25, Mr.
Chaparro alleged serious injuries resulting from his
accident, which "[made] his case worth more than $52,
500.00, " id. ¶ 71. In particular, the
Complaint alleges, Mr. Chaparro's "lost income
damages alone exceeded $150, 000 as of the Settlement
date." Id. The Complaint further alleged that
recovery of those damages was likely. As the Complaint
alleges, the Bronx Supreme Court denied summary judgment to
the defendants in the underlying action in an October 15,
2012 Order. Id. ¶ 37. Given that ruling, the
Complaint alleges, it was "likely" that the
Chaparros "would have succeeded on the merits and
received a judgment far in excess of $52, 500.00 after
trial." Id. ¶ 72.
the Chaparros' Complaint alleges that they agreed to the
$52, 500 settlement amount without having been informed of
the liens against them and that, had they known of the liens,
they would not have accepted such a small settlement.
Id. ¶¶ 74, 76. This claim-the one on which
Kowalchyn's motion in limine is based-alleges
that Kowalchyn was aware of the liens at the time he advised
the Chaparros to accept the $52, 500 settlement offer,
id. ¶ 54; that Kowalchyn did not inform the
Chaparros, id. ¶ 55, or the Bronx Supreme
Court, id. ¶ 58, of the liens' and that
Kowalchyn never explained to the Chaparros that, because of
the liens, they would, in practice, not recover anything from
the settlement, id. ¶ 61.
the Complaint alleges that Kowalchyn acted negligently by
failing to resolve either of the liens before agreeing to
settle the Bronx Action. Id. ¶ 78.
Specifically, the Complaint alleges, inter alia,
that Kowalchyn "never attempted to negotiate the liens
with either the Dept. of Social Services or Chubb, losing an
opportunity to reduce the lien amounts for Plaintiffs."
Id. ¶ 62.
Complaint thus brings claims of legal malpractice alleging
more than merely whether counsel failed to inform the
Chaparros as to who stood to collect the proceeds of the $52,
500 settlement. Rather, the Chaparros' claim also seeks
to hold Kowalchyn liable for (1) his allegedly negligent
decision to settle for $52, 500 at all, and (2) his allegedly