Statute of Limitations, Causation, Breach of Fiduciary Duty, Legal Malpractice; Continuous Representation Doctrine; RICO Claims
By: Lauren Tucker | Senior Staff Member
Richard Allen III (“CRA”), through his guardian, entered into a retainer agreement with Cohen and Gresser LLP (“Defendant”), to collect personal guaranties that CRA executed. The agreement stated that the scope of Defendant’s representation of CRA was broad and was not limited to the action to collect the personal guaranties. Later, Defendant commenced an action (“the RICO action”) on behalf of CRA against Christopher Devine alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The RICO violations included allegations of fraud, conspiracy, conversion, unjust enrichment, breach of fiduciary duty, and constructive trust on the basis that Devine fraudulently induced CRA and Excelsior, Plaintiff’s wholly owned company, into loaning him and companies he controlled millions of dollars. Significantly, Defendant failed to raise the RICO claims against CRA’s former counsel and his law firm, Neiman and GT, as Defendant concluded that there were no viable RICO claims against the former attorneys. Two years later, CRA died and a representative of estate of CRA (“Plaintiff”) was appointed.
Plaintiff commenced a legal malpractice suit against Defendant on the bases that (1) it failed to institute a RICO action against CRA’s former counsel and (2) it allowed the statute of limitations to expire in the RICO action against CRA’s former attorneys. In response, Defendant moved to dismiss the complaint on two grounds: (1) that the statute of limitations for a legal malpractice claim expired; (2) that Defendant’s alleged negligence was not the proximate cause of the estate’s injury because Plaintiff’s new counsel had sufficient opportunity to raise such allegations.
The Court granted Defendant’s motion to dismiss because Plaintiff’s claim was untimely. First, the Court held the claim was barred by statute of limitations. A legal malpractice claim commenced more than three years after a client’s death is untimely as a matter of law. Here, CRA died on March 9, 2011, and the subject action did not commence until August 12, 2014. Thus, Plaintiff’s claim was barred by the statute of limitations. Second, the Court held that the statute of limitations was not tolled under the continuous representation doctrine. The continuous representation doctrine will toll the limitations period if the attorney continues to represent the client in the same matter in which the malpractice occurred and the parties have a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim. The continuous representation doctrine toll ceases to be operative when the representation in the particular matter comes to an end. Here, the death of CRA severed the attorney-client relationship with Defendant. Thus, the continuous representation doctrine did not toll the statute of limitations.
Third, notwithstanding the untimeliness of the claim, the Court held that Plaintiff failed to allege that Defendant’s negligence was the proximate cause of Plaintiff’s injury. The introduction of new counsel serves as an intervening cause in a legal malpractice, severing the chain of causation between the negligent actions of an attorney and a plaintiff’s injuries, so long as new counsel has “sufficient opportunity to protect the plaintiffs” rights. Here, the successive counsel of CRA’s estate had sufficient time and opportunity to adequately protect the estate’s rights by timely asserting a RICO claim against CRA’s former attorneys because the statute of limitations to bring the RICO action expired after CRA’s death. Thus, Plaintiff failed to prove that Defendant’s negligence was the proximate cause of Plaintiff’s injury after the appointment of new counsel.
Accordingly, the Court granted Defendant’s motion to dismiss.
Davis v. Cohen & Gresser LLP, Index No. 157930/14, 03/24/16, (Ramos, J).