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THE FIRST DEPARTMENT REAFFIRMS THAT A CLAIM FOR EXCESSIVE FEES AGAINST AN ATTORNEY IS SEPARATE AND DISTINCT FROM A LEGAL MALPRACTICE CLAIM

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  • Posted on: Apr 19 2019

The Second Department has held that “[t]o state a cause of action to recover damages for legal malpractice, a plaintiff must allege that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages.”  Board of Managers of Bay Club v. Borah, Goldstein, Schwartz, Altschuller & Nahins, P.C., 97 A.D.3d 612, 613 (2nd Dep’t 2012) (citations and internal quotation marks omitted). 

Many times, plaintiffs that sue their attorney because they are aggrieved by the conduct of the attorney assert numerous causes of action in their complaint. Sometimes duplicative causes of action are dismissed and sometimes they survive.  For example, in Cherry Hill Market Corp. v. Cozen O’Connor P.C., 118 A.D.3d 514 (1st Dep’t 2014), the First Department agreed with supreme court that two causes of action sounding in common-law negligence and breach of fiduciary duty were properly treated as legal malpractice causes of action, and were appropriately dismissed due to “insufficient allegations as to proximate cause.”  Cherry Hill, 118 A.D.3d at 514.  Nonetheless, the Cherry Hill Court reversed the dismissal, as duplicative, of an additional breach of fiduciary duty claim based on the averment that the law firm “either collected and/or billed plaintiffs for excessive and/or unearned fees.”  Cherry Hill, 118 A.D.3d at 514.  In so doing, the Cherry Hill Court, found that the fiduciary duty claim was not based on the same facts as the malpractice claim and that a fiduciary duty breach could be based on the charging of excessive legal fees.

The plaintiff in Postiglione v. Castro, 119 A.D.3d 920 (2nd Dep’t 2014), brought an action sounding in negligence, legal malpractice, fraud, breach of contract and conversion against his former attorney.  Among other things, supreme court dismissed the contract and fraud claims as duplicative of the dismissed, time-barred, legal malpractice claim.  In reversing supreme court, the Second Department recognized that “where a cause of action alleging breach of contract or fraud arises from the same facts as a legal malpractice cause of action and does not allege distinct damages, the breach of contract or fraud cause of action must be dismissed as duplicative of the legal malpractice cause of action.”  Postiglione, 119 A.D.3d at 922 (citations omitted).  However, the Postiglione Court held that the breach of contract cause of action was not duplicative of the legal malpractice cause of action, and should not have been dismissed, because the claim was not based on the quality of the legal representation, and, instead, resulted from over billing and allegations of pilfered escrow money in violation of the parties’ retainer agreement. 

Similar analyses were made by the First Department in Ullmann-Schneider v. Lacher & Lovell-Taylor, P.C., 121 A.D.3d 415 (2014).  There, the Court affirmed the motion court’s finding that plaintiff’s breach of contract claim against its former law firm, in which it was alleged that defendant over billed and performed unnecessary services, was not duplicative of plaintiff’s legal malpractice claim.  The Court reasoned that the contract claim “does not speak to the quality of defendants’ work.”  Ullmann, 121 A.D.3d at 416.  See also, Johnson v. Proskauer Rose LLP, 129 A.D.3d 59 (1st Dep’t 2015) (holding that an excessive fee claim and an unjust enrichment claim were not duplicative of a malpractice claim because “the former is stated regardless of the quality of the work performed, so long as a plaintiff can reasonably allege that the fee bore no rational relationship to the product delivered” and the latter, “which is predicated on the excessiveness of the … fee also properly survived the motion to dismiss”).

The Appellate Division, First Department addressed these issues most recently in  Cascardo v. Dratel (April 18, 2019).  There, plaintiff asserted claims against her former law firm sounding in legal malpractice, fraud, excessive legal fees and breach of fiduciary duty.   Supreme court denied defendant’s motion to dismiss the fraud, excessive legal fees and breach of fiduciary duty claims.  On appeal, the First Department sustained the excessive fee cause of action and dismissed the fraud and fiduciary duty claims as being “subsumed in the excessive attorney fees claim….”  As to the excessive legal fee claim, the Court stated that:

The claim for excessive legal fees (and the related discussion in the complaint of defendants’ alleged breach of fiduciary duty based on the alleged overcharges) was correctly sustained. Plaintiff alleged that “[her] fee bore no rational relationship to the product delivered,” and detailed that, in exchange for the $25,000 fee, defendants produced only a draft complaint that was essentially identical to the one that she had presented to them. This claim is not duplicative of the legal malpractice claim, as plaintiff’s complaints regarding the over billing were not a direct challenge to the quality of the work but instead a claim that the fee paid bore no rational relationship to the work performed. To the extent that the motion court read the pro se complaint as alleging a separate cause of action for breach of fiduciary duty, these allegations are subsumed in the cause of action for excessive attorney fees.  (Citations omitted.)

TAKEAWAY

The distinction between fraud and contract claims in which excessive fees are alleged and legal malpractice claims is significant for a number of reasons.  Legal malpractice actions are governed by a three-year statute of limitations. Contract, fraud claims and breach of fiduciary duty (in this context) claims are governed by a longer six-year statute of limitations.  Under circumstances where a malpractice action is time-barred, a plaintiff may still be able to assert an excessive fee claim under a contract, fraud and/or breach of fiduciary duty theory.

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