Legal malpractice action dismissed based upon doctrines of res judicata and collateral estoppel

The Appellate Division, in Kleinman v Weisman Law Group, P.C., 176 AD3d 1046 [2d Dept 2019], dismissed a former client’s legal malpractice action based upon the doctrines of res judicata and collateral estoppel. The court stated as follows:

In 2013, the defendant Weisman Law Group, P.C. (hereinafter the defendant firm), commenced an action against the plaintiff to recover unpaid legal fees in the Nassau County District Court. The plaintiff asserted a counterclaim, alleging that he was overbilled by the defendant firm. A judgment was entered in favor of the defendant firm and against the plaintiff. The plaintiff appealed the judgment of the Nassau County District Court to the Appellate Term of the Supreme Court for the Ninth and Tenth Judicial Districts, which affirmed the judgment (see Weisman Law Group, P.C. v. Kleinman, 60 Misc.3d 133[A], 2018 N.Y. Slip Op. 51042[U], 2018 WL 3309514 [App Term, 2d Dept, 9th & 10th Jud Dists 2018] ). In 2016, the plaintiff commenced the instant action against the defendants asserting causes of action alleging, inter alia, breach of contract and legal malpractice.

Scales of justice illustrating article about legal malpractice.

The plaintiff contends that the doctrines of res judicata and collateral estoppel do not apply in the instant case, as the Nassau County District Court lacked subject matter jurisdiction over his counterclaim in the prior action. Contrary to the plaintiff’s contention, the Nassau County District Court did have jurisdiction over his counterclaim pursuant to Uniform District Court Act Section 208(b), as the counterclaim was for money only. The doctrine of res judicata precludes the plaintiff from litigating the claims set forth in his complaint, as a judgment on the merits exists in the prior action between the same parties involving the same subject matter (see Matter of Josey v. Goord, 9 N.Y.3d 386, 389, 849 N.Y.S.2d 497, 880 N.E.2d 18; Matter of Hunter, 4 N.Y.3d 260, 269, 794 N.Y.S.2d 286, 827 N.E.2d 269). New York has adopted the transactional analysis approach to res judicata, so that once a claim is brought to a final conclusion, all other claims between the same parties or those in privity with them arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy (see Matter of Josey v. Goord, 9 N.Y.3d at 389–390, 849 N.Y.S.2d 497, 880 N.E.2d 18; Matter of Hunter, 4 N.Y.3d at 269, 794 N.Y.S.2d 286, 827 N.E.2d 269; *124 O’Brien v. City of Syracuse, 54 N.Y.2d 353, 357, 445 N.Y.S.2d 687, 429 N.E.2d 1158; Greenstone/Fontana Corp. v. Feldstein, 72 A.D.3d 890, 893, 901 N.Y.S.2d 643).

Furthermore, the plaintiff’s causes of action are barred by the doctrine of collateral estoppel, which precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same (see Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500, 478 N.Y.S.2d 823, 467 N.E.2d 487; Williams v. New York City Tr. Auth., 171 A.D.3d 990, 97 N.Y.S.3d 692). The doctrine of collateral estoppel applies here, as the issues in both actions are identical, the issue in the prior action was actually litigated and decided, there was a full and fair opportunity to litigate the action, the issue previously litigated was necessary to support a valid and final judgment on the merits, and the defendant Rachel J. Weisman was in privity with the defendant firm (see Conason v. Megan Holding, LLC, 25 N.Y.3d 1, 17, 6 N.Y.S.3d 206, 29 N.E.3d 215; Williams v. New York City Tr. Auth., 171 A.D.3d at 991–992, 97 N.Y.S.3d 692; Karimian v. Time Equities, Inc., 164 A.D.3d 486, 83 N.Y.S.3d 227).

R. A. Klass
Your Court Street Lawyer

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Outlining the scope of an attorney’s retainer agreement is important.

Outlining the scope of an attorney’s retainer agreement is important. This sets forth the nature of the work to be rendered by an attorney on behalf of his client. In Attallah v Milbank, Tweed, Hadley & McCloy, LLP, 2019 NY Slip Op 00583 [2d Dept Jan. 30, 2019], the court held:

An attorney may not be held liable for failing to act outside the scope of a retainer (see AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705, 866 N.E.2d 1033). Therefore, since the defendant’s alleged failure to negotiate with the school, its alleged failure to commence litigation against the school, and its alleged failure to properly advise the plaintiff on the efficacy of a defamation action against nonschool parties fell outside the scope of the parties’ letter of engagement, dismissal of the cause of action alleging legal malpractice was warranted, pursuant to CPLR 3211(a)(1), on documentary evidence grounds.

R. A. Klass
Your Court Street Lawyer

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Employment agreement termination

Employer’s termination of employment agreement must comply with contract provisions

When an employment agreement specifies certain acts or actions to be performed to effectuate a termination, the employer must follow the procedure as outlined in the employment agreement, or it is deemed a breach of the agreement. Kalus v. Prime Care Physicians, 20 A.D.3d 452 [2d Dept. 2005]; Scudder v. Jack Hall Plumbing, 302 A.D.2d 848, 850 [3d Dept. 2003]; Hanson v. Capital District Sports, 218 A.D.2d 909, 911 [3d Dept. 1995] (“If there was cause, plaintiff could not be discharged absent compliance with the relevant provisions of the employment contract. In view of defendant’s demonstrated noncompliance, in either case, the discharge would be ineffective and plaintiff would be entitled to the relief demanded in the complaint.”).

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Frustration of purpose

Contract may be voided when there is a frustration of its purpose.

Frustration of Purpose

“To invoke frustration of purpose as a defense for nonperformance, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.” PPF Safeguard, LLC v. BCR Safeguard Holding, LLC, 85 AD3d 506, 508 [1st Dept 2011] (quotation marks omitted); Crown IT Servs., Inc. v. Koval–Olsen, 11 AD3d 263, 265 [1st Dept 2004]; see also Rockland Dev. Assocs. v. Richlou Auto Body, Inc., 173 A.D.2d 690, 691 [2d Dept 1991] (the doctrine of frustration of purpose applies when the frustration is substantial). “The doctrine applies when a change in circumstances makes one party’s performance virtually worthless to the other, frustrating his purpose in making the contract.” PPF Safeguard, 85 AD3d at 508 (emphasis added), quoting Restatement (Second) of Contracts Section 265, Comment a. Gelita, LLC v. 133 Second Ave., LLC, 42 Misc 3d 1216(A) [N.Y. Sup Ct 2014].

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Waiver of a contract right

Waiver of a contract right is knowingly giving up a right.

The essence of a waiver is when a party intentionally relinquishes a known right. It is well settled that when there is a no oral modification clause, the doctrines of waiver, release and estoppel do not apply. (“ Waiver is an intentional relinquishment of a known right and should not be lightly presumed. ”) Gilbert Frank Corp. v. Fed. Ins. Co., 70 N.Y.2d 966, 968 [1988]; Brooklyn Fed. Saving Bank v. 9096 Meserole St. Realty LLC, 29 Misc 3d 1220(A) [Kings Sup Ct 2010].

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Monetary damages for breach of employment contract

The damages payable for breach of an employment contract are measured, prima facie, by the wages that would have been paid during the remainder of the contract term (see Cornell v. T.V. Development Corp., 17 N.Y.2d 69, 74, 268 N.Y.S.2d 29, 215 N.E.2d 349; Rebh v. Lake George Ventures, 241 A.D.2d 801, 803, 660 N.Y.S.2d 901). This, however, is only the prima facie measure. “The actual damage is measured by the wage that would be payable during the remainder of the term reduced by the income which the discharged employee has earned, will earn, or could with reasonable diligence earn during the unexpired term” (Hollwedel v. Duffy–Mott Co., 263 N.Y. 95, 101, 188 N.E. 266; see Cornell v. T.V. Development Corp., 17 N.Y.2d at 74, 268 N.Y.S.2d 29, 215 N.E.2d 349). Tendler v. Bais Knesses of New Hempstead, Inc., 112 AD3d 911, 911 [2d Dept 2013].

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Employee breach of good faith and loyalty

Appellate Division Second Department case law is clear that “an employee owes a duty of good faith and loyalty to an employer in the performance of the employee’s duties.”  Is. Sports Physical Therapy v. Burns, 84 AD3d 878, 878 [2d Dept 2011].

While there is duty of good faith and loyalty owed to an employer, “an employee may create a competing business prior to leaving her or his employer without breaching any fiduciary duty unless she or he makes improper use of the employer’s time, facilities or proprietary secrets in doing so.” Is. Sports Physical Therapy v. Burns, 84 AD3d 878, 878 (2d Dept 2011) (citing Schneider Leasing Plus v. Stallone, 172 A.D.2d 739, 741, 569 N.Y.S.2d 126).

A common example of a breach of a duty of good faith and loyalty is when an employee solicits his or her employer’s customers or otherwise compete during the course of his or her employment with the employer by the use of the employer’s time, facilities or proprietary information.  30 FPS Productions, Inc. v. Livolsi, 68 AD3d 1101, 1102 [2d Dept 2009]; A & L Scientific Corp. v. Latmore, 265 AD2d 355, 355 [2d Dept 1999}; Schneider Leasing Plus, Inc. v. Stallone, 172 AD2d 739 [2d Dept 1991].

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Oral modification to contract?

Oral modification: Changes to a contract must be in writing and not oral.

“Parties to a written agreement who include a proscription against oral modification are protected by subdivision 1 of section 15-301 of the General Obligations Law. Any contract containing such a clause ‘cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement is sought.’ Put otherwise, if the only proof of an alleged agreement to deviate from a written contract is the oral exchanges between the parties, the writing controls. Thus, the authenticity of any amendment is ensured ( see 1283 DFI Communications v. Greenberg, 41 N.Y.2d 602, 606-607, 394 N.Y.S.2d 586, 589-590, 363 N.E.2d 312, 315-316 [1977]).” Rose v Spa Realty Assoc., 42 NY2d 338, 343 [1977].

“In order to be valid, oral agreement modifying time of payment of original note must be supported by sufficient consideration and part payment on a note which is due does not fulfill these requirements since neither a promise to do that which promisor is already legally bound to do, nor the performance of an existing legal obligation, constitutes a valid consideration for an agreement.” Fed. Deposit Ins. Corp. v Hyer, 66 AD2d 521 [2d Dept 1979]. Moreover, if the contract contains a no waiver clause, failure to honor a party’s demand for compliance with the contract’s unambiguous terms will constitute a breach in spite of what the course of performance has been. DeCapua v Dine-A-Mate, Inc., 292 AD2d 489, 491 [2d Dept 2002].

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Part performance of a contract can be a valid modification.

Although courts have held that if there is partial performance under an oral modification and as a result, the doctrine of equitable estoppel would apply, such modification would have to have been agreed to by both parties. Beacon Term. Corp. v Chemprene, Inc., 75 AD2d 350, 354 [2d Dept 1980]. Additionally, for a course of performance to demonstrate mutual assent to a modification, it must be unequivocally referable to the modification. Nassau Beekman, LLC v Ann/Nassau Realty, LLC, 105 AD3d 33, 35 [1st Dept 2013].

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Breach of Contract

Elements of a cause of action for breach of contract

The elements of a cause of action for breach of contract are (1) formation of a contract between the plaintiff and defendant; (2) performance by plaintiff; (3) defendant’s failure to perform; and (4) resulting damage. See, Palmetto Partners LP v. AJW Qualified Partners LLC, 83 AD3d 804 [2 Dept. 2011].

The elements of a cause of action for breach of contract are, “The existence of a contract, the plaintiff’s performance pursuant to that contract, the defendants’ breach of their obligations pursuant to the contract, and damages resulting from that breach (see JP Morgan Chase v. J.H. Elec. of N.Y., Inc., 69 A.D.3d 802, 893 N.Y.S.2d 237; Furia v. Furia, 116 A.D.2d 694, 498 N.Y.S.2d 12). Elisa Dreier Reporting Corp. v. Global Naps Networks, Inc., 84 AD3d 122, 127 [2d Dept 2011]; Harris v. Seward Park Housing Corporation, 79 A.D.3d 425 [1st Dept. 2010].

Breach of contract has a 6 year statute of limitations.

A breach of contract claim has a statute of limitations of six years, and which the “clock” begins to tick, not at the inception of the agreement, but at the inception of the default.  Brooklyn Union Gas Co. v. Interboro Surface Co., Inc., 87 AD2d 833, 833 [2d Dept 1982]; see also, Guild v. Hopkins, 271 App.Div. 234, 244, 63 N.Y.S.2d 522 [1st Dept 1946]; Edlux Construction Corp. v. State of New York, 252 App.Div. 373, 300 N.Y.S. 509, affd. 277 N.Y. 635, 14 N.E.2d 197 [1938]).

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