Duplicative causes of action against an attorney

When a client alleges duplicative causes of action against an attorney based upon different theories of liability, the court can dismiss those duplicative causes of action.

“ To state a claim for breach of fiduciary duty, a plaintiff must allege the existence of a fiduciary relationship, misconduct by the other party, and damages directly caused by that party’s misconduct ” (Castellotti v Free, 138 AD3d 198, 209 [1st Dept 2016]). “ [A] fiduciary relationship arises between two persons when one of them is under a duty to act or give advice for the benefit of another upon matters within the scope of the relation ” (Oddo Asset Mgt. v Barclays Bank PLC, 19 NY3d 584, 593-594 [2012], rearg denied 19 NY3d 1065 [2012] [internal quotation marks and citation omitted]). The existence of a duty is essential and may not be imposed unilaterally (see Marmelstein v Kehillat New Hempstead: The Rav Aron Jofen Community Synagogue, 45 AD3d 33, 36-37 [1st Dept 2008], affd 11 NY3d 15 [2008]). Whether a fiduciary relationship exists involves a fact-specific inquiry (see EBC I, Inc. v Goldman Sachs & Co., 5 NY3d 11, 19 [2005]). A claim for breach of fiduciary duty also requires “ the violation of some duty due to an individual, which duty is a thing different from a mere contractual obligation ” (see Batas v Prudential Ins. Co. of Am., 281 AD2d 260, 264 [1st Dept 2001] [internal quotation marks and citation omitted]).

A breach of fiduciary duty claim is duplicative of a legal malpractice claim when both are based upon the same facts and seek the same damages (see Barrett v Goldstein, 161 AD3d 472, 473 [1st Dept 2018]; accord Cohen, 115 AD3d at 513). As applied herein, plaintiff has established that the fiduciary duty counterclaim is grounded upon the same facts as the legal malpractice counterclaim. Defendant has neither attempted to distinguish the two counterclaims nor addressed why the second counterclaim should not be dismissed.

Adam Leitman Bailey, P.C. v Pollack, 63 Misc 3d 1229(A) [Sup Ct 2019]

 

R. A. Klass
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[ duplicative causes of action ]

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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Elements of a Cause of Action to Recover Damages for Breach of Fiduciary Duty

Elements of a Cause of Action to Recover Damages for Breach of Fiduciary Duty

“ The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct (Rut v. Young Adult Inst., Inc., 74 A.D.3d 776, 777, 901 N.Y.S.2d 715; see Faith Assembly v. Titledge of N.Y. Abstract, LLC, 106 A.D.3d 47, 61, 961 N.Y.S.2d 542; Armentano v. Paraco Gas Corp., 90 A.D.3d 683, 684, 935 N.Y.S.2d 304). A fiduciary relationship exists between two persons when one of them is under a duty to act for…the benefit of another upon matters within the scope of the relation. (EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26 [internal quotation marks omitted]; see Faith Assembly v. Titledge of N.Y. Abstract, LLC, 106 A.D.3d at 62, 961 N.Y.S.2d 542). ” Varveris v Zacharakos, 110 AD3d 1059, 1059 [2d Dept 2013].

R. A. Klass
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Probate/Administration: a guide to probate or administration proceedings in New York State.

Upon a person’s death, a proceeding may be brought in the Surrogate’s Court of the county in which the person formerly resided. The proceeding will seek to collect and administer assets of the deceased person, and distribute them to his/her heirs.

There are two basic types of proceedings: Probate and Administration.

Probate: where the deceased executed a “Last Will and Testament,” a proceeding will be filed to “probate” [or “prove”] the Will. The deceased, known as the “testator” will have designated an “executor” [someone selected to carry out the deceased’s wishes], who may or may not receive a commission for such services. The deceased will also have designated beneficiaries to receive portions of his/her estate. The deceased may indicate specific bequests of property (such as “to my brother, I leave my guitar”) or general bequests (such as “to my three siblings, I leave them each one-third of my net estate”).

Administration: where the deceased did not execute a Will, the person is referred to having died “intestate.” Contrary to popular belief, the assets of that person’s estate do not automatically go to the State. Rather, there is a section of law which specifies the manner in which an intestate’s assets are distributed. Depending on who the survivors of the intestate are (such as a spouse, child, parent, or cousin), the law will tell the “administrator” to whom the net assets of the estate must be paid. The “administrator” serves a similar duty to the deceased’s estate as the “executor” mentioned above, and may be appointed by the Surrogate of the county upon proper application.

Collection of assets
After appointment, the executor/administrator will have the duty to locate and collect the various assets of the deceased. An account may be opened in which the assets will be deposited; non-liquid assets, such as cars, houses, stocks, or furniture may be sold at auction or otherwise converted to money. Actions may be brought on behalf of the deceased to collect moneys due to the estate or for wrongful death/personal injury actions.

Tax returns
After all of the assets have been collected, the executor/administrator will determine whether federal and/or state estate tax returns must be filed. Various banks or institutions may require “tax waivers” or “releases of tax lien” from the State in order to release funds to the executor/administrator.

Accounting
The final duty of the fiduciary is to file with the court an “accounting” of what that person did during his term as executor/administrator.

Professional fees
The fiduciary will retain and pay professionals in connection with the estate proceeding, including attorneys, accountants, brokers, auctioneers, and appraisers.

by Richard A. Klass, Esq.

———–
copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.


R. A. Klass
Your Court Street Lawyer

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Continuing Wrongs Doctrine and the Statute of Limitations

“This Action Is Not Barred By the Statute of Limitations”
“This action is not barred by the statute of limitations, and should be permitted to proceed. As laid out in the Complaint, there have been a series of wrongs on the part of Defendants, over the course of years, which establish their bad faith and lack of fair dealing with Plaintiff. Based upon the continuing wrongs, the causes of action were properly brought within the statute of limitations period.”
Breach of fiduciary duty may constitute a continuing wrong that “is not referable exclusively to the day the original wrong was committed.” Kaymakcian v. Board of Managers of Charles House Condominium, 49 AD3d 407, 854 NYS2d 52 [1 Dept. 2008]  (denying dismissal of the breach of fiduciary duty claim as time-barred where board had a continuing duty to repair leaks in building’s limited common elements); 1050 Tenants Corp. v. Lapidus, 289 AD2d 145, 146, 735 NYS2d 47 [1 Dept. 2001]. The continuing wrong doctrine applied to breach of fiduciary duty limits monetary damages to three years from the commencement of the action. See Kaufman v. Cohen, 307 AD2d 113, 118, 760 NYS2d 157 [1 Dept. 2003]; CPLR 214[4].
by Richard A. Klass, Esq.
———– copyr. 2012 Richard A. Klass, Esq. The firm’s website: www.CourtStreetLaw.com Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions. Prior results do not guarantee a similar outcome.

R. A. Klass Your Court Street Lawyer

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The Directors of a Corporation Owe a Fiduciary Duty to Their Shareholders

Without doubt, the directors of a corporation owe its shareholders a fiduciary duty. The fiduciary duty of a director of a corporation consists of the obligation to perform his duties in good faith, without discriminatory practice, and with the degree of care which an ordinary prudent person in a like position would use under similar circumstances. See, Bernheim v. 136 East 64th Street Corp., 128 AD2d 434 [1 Dept. 1987]. In Levandusky v. One Fifth Avenue Apartment Corp., 75 NY2d 530 [1990], the Court of Appeals held that, generally, members of a board of directors who act in good faith and in the honest exercise of business judgment are protected by the business judgment rule. The business judgment rule has been held to apply to cooperative apartment sales. See, Woo v. Irving Tenants Corp., 276 AD2d 380 [1 Dept. 2000]. Without doubt, the directors of a corporation owe its shareholders a fiduciary duty. The fiduciary is bound at all times to exercise the utmost good faith toward the principal or shareholder. Soam Corp. v. Trane Co., 202 AD2d 162, 608 NYS2d 177 [1 Dept. 1994].  The fiduciary must also act in accordance with the highest and truest principles of morality. Elco Shoe Mfrs., Inc., v. Sisk, 260 NY 100, 183 NE 191 [1932]. The fiduciary duty of a director of a corporation consists of the obligation to perform his/her duties in good faith, without discriminatory practice, and with the degree of care which an ordinary prudent person in a like position would use under similar circumstances. SeeBernheim v. 136 East 64th Street Corp., 128 AD2d 434 [1 Dept. 1987]. However, the business judgment rule does not apply where the directors acted in bad faith or were motivated by factors other than the interest of the cooperative corporation. See, Woo v. Irving Tenants Corp., supra. Further, the business judgment rule does not protect the board from liability for discrimination. Jones v. Surrey Cooperative Apartments, 263 AD2d 33 [1 Dept. 1999]. In a case in which the owner of a cooperative unit sued the board members for rejecting applicants for various reasons, including discriminatory ones, the court noted that the general deference granted to decisions of a cooperative corporation’s board of directors is not unlimited. If those board members act in a manner which is contrary to their duty to act fairly and impartially, courts may review claims of misconduct. Further, upon review, those claims of misconduct may prove actionable against the board members. See, Axelrod v. 400 Owners Corp., 189 Misc.2d 461 [Sup.Ct., NY Co. 2001]. A corporation can be directly liable for breach of fiduciary duty by the actions of its board of directors.  The Board owes a fiduciary duty to its shareholders, and controlling case law is replete with examples of shareholders properly stating these claims directly against cooperative housing corporations where particular board misconduct is alleged. Kleinerman v. 245 East 87 Tenants Corp, et al., 74 AD3d 448, 903 NYS.2d 356 [1 Dept. 2010] (denying defendants’ pre-answer motion to dismiss where complaint stated claims for breach of fiduciary duty against the cooperative, its board, its officer and individual board members); Stowe v. 19 East 88th Street, Inc., 257 AD2d 355, 683 NYS2d 60 [1 Dept. 1999] (denying a pre-answer motion to dismiss of the sole defendant, a cooperative corporation, and holding that directors of apartment cooperative owe a fiduciary duty to act solely in best interest of all shareholders); Ackerman v. 305 East 40th Owners Corp., 189 AD2d 665, 592 NYS2d 365 [1 Dept. 1993] (same); Demas v. 325 West End Ave. Corp., 127 AD2d 476, 511 NYS2d 621 [1 Dept. 1987] (same). It is therefore beyond cavil that where a board of directors allegedly breaches its fiduciary duty to a shareholder, the claim is actionable against the corporation, particularly where a board’s conduct has “no legitimate relationship to the welfare of the coop at large.” Bryant v. One Beekman Place, Inc., 73 AD3d 616, 904 NYS2d 370 [1 Dept. 2010]. The very fact that the Board refused to satisfy its obligation to repair the shareholder’s apartment is alone sufficient to state a claim for breach of fiduciary duty. Kaymakcian v. Board of Managers of Charles House Condominium, 49 AD3d 407, 854 NYS2d 52 [1 Dept. 2008] (denying dismissal of fiduciary duty claim against a condominium board of managers where it failed to repair limited common elements). As for damages, the trial court is accorded significant leeway in ascertaining a fair approximation of the loss where a breach of fiduciary duty has been proved.  Keizman v. Hershko, 52 AD3d 204, 859 NYS.2d 79 [1 Dept. 2008].  After all, “[w]hen a difficulty faced in calculating damages is attributable to the defendant’s misconduct, some uncertainty may be tolerated.” Whitney v. Citibank, 782 F2d 1106, 1118 [2 Cir. 1986]. Courts have held a fiduciary liable for the attorney’s fees and other expenses incurred in exposing his misconduct. Birnbaum v. Birnbaum, 157 AD2d 177, 555 NYS2d 982 [4 Dept. 1990]; Matter of Campbell, 138 AD2d 827, 829, 525 NYS2d 745 [4 Dept. 1988]; Parker v. Rogerson, 49 AD2d 689, 689-690, 370 NYS2d 753 [3 Dept. 1975]; Matter of Rothko, 84 Misc.2d 830, 379 NYS2d 923 [Surr. Ct., NY Co. 1975]. These holdings do not conflict with the “American Rule” articulated in Matter of A.G. Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 511 NYS2d 216 [1986]. While Lezak holds that attorney’s fees are ordinarily not recoverable by the prevailing party against the losing party as an incident of litigation, Lezak does not concern the propriety of awarding attorney’s fees as an element of damages. In a case of breach of fiduciary duty, the aggrieved party is entitled to prejudgment interest. CPLR 5001; Howard v. Carr, 222 AD2d 843, 635 NYS2d 326 [3 Dept. 1995]. Indeed, if the breach of fiduciary duty is found to be sufficiently egregious, punitive damages may be recoverable. Don Buchwald Assocs. v. Rich, 281 AD2d 329 [1 Dept. 2001].
by Richard A. Klass, Esq.
———– copyr. 2012 Richard A. Klass, Esq. The firm’s website: www.CourtStreetLaw.com Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions. Prior results do not guarantee a similar outcome.

R. A. Klass Your Court Street Lawyer

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Don’t Give Me a Black Russian!

Photograph by Prokudin-Gorskii illustrating article by Richard Klass about discriminatory practices.In 2006, the executor of the estate of a woman who owned a cooperative apartment in Brooklyn attempted to sell the apartment. She first made a contract with a black woman who had two children to sell the apartment for $160,000. The contract of sale provided (as almost all do in cooperative apartment sales) that the buyer had to apply to the coop board for approval of the sale. She applied to the coop board for approval; then, dissention came about between the resident board members and the sponsor-management company. Despite supposedly being “approved” by the residents on the board, the management company claimed that the board was not legally constituted; accordingly, no closing of title would be scheduled. The buyer elected to file a complaint with the New York State Division of Human Rights, charging that the coop engaged in discriminatory housing practices against her based upon her race. The NYS Division of Human Rights made a determination after investigation that there was “probable cause” to believe that the respondents engaged in discriminatory practices.
The executor then attempted to sell the apartment to another person, a young Russian woman whom the board declined to even interview. It started to appear to the executor that a cooperative apartment owner’s fear of having every potential buyer denied, like a revolving door, was happening here. Faced with the possibility of the estate being left with a “dead asset”—an apartment that cannot be disposed of by the estate and continues to incur monthly maintenance charges, the estate turned to Richard A. Klass, Your Court Street Lawyer, for legal assistance to sue the coop board for breach of fiduciary duty, breach of the proprietary lease and housing discrimination.

Breach of Fiduciary Duty

According to New York State law, the directors of a corporation owe its shareholders a fiduciary duty. The fiduciary duty of a director of a corporation consists of the obligation to perform his duties in good faith, without discriminatory practice, and with the degree of care which an ordinary prudent person in a like position would use under similar circumstances. See, Bernheim v. 136 East 64th Street Corp.,128 AD2d 434 [1 Dept. 1987]. In the Complaint against the coop, it was alleged that the coop board breached its fiduciary duty to the estate as the owner of shares of stock in the corporation and the proprietary lease to the apartment. In a similar case, in which the owner of a cooperative unit sued the board members for rejecting applicants for various reasons, including discriminatory ones, the court noted that the general deference granted to decisions of a cooperative corporation’s board of directors is not unlimited. If those board members act in a manner which is contrary to their duty to act fairly and impartially, courts may review claims of misconduct. Further, upon review, those claims of misconduct may prove actionable against the board members. See, Axelrod v. 400 Owners Corp., 189 Misc.2d 461 [Sup.Ct., NY Co. 2001].

The Estate was “Personally Affected” by Discrimination

Both New York Executive Law Section 296 and New York City Administrative Code Section 8-107 provide that it is an unlawful discriminatory practice for a cooperative housing corporation to discriminate against an applicant based upon his age, race, familial status or religion. Those statutes also provide that it is an unlawful discriminatory practice for any person to aid, abet, incite, or compel the doing of any acts forbidden under those statutes. In Dunn v. Fishbein, 123 AD2d 659 [2 Dept. 1986], the court permitted a Caucasian person to maintain a claim that he was denied an apartment because his roommate was African-American. As was held in Axelrod v. 400 Owners Corp., 189 Misc.2d 461 [Sup.Ct., NY Co. 2001], if the plaintiff can show that she was adversely affected by reason of discrimination perpetrated against the prospective purchasers, she has a cognizable claim for discrimination. The Complaint alleged that the estate was personally affected by the unlawful discriminatory practices of the coop board and coop corporation.

“Reverse Holdover”

The Complaint suggested the creation of a new cause of action under New York law—the concept of a “reverse holdover.” In this case, the estate claimed that the defendants effectively prevented the estate from exercising its right to sell the apartment to another party. Accordingly, it was urged that the defendants should be deemed to have effectively “purchased” the estate’s shares and leasehold interest in the apartment. By their alleged actions, it was claimed that the defendants had rendered this asset of the estate a “dead” asset—it could not be disposed of or sold! Generally, a tenant may be subject to eviction because of a substantial violation of the terms of the tenancy. In this situation, the reverse had occurred—the Complaint claimed that the defendants have committed a substantial violation of the estate’s tenancy. It is axiomatic that in every cooperative corporation, the right to sell a cooperator’s apartment is a valuable right, which ought not be irrationally or arbitrarily taken away. It is safe to say that the whim and caprice of coop boards is one of the prime reasons that people prefer to buy condominiums. In upholding the estate’s Complaint, the judge held that the estate had stated “cognizable causes of action.” Estate of Cameron v. United Management, Sup. Ct., Kings Co. Index No. 2671/2008. During the pendency of the litigation, the estate found another buyer for the apartment, albeit at a lower price than originally negotiated with the first buyer. The estate, coop board, and management company settled the litigation—the estate sold the apartment for $139,000 and the defendants paid $35,000 to the estate.
by Richard A. Klass, Esq.
 
©2009 Richard A. Klass. Art credits: page one, Man in uniform beside building, yurt in background (1905-1915). Photographer: Prokudin-Gorskii, Sergei Mikhailovich, 1863-1944. Digital color composite made for the Library of Congress by Blaise Agüera y Arcas, 2004. Newsletter marketing by The Innovation Works, Inc.www.TheInnovationWorks.com. ———– copyr. 2011 Richard A. Klass, Esq. The firm’s website: www.CourtStreetLaw.com Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions. Prior results do not guarantee a similar outcome.

R. A. Klass Your Court Street Lawyer

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