Malpractice Suit Proceeds Against Pryor Cashman

Malpractice Suit Proceeds Against Pryor Cashman
The New York Law Journal by Brendan Pierson  -  November 21, 2011

A legal malpractice lawsuit filed by the trustees to a union's benefit funds against Pryor Cashman for failing to provide advice that would have prevented the funds' third-party administrator from embezzling $42 million may go forward, a unanimous Appellate Division, First Department, panel ruled Thursday.  The trustees for the three Construction Workers Local 147 filed the lawsuit, Fitzsimmons v. Pryor Cashman, 651360/10, last year (NYLJ, Aug. 30, 2010). It followed the December 2009 arrest of Melissa G. King on federal charges of embezzling millions from the funds as the principal behind administrator King Care LLC.  Pryor Cashman had advised the trustees and benefit funds for more than a decade. The trustees claim the law firm should have realized administrative expenses for the funds were "unusually high" and encouraged the trustees to ask why, the complaint said. Pryor Cashman also should have recommended hiring an independent auditor, the complaint said.  Pryor Cashman moved to dismiss, arguing that the trustees had not brought specific allegations of the firm failing to fulfill its duties. Manhattan Supreme Court Justice Barbara R. Kapnick denied the motion in March, and the First Department affirmed. "Plaintiff put forth sufficient detail to establish the negligence of the attorneys, that the negligence was the proximate cause of the losses sustained by the benefits funds, and actual damages to those funds," the panel said. "Plaintiffs were not required to allege the specific scope of defendants' duties, given the absence of a governing retainer agreement."  Justices Luis A. Gonzalez, Peter Tom, James M. Catterson, Rosalyn H. Richter and Nelson S. Roman sat on the panel.

-----RELATED STORY:

Funds Sue Pryor Cashman Over Embezzlement Scandal
New York Law Journal by Nate Raymond  -  August 31, 2010

Trustees to a union's benefit funds have sued Pryor Cashman for failing to provide legal advice that would have prevented the funds' third-party administrator from embezzling $42 million. The trustees for the three funds filed the suit last week in Manhattan Supreme Court against the firm and partner Christopher J. Sues. The malpractice suit followed the December arrest of Melissa G. King, who was charged federally with misappropriating millions from the funds as the principal

-----COURT DECISION:

Fitzsimmons v Pryor Cashman LLP
NY Slip Op 08280 Decided on November 17, 2011  -  Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 17, 2011 - Gonzalez, P.J., Tom, Catterson, Richter, Román, JJ.  -  6072  -  651360/10


Richard T. Fitzsimmons, et al., Plaintiffs-Respondents,
v
Pryor Cashman LLP, et al., Defendants-Appellants.
Pryor Cashman LLP, New York (Gideon Cashman of counsel), for appellants.
Schulte Roth & Zabel LLP, New York (Ronald E. Richmanand Max Garfield of counsel), for respondents.

Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered March 10, 2011, which, in a legal malpractice action alleging, among other things, that defendants failed to notify plaintiffs of information indicating that money may have been misappropriated from the benefit funds of which plaintiffs were trustees, denied defendants' motion to dismiss the complaint based on documentary evidence and for failure to state a cause of action, unanimously affirmed, without costs. The court applied the correct standard and properly held that the complaint states a cause of action for legal malpractice. Plaintiff put forth sufficient detail to establish the negligence of the attorneys, that the negligence was the proximate cause of the losses sustained by the benefits funds, and actual damages to those funds (see Leder v Spiegel, 9 NY3d 836, 837 [2007], cert denied 552 US 1257 [2008]; O'Callaghan v Brunelle, 84 AD3d 581, 582 [2011]). Plaintiffs were not required to allege the specific scope of defendants' duties, given the absence of a governing retainer agreement (see Greenwich v Markhoff, 234 AD2d 112, 114 [1996]). Moreover, the documentary evidence including Form 5500s, minutes of a 1997 Board meeting, and Department of Labor letters" does not conclusively disprove plaintiffs' allegations (see Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). Plaintiffs' expert affidavit was properly considered to remedy any defects in the complaint (see Leon v Martinez, 84 NY2d 83, 88 [1994]). We have considered defendants' remaining contentions and find them unavailing.


THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: NOVEMBER 17, 2011 [*2]
CLERK

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$42 mln malpractice suit against firm may proceed: appeals court
REUTERS by Leigh Jones  -  November 17, 2011

NEW YORK - A $42 million legal malpractice action against Pryor Cashman involving pilfered union benefits can move ahead following an appeals court decision Thursday.  Affirming a lower court ruling, the Appellate Division, First Department, refused to dismiss a lawsuit filed against the law firm in 2010 by trustees for the benefits fund of a construction workers' union.  The Local 147 Construction Workers Retirement Fund alleged that Pryor Cashman failed to give legal advice that would have prevented the funds' third-party administrator, Melissa King, from embezzling $42 million. King pleaded guilty last month to the embezzlement.  The trustees' lawsuit alleged that as fund counsel, Pryor Cashman lawyers failed to recommend an independent auditor to examine the funds' books and failed to advise the trustees on how to ensure that books were maintained properly.  Thursday's decision affirmed a ruling that found the complaint sufficiently pled the trustees' claims.  Pryor Cashman did not immediately respond to requests for comment.  The case is Fitzsimmons v. Pryor Cashman, No. 651360/2010, Appellate Division, New York County Supreme Court. For the plaintiffs: Ronald Richman, Schulte Roth & Zabel, New York.  For the defendants: Gideon Cashman, Pryor Cashman, New York.