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Continuous Representation Doctrine Did Not Toll the Statute of Limitations for the Legal Malpractice Cause of Action/Fraud, Excessive Fees and Unjust Enrichment Causes of Actions Were Not Duplicative of the Legal Malpractice Cause of Action/Punitive Damages Claim Properly Pled

The First Department, in a full-fledged opinion by Justice Mazzarelli, in the context of a motion to dismiss for failure to state a cause of action, determined the continuous representation doctrine did not toll the statute of limitations for the legal malpractice cause of action, the fraud, excessive fees, and unjust enrichment causes of action were not duplicative of the legal malpractice action, and the demand for punitive damages properly survived dismissal. It was alleged that defendants-attorneys gave the plaintiffs bad advice re: a tax shelter and failed to inform plaintiffs of the close business ties between the attorneys and a firm which profited directly from the advice given plaintiffs. With regard to the continuous representation doctrine, the court explained that, in order to toll the statute, the representation must relate to the specific matter out of which the malpractice is alleged to have arisen—an on-going relationship on other matters does not toll the statute. The allegation that the defendants did not disclose their business relationship with the firm profiting from the legal advice was sufficient to support the fraud cause of action (as “non-duplicative”). The excessive fees and unjust enrichment causes of action were likewise not duplicative of the legal malpractice cause of action. The punitive damages claim was sufficiently pled because it alleged a wide-ranging scheme affecting many of defendants’ clients:

…[W]hile there was certainly the possibility that the need for future legal work would be required with respect to the tax strategy, plaintiffs could not have “acutely” anticipated the need for further counsel from defendants that would trigger the continuous representation toll. * * *

Defendants argue that, because the legal malpractice claim is time-barred, plaintiffs’ other claims arising out of the representation are also time-barred since they are merely duplicative of the malpractice cause of action. This contention derives from CPLR 214(6), which was enacted to prevent plaintiffs from circumventing the three-year statute of limitations for professional malpractice claims by characterizing a defendant’s failure to meet professional standards as something else, such as a breach of contract (for which there is a six-year statute of limitations) … . The key to determining whether a claim is duplicative of one for malpractice is discerning the essence of each claim … . * * *  Here, the essences of the fraud and malpractice claims are sufficiently distinct from one another that the court properly did not invoke the duplicative claims doctrine. * * *

The excessive fee and unjust enrichment claims are also not duplicative of the malpractice claim. 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 … . Here, plaintiffs did so, since they asserted that defendants collected a $425,000 fee for a “cookie cutter” legal opinion. By the same logic, the unjust enrichment claim, which is predicated on the excessiveness of the $425,000 fee, also properly survived the motion to dismiss. * * *

…[P]laintiffs’ claim for punitive damages properly survived dismissal. Defendants’ conduct is alleged to have been directed at a wide swath of clients, and the first amended complaint sufficiently alleges intentional and malicious treatment of those clients as well as a “wanton dishonesty as to imply a criminal indifference to civil obligations” … .  Johnson v Proskauer Rose LLP, 2015 NY Slip Op 03626, 1st Dept 4-30-15

 

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