TELS Attorneys Stephen Straus and Mark Froehlich Win Pre-Answer Motion to Dismiss Legal Malpractice Claim Against Real Estate Attorney

November 28, 2006

HAWTHORNE, New York -- TRAUB EGLIN LIEBERMAN STRAUS LLP (TELS) is pleased to announce that on November 21, 2006, the New York Supreme Court, Westchester County granted TELS’ pre-answer motion to dismiss third-party plaintiffs’ complaint for contribution against a real estate attorney alleging malpractice and fraudulent concealment.   

In Apoldo, et ano. v. Herlitz, et al., Index No. 05-10673, Plaintiffs alleged breach of contract against Defendants and other Third-Party Plaintiffs based on the sale of the condominium unit in excess of the permissible price and without obtaining approval for the sale from Westchester County under certain restrictive covenants.  Plaintiffs also alleged fraud against Defendants/Third-Party Plaintiffs, who allegedly knew of the restrictions on the resale of the condominium unit and undertook to hide that fact from Plaintiffs to recover more than the allowable sales price from the plaintiffs for the unit.  Plaintiffs seek to recoup the excess sale price from Defendants/Third-Party Plaintiffs and damages  representing the fair market value of the condominium unit less the purchase price.  
                                       
After the sale closing, third-party defendant Westchester County demanded that Defendant/Third-Party Plaintiffs disgorge the excess sales price amount pursuant to the restrictive covenants.  Defendants/Third-Party Plaintiffs paid the amount demanded by the County.  Defendants/Third-Party Plaintiffs then filed a third-party complaint against Plaintiffs’ attorney and Westchester County. It was alleged that TELS’s client represented Plaintiffs in connection with their purchase of the condominium unit.  Third-Party Plaintiffs further alleged that, as Plaintiffs’ attorney, TELS’ client owed a duty to review the restrictive covenants and advise Plaintiffs of same, but failed to do so. The Third-Party Plaintiffs sought contribution from Plaintiffs’ attorney based on the theory of legal malpractice. 

TELS attorneys Stephen Straus and Mark Froehlich defended Plaintiffs’ attorney in the third-party action.  In lieu of an answer, TELS moved to dismiss the third-party complaint as against the attorney on grounds that the third-party complaint failed to state a cause of action upon which relief may be granted.  TELS argued that contribution is not available under New York law where the alleged damages arise out of breach of contract.  While Plaintiffs’ complaint also alleges fraudulent concealment against Third-Party Plaintiffs, TELS contended that it is not the theory upon which the contribution claim is based, but rather the alleged damages that sustains a contribution action.  Plaintiffs’ complaint concerns Third-Party Plaintiffs’ alleged breach of contract of sale of a condominium unit.  It was thus argued that Third-Party Plaintiffs have no right of action for contribution against Plaintiffs’ attorney under New York law.  TELS further argued that Third-Party Plaintiffs lacked standing to sue Plaintiffs’ attorney on grounds that there is no attorney-client relationship, or any other relationship giving rise to a duty to Third-Party Plaintiffs. 

The Court agreed with TELS’ contentions which warranted dismissal of the third-party complaint as against Plaintiffs’ attorney.  The right to seek contribution is not premised upon the asserted theory of recovery, but rather by the nature of the damages sought.  The Court found Third-Party Plaintiffs’ attempt to characterize Plaintiffs’ complaint as a tort action rather than as a contract action unavailing.  Plaintiff’s complaint alleges economic damages against Defendants/Third-Party Plaintiffs resulting from the latter’s allegedly false contractual representation that they had the full right and authority to sell the condominium unit at full market value.  The Court further agreed with TELS that there was no privity between Third-Party Plaintiffs and Plaintiffs’ attorney, and thus no cause of action for legal malpractice against the attorney absent special circumstances such as fraud, collusion or malicious acts.  

The case was James C. Apoldo, et ano. v. Kris S. Herlitz, et al., (New York Supreme Court, Westchester County, Index No. 05-10673).

TELS congratulates Mr. Straus and Mr. Froehlich on their successful outcome. For more information on Mr. Straus, a partner with TELS, please visit:

www.tels.com/profiles/stephenstraus/

And for more information on Mr. Froehlich, an associate with TELS, please visit:

www.tels.com/profiles/markfroehlich/