Recent developments

Recent developments

Have there been any notable recent trends or developments in professional negligence law and practice in your jurisdiction, including any pertinent cases?

The trends in New York always emphasize the protection of law firms in legal malpractice cases. Case law protects lawyers on almost every aspect of a case, including: 

  • when a client relationship ends so the claim starts accruing for limitations purposes (as early as possible);
  • what causes the claim to accrue (i.e., the act of malpractice, not its discovery);
  • who has the standing to sue (generally, only the client or the client’s estate);
  • what is needed to establish causation (“but for” causation rather than a looser standard);
  • what is needed to show damages (they cannot be speculative);
  • the types of damages (economic damages only, not emotional damages or “pain and suffering,” though there is some exception for that in cases involving immigration malpractice where families are separated); and
  • what is the relationship between legal malpractice and related, but often broader tort claims, such as the breach of fiduciary duty and negligent misrepresentation (they generally merge into one another).

There have been three recent cases that are significant in this area:

  • Marin v. Constitution Realty, LLC, 28 N.Y.3d 666 (2017)—the Court of Appeals held that a lawyer may not invoke the New York ethics rules on fee splitting in an effort to deprive another lawyer she had engaged to assist her of his fee. The court held that she could not “use the ethical rules as a sword” to render the fee agreement between the lawyers void.
  • Stock v. Schnader Harrison Segal & Lewis, LLP, 142 A.D.3d 210 (1st Dep’t 2016)—this decision, of national importance, established an “in-house counsel” privilege for law firms.  This protects certain communications between lawyers in the same firm from discovery in a suit against the firm. The communications receiving protection are those between lawyers and the firm’s general counsel—either someone designated as such or playing an equivalent role. Neither the lawyers nor the general counsel may bill for the time spent on these communications, and they must relate to a case-specific situation. Communications between, say, a lawyer and a department head would not receive that same protection.
  • Melcher v. Greenberg Traurig LLP, 2018 N.Y. Slip Op. 6310 (App. Div. 1st Dep’t, Sept. 28, 2018)—this case slashed the potential damages that a plaintiff seeking damages under New York Judiciary Law Section 487 may seek in a case, limiting them to only damages directly resulting from the “fraud, deceit or collusion” required under the statute. Here, the plaintiff sought all of his legal fees accrued in the case. The court limited him to only those fees which resulted from the allegedly deceitful act, and noted that many of the issues in the case would have had to have been litigated even if that act had not occurred.

Law and regulation

Applicable legislation

What legislation is applicable in the context of professional negligence claims?

There is no legislation in New York that is directly applicable to professional negligence in itself, other than the statutes of limitations for such claims—two-and-a-half years for medical malpractice [CPLR Sect. 214-a] and three years for all other forms of malpractice [CPLR Sect. 214]. There is one complex exception, CPLR Sect. 214-d, which gives a 10-year statute for someone suing for personal injury, wrongful death, or property damage against a licensed architect, engineer, land surveyor, or landscape architect, and requires the plaintiff to serve a 90-day notice before commencing that action so that preliminary discovery can immediately be taken to help ascertain whether there is in fact a valid claim, and the purported defendant can make a motion to dismiss or for summary judgment. This statute appears to have been designed to allow parties to sue engineering and architecture professionals for late-discovered defects in the engineering or design of a building, but it also gives the professional defendants an opportunity to quickly dismiss the claims. 

New York statutes also require a certificate of merit to be served with any complaint of medical, dental, and podiatric malpractice (CPLR Sect. 3012-a).

Also relevant to the professional liability of lawyers is New York Judiciary Law Section 487, which allows a client or a third party to sue a lawyer for treble damages for any act of “fraud, deceit or collusion” before a court. This statute dates from the Middle Ages and was imported into New York law even before the U.S. Constitution. It has recently received a great deal of judicial attention, mostly aiming to limit its scope. Though the Court of Appeals has made clear this statute has a six-year limitations period, and some courts have said that a single act (or attempted act) of deceit is enough, other courts (including the Court of Appeals and Second Circuit) have imposed significant limitations: 

  • New York’s First Department and other courts have imposed a requirement of a “continuous and systematic” course of conduct, not just a single act;
  • treble damages are limited only to those arising directly from the alleged fraud or deceit;
  • the claim must relate to statements made or material omissions in a court proceeding, not in a transaction or negotiation;
  • that proceeding must be in a New York state or federal court—not in another state and not in arbitration; and
  • the claim must be made as part of the underlying action (some courts say this, others disagree). 

Suffice to say that this a difficult statute to satisfy.

Regulatory bodies

What regulatory bodies and associations play a role in setting and enforcing standards in professions most commonly subject to negligence claims, and what is the extent of their responsibilities and powers?

For legal malpractice, the New York state Court Administrative Board, which consists of the presiding justices of each judicial department as well as the chief judge of the Court of Appeals, promulgates the Rules of Professional Conduct. Only the rules are binding; the comments, promulgated by the New York state Bar Association, are not. Nor is it clear in New York whether the Rules of Professional Conduct set the standards for “reasonable and customary practice” needed to show malpractice, though most judges will allow expert testimony about them in cases involving conflicts of interest and other ethical violations.

For accounting malpractice, the American Institute of Certified Public Accountants standards are often invoked, again via expert testimony.

For medical malpractice, findings by hospital boards, as well as New York state and local Department of Health standards and regulations, will also be relevant to determining whether customary practices have been followed.

Claims

Applicable professionals

Who may be subject to a professional negligence claim? Is there a standard or legal definition of ‘professional’ in this context?

Yes. A “professional” is anyone licensed by the state to perform their role, either by the courts, the Department of Education, or any other state agency.

Eligible claimants

Who may file a claim for professional negligence? In what circumstances (if any) can third parties file a claim?

Legal malpractice claims generally must be brought by the lawyer’s (former) client or the client’s estate. With very rare exceptions, third parties are not permitted to sue. This is known as the “privity rule,” and it can be very harsh. For example, if a brokerage firm hires a law firm to advise it on the scope of a particular securities regulation, an employee who, relying on that advice, gets penalized by the Securities and Exchange Commission cannot sue the law firm, since the employee was not the law firm’s client. The privity rule is applied more loosely to claims under New York Judiciary Law Section 487, where any party to the litigation may sue a lawyer who has engaged in “fraud, deceit or collusion” on the court. 

Third parties can sue in medical malpractice cases for loss of consortium and other emotional and economic damages resulting from wrongful death.

Legal bases

On what legal bases are claims against professionals usually brought? What other factors are pertinent in establishing a duty of care and/or any other relevant duties?

In New York, there are three principal bases for claims against lawyers: 

  • malpractice;
  • breach of fiduciary duty; and
  • common law fraud (New York Judiciary Law Section 487). 

Breach of fiduciary duty, which has a longer statute of limitations and a looser causation standard (“substantial cause”) is usually deemed duplicative of a malpractice claim and will be deemed to “merge into” that claim. (Other claims that are generally deemed to merge into a legal malpractice claim are claims for breach of contract and negligent misrepresentation.) However, if the breach of fiduciary duty seeks damages that are different to the malpractice claim—for example, the disgorgement of legal fees resulting from a conflict of interest or overbilling—the breach of fiduciary duty claim will stand on its own (See, e.g., Ulico Casualty Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 A.D.3d 1 (1st Dep’t 2008). 

The scope of duty in any legal or other malpractice case arises from the relationship between the parties. In a case for fraud or under New York Judiciary Law Section 487, the scope of duty is broader as defined by the statute, covering any party to the court proceeding where “fraud, deceit or collusion” has taken place.

Pleading and evidentiary requirements

What pleading and evidentiary requirements apply to professional negligence claims, including with regard to establishing the breach of a duty of care, standard of care and loss causation?

In all professional negligence claims, the plaintiff must establish:

  • a legal duty running from the professional to the plaintiff;
  • a breach of that duty;
  • causation; and
  • ascertainable damages. 

The legal duty arises from the relationship between the parties and is generally limited to the client or patient. The breach of that duty requires proof of a deviation from the customs and practices of similar professionals handling that matter. Though older New York cases defined the standard of care as that of a “reasonable” doctor or lawyer—in other words, not a specialist—that standard is changing, and the courts are now holding professionals to stricter standards, particularly in areas where the need for specialization is obvious. Causation is usually not a difficult issue in medical malpractice, except when there are multiple injuries from multiple causes, but it is indeed difficult in legal, architectural, and accounting malpractice, where a “but for” standard is required. This means the malpractice must be the only cause of the injury—not just one cause, or even a substantial cause. As for damages, the plaintiff must establish their injury and their economic loss. Again, in medical malpractice cases the standards in New York for this are straightforward and are usually established by economics experts. In legal and accounting malpractice, this is harder because there are usually many reasons for an adverse result in these areas—including the plaintiff’s own misconduct—and, as such, isolating the damages caused specifically by a lawyer’s misconduct is difficult. Also, the courts are prone to find most causation and damages claims speculative. If, for example, a business person buys an apartment building based on advice from the lawyer that certain rent-controlled tenants can be vacated, and it turns out they cannot be, the business person may not be able to recover even the loss in rental stream from what was expected, because it is often difficult to show that the business person would not have bought the building—which will still almost certainly be generating a profitable rental stream—if they had known of the problem.

Loss mitigation

To what extent are claimants required or expected to mitigate their losses?

Plaintiffs are always expected to make reasonable efforts to mitigate their losses.

Claim filing procedure

What is the procedure for filing professional negligence claims?

For legal and accounting malpractice, a plaintiff has two options: 

  • filing a summons with notice, a simple one-page document that describes the claim in bare-bones form but stops the statute of limitations from running; and
  • filing a full complaint. 

In medical, dental, and podiatric malpractice, the same is true, but the plaintiff must also file a certificate of merit. There is one complex exception, CPLR Sect. 214-d, which gives a 10-year statute for someone suing for personal injury, wrongful death, or property damage against a licensed architect, engineer, land surveyor, or landscape architect, and requires the plaintiff to serve a 90-day notice before commencing that action so that preliminary discovery can immediately be taken to help ascertain whether there is in fact a valid claim, and the purported defendant can make a motion to dismiss or for summary judgment. This statute appears to have been designed to allow parties to sue engineering and architecture professionals for late-discovered defects in the engineering or design of a building, but it also gives the professional defendants an opportunity to quickly dismiss the claims. 

Limitation period

What is the limitation period for professional negligence claims and what is the legal framework that governs it?

The statutes of limitations for professional negligence claims are two-and-a-half years for medical malpractice [CPLR Sect. 214-a] and three years for all other forms of malpractice [CPLR Sect. 214]. There is one complex exception, CPLR Sect. 214-d, which gives a 10-year statute for someone suing for personal injury, wrongful death, or property damage against a licensed architect, engineer, land surveyor, or landscape architect, and requires the plaintiff to serve a 90-day notice before commencing that action so that preliminary discovery can immediately be taken to help ascertain whether there is in fact a valid claim, and the purported defendant can make a motion to dismiss or for summary judgment. This statute appears to have been designed to allow parties to sue engineering and architecture professionals for late-discovered defects in the engineering or design of a building, but it also gives the professional defendants an opportunity to quickly dismiss the claims. 

New York statutes also require a certificate of merit to be served with any complaint of medical, dental, and podiatric malpractice (CPLR Sect. 3012-a).

The statute of limitations for claims under New York Judiciary Law Section 487 and common law fraud is six years.

Litigation

Court procedure

What rules govern court procedure? Are there any notable considerations for professional negligence claims in this regard?

New York statutes also require a certificate of merit to be served with any complaint of medical, dental, and podiatric malpractice (CPLR Sect. 3012-a).

Further, CPLR Sect. 214-d gives a 10-year statute for someone suing for personal injury, wrongful death, or property damage against a licensed architect, engineer, land surveyor, or landscape architect, and requires the plaintiff to serve a 90-day notice before commencing that action so that preliminary discovery can immediately be taken to help ascertain whether there is in fact a valid claim, and the purported defendant can make a motion to dismiss or for summary judgment. This statute appears to have been designed to allow parties to sue engineering and architecture professionals for late-discovered defects in the engineering or design of a building, but it also gives the professional defendants an opportunity to quickly dismiss the claims.

Pre-trial disclosure

What pre-trial disclosure/discovery procedures and protocols are used in professional negligence cases, if any?

The ordinary discovery devices are available in malpractice cases, and the normal procedures apply, which generally include the right to stay discovery by bringing a motion to dismiss. This may not be true in a legal malpractice case assigned to the commercial division, where the rules say such stays are not allowed absent court permission. Also, medical, dental, and podiatric malpractice cases require a certificate of merit at the time of pleading, which other forms of malpractice do not. CPLR Sect. 214-d allows a form of accelerated, pre-pleading discovery in claims of malpractice against engineering and architectural professionals. 

Evidence

What rules govern the submission of evidence? Are there any special considerations for evidence submission in professional negligence cases?

The ordinary rules for the submission of evidence apply. There are no special evidentiary rules for professional malpractice, except that under CPLR Sect. 4546, in cases of dental, medical, and podiatric malpractice, evidence of the personal income taxes which the plaintiff was legally required to pay is taken outside of the presence of the jury, and the jury is later instructed not to deduct any amount for taxes from the award. The court may deduct any lost earnings claim by the amount of taxes attributable to those earnings. Also, in dental, medical, and podiatric malpractice cases, collateral source evidence—that is, evidence that medical costs and other expenses will be reimbursed by insurance—is admissible to the court to reduce the award (see CPLR Sect. 4545).

Expert witnesses

What rules and standards govern expert witness testimony in professional negligence cases?

Expert witnesses generally must provide bare-bones reports under CPLR 3101(d), just listing the expert’s qualifications and stating, often in a paragraph, the substance of the expert opinion. For legal and accounting malpractice cases in the commercial division, a full expert report is required.  In non-commercial division cases, the standards for the timing of expert disclosure are often quite loose, with expert reports often permitted on or near the eve of the trial. Malpractice cases are placed in the commercial division when the alleged malpractice relates to a commercial transaction.

The main substantive issue with expert testimony relates to legal malpractice cases, where courts differ on whether experts can rely on the Rules of Professional Conduct in determining the customary and standard practices of New York lawyers. While some decisions have prohibited references to the rules, because the rules themselves say they do not create standards for civil liability, most courts allow the expert to refer to the rules in offering their opinions, particularly where the malpractice relates to subjects covered by the rules (e.g., conflicts of interest or escrow accounts).

Appeals

What rules and procedures govern appeals of court decisions?

New York allows the appeal of interlocutory (non-final) orders, as well as appeals from final judgments. Any order can be appealed by filing a simple notice of appeal within 30 days, generally accompanied by a disclosure statement in conformity with the rules of the particular appellate division (the first, second, third or fourth department) to which the appeal is directed. Depending on the department in question, the appealing party then has from six to nine months to “perfect” the appeal by filing the brief. (The record on appeal must be filed earlier, but the failure to do so is generally not grounds for dismissing an appeal.)

Timeframe

What is the typical duration of proceedings in professional negligence cases?

There is no typical time period. The trend is to dismiss more legal and accounting malpractice cases on the face of the complaint, which can end the case within a few months. Medical, dental, and podiatric cases, and most legal malpractice cases, generally last longer, at least to the summary judgment stage and beyond before being resolved. This process can take many years—three to five years is normal, and many cases go on for far longer. 

Funding

Is public and/or third-party litigation funding available in your jurisdiction? If so, what rules, standards and procedures apply?

There is no public funding allowed. Third-party litigation funding is allowed, but a recent New York City Bar Opinion limited the ability of funders to provide non-recourse funding to lawyers. Also, the New York Court of Appeals has made it clear that the champerty doctrine is still alive and well in New York, so funders have to be careful not to purchase claims or fund them solely for the purpose of continuing litigation.

Settlement

What rules and procedures govern the settlement of professional negligence cases? How common are settlements?

Settlements are obviously very common, as in all litigation. Although there are no statistics, it is assumed that legal malpractice cases are less likely to go to trial if they survive dismissal and summary judgment; most lawyers are wary of going before juries, especially outside of Manhattan. The existence of many experienced, active trial lawyers on both the plaintiffs’ and defendants’ sides on medical, dental, and podiatric malpractice means that many of those cases go to trial.

Alternative dispute resolution

Are any alternative dispute resolution (ADR) methods required or advised before or in lieu of proceeding with litigation? How commonly is ADR used in relation to professional negligence cases in your jurisdiction?

There is no required court alternative dispute resolution (ADR) outside of the commercial division in New York, and even there the courts do not always compel it. ADR is becoming increasingly common in all forms of professional negligence, but particularly in sophisticated legal and accounting malpractice cases, especially where legal fees are involved. (New York requires mandatory arbitration of legal fee disputes under $50,000, but explicitly exempts malpractice claims from that rule.)

Defendants

Defences

What defences are available to professionals subject to a negligence claim? Which are most common and successful?

There are myriad defences to legal malpractice:

  • that the statute of limitations has run, because the claim accrued when the legal malpractice actually occurred, not when it was discovered;
  • that the plaintiff lacks standing to sue because it was not in privity with the lawyer;
  • that there is no “but for” causation because factors other than the lawyer’s malpractice contributed to the result; and
  • that damages are too speculative. 

All of these defences and more are available and are commonly invoked by the courts, with lack of causation being used most often. 

Limitation of liability

How can professionals limit their liability for negligence?

The Rules of Professional Conduct prohibit lawyers from limiting their liability for negligence at the outset of the representation. After the representation ends, the lawyer can get a release as part of a final settlement on fees.

Insurance

What insurance cover against negligence claims is required or recommended for professionals?

There is no mandatory insurance requirement for lawyers or accountants in New York.

Costs

Cost burden

Who commonly bears the legal costs arising from professional negligence claims? Can this burden be shifted?

Absent some form of sanctions, the parties generally bear their own costs in all forms of professional negligence cases.

Calculation

How are legal costs calculated? Is there any notable case law or regulation in this regard?

There are 13 categories of costs that are allowable in an action or appeal in New York. These are listed in CPLR Sect. 8301, and include witness fees, the prospective charges of entering a judgment and hiring the sheriff to collect, transcript costs, and the costs of obtaining certified copies. The court can also impose discretionary costs.

Insurance

Is insurance coverage for legal costs available? If so, how common is it?

Yes, every malpractice policy includes this coverage. Many lawyers do not have malpractice insurance; approximately 40% of solo practitioners nationwide do not carry it. 

Contingency fee arrangements

What rules and restrictions (if any) govern contingency fee arrangements?

For personal injury cases of all kinds, and thus including medical, dental, and podiatric malpractice, the appellate divisions each have detailed contingency fee schedules. Other forms of professional malpractice do not have such rigid requirements. The New York Rule of Professional Conduct 1.5(c) requires contingency fees to be in writing and to be “reasonable,” which has generally been viewed fairly broadly in New York. The courts have approved contingency fees of as high as 50% with sophisticated litigants.

Damages

Types

What types of damages may be awarded in professional negligence cases? Are punitive damages allowed?

In legal and accounting malpractice cases, economic damages are only allowed and, very occasionally, punitive damages. Other forms of malpractice can allow pain and suffering and emotional damages. Punitive damages are rarely granted.

Calculation

How are damages calculated? Is there any notable case law or regulation in this regard (eg, are damages capped)?

Damages are not capped.

Other remedies

Are any other remedies available to claimants?

As lawyers are among the only professionals considered fiduciaries, they can be required to disgorge legal fees in the appropriate case.