Appellate Division, First Department at 27 Madison Ave. Photo: David Handschuh/NYLJ
Finding that a plaintiff café/bar failed to show that it was ever or would ever be profitable, a state appeals court has rejected a legal malpractice suit against a Manhattan law firm that had allegedly provided "erroneous' insurance coverage advice while the bar was being sued for noise complaints.
In a terse opinion, the Appellate Division, First Department wrote that "because the calculation of plaintiff's [VPC Projects, LLC's] damages [linked to any legal malpractice] would rely on gross speculations about future events, namely, that the bar would have stayed open until such time as it became profitable and the profits matched plaintiff's significant investment [of $1 million in the bar], plaintiff cannot prove that defendant's malpractice, if any, proximately caused those damages."
The unanimous First Department panel also said that the underlying court record in the case "is devoid of evidence tending to support the speculations" about the bar's future profitability. It similarly wrote that the principal of bar's ownership company, plaintiff VPC Projects, "testified that the bar had doubled its sales in the year preceding its closure, but there is no evidence that the bar ever was profitable."
The panel, composed of Justices Rolando Acosta, Dianne Renwick, Anil Singh and Manuel Mendez, kept its ruling to a singular focus on proximate causation in the legal malpractice suit, despite the underlying Manhattan Supreme Court dismissal of the action, which the panel affirmed, providing two bases for dismissal.
The 2016-filed lawsuit had centered on VPC Projects, which owned the Brooklyn-based bar Veronica Peoples Club, alleging that it had closed the bar's doors in March 2012 because Elizabeth Jaffe, of counsel at the defendant law firm Golenbock Eiseman Assor Bell & Peskoe, had given it "erroneous" advice that VPC's insurance "would not indemnify it in, or defend it against, a noise-based nuisance action brought against the bar by its residential neighbors," wrote the panel.
VPC's malpractice suit had further contended that, "had it been correctly advised [by Jaffe about its insurance coverage], it would not have closed the bar and would have recouped its $1 million investment in the bar's storefront," the panel also wrote.
In Manhattan Supreme Court Justice Margaret Chan's trial-level decision, she wrote in part that VPC's "allegations on its legal malpractice claims fall into two distinct categories: (a) defendant's [Golenbock Eiseman's alleged] failure to make an insurance coverage determination; and (b) [Golenbock Eiseman's alleged] affirmative statement that plaintiff lacked insurance coverage" for the nuisance lawsuit.
Chan further explained that Golenbock Eiseman had argued "there is no evidence supporting [VPC's] claim that Jaffe allegedly misinformed the Millstones [meaning, VPC principal Heather Millstone and her father, Robert Millstone, who'd retained Golenbock Eiseman] … regarding the plaintiff's lack of insurance coverage, and that Golenbock Eiseman had also argued "there is no evidence demonstrating that part of [its] scope of representation was to make a coverage determination."
By contrast, VPC had contended, wrote Chan, that Golenbock Eiseman "voluntarily undertook a duty to provide legal advice about insurance coverage by 'browsing' the [insurance] policy and discussing the policy with the Millstones on two occasions in January 2012." In addition, Chan said that VPC "insists that in a January 2012 phone conference, Jaffe affirmatively informed the Millstones that plaintiff lacked insurance coverage in the Jou Action" for nuisance.
Chan then ruled against VPC on both the failure to make a coverage determination issue, and the issue of Golenbock Eiseman allegedly making an affirmative statement that VPC lacked insurance coverage for its nuisance suit defense.
"Heather Millstone's belief that [Golenbock Eiseman] would review and make a coverage determination does not suggest even a tacit agreement on [Golenbock Eiseman]'s part to undertake the insurance coverage issue," wrote Chan. She added that "Heather Millstone's belief is also undermined by the actions taken in January 2012: neither the tendering of the Jou Action pleadings to plaintiff's insurance broker on January 6 nor Jaffe's email response on the same day to Heather Millstone's coverage inquiry—'no, not at all. Probably not, but we will give it a shot just in case' constitutes an affirmative undertaking."
Addressing the alleged affirmative statement of lack of coverage, Chan wrote that it had become "academic" but "nonetheless, [VPC] fails to show that it would not have incurred any damages but for defendant's alleged negligence. … The Millstones' respective emails in February and March 2012 show that the prominent reason plaintiff lost its investment or 'throwing in the towel' was because the bar was not profitable to warrant dealing with the incessant noise complaints and fines" it was getting.
The First Department panel affirmed Chan's decision on the alleged affirmative statement issue while, like Chan, pointing to any lack of proximate causation for the bar closing its doors. The panel did not address Chan's ruling on the failure to make an insurance coverage determination issue.
In an email, John Somoza, a member of Melito & Adolfsen who represented Golenbock Eiseman, said, "We are pleased that the appellate division concluded that all of the evidence showed as a matter of law that the damages claimed of approximately $1 million were not proximately caused by any acts of the law firm."
Daniel Abrams of the Law Office of Daniel L. Abrams represented VPC. He could not be reached for comment.
Jason Grant
Jason Grant is a staff writer covering legal stories and cases for the New York Law Journal, the National Law Journal and Law.com, and a former practicing attorney. He's written and reported previously for the New York Times, the Star-Ledger, the L.A. Times and other publications. Contact him at [email protected]. On Twitter, pls find him @JasonBarrGrant