No Expert Needed When Party’s Attempt To Fix Clogged Tub “Bespeaks Negligence”

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Although I have been a homeowner for a number of years and like to think that I am reasonably handy, my knowledge of plumbing is probably more informed by Mario Brothers than anything else. As the saying goes, I know just enough about the subject to be dangerous, so I generally try to avoid it. One of the parties in a recent Appellate Division decision, Sayat Nova, LLC v. Koestner, probably would have been better served heading this advice, as the Appellate Division held that no expert was needed to show that it acted negligently when it broke a pipe in a clogged tub that caused flooding in a restaurant several floors down.

In Sayat Nova, plaintiff operated a restaurant in defendant's building. After water from a third-floor apartment came flooding like a "waterfall" out of the ceiling and into the restaurant, plaintiff sued. The incident that precipitated the lawsuit was not the first time that the restaurant flooded. Four times in the previous three years, water entered the restaurant from the same general area in the ceiling. Each incident "involved more water and more damage than the previous incident." Each time plaintiff notified defendant, but never received a response. On one prior occasion, after receiving no response from defendant, plaintiff hired contractors at his own expense to repair the damage. Plaintiff was never compensated for these expenses or any losses caused by the prior incidents.

In the incident that led to the complaint, water came into plaintiff's restaurant from the ceiling above a different area of the restaurant than in prior incidents. Moments after plaintiff noticed the intrusion, the building's superintendent entered the restaurant with a man plaintiff did not know. Neither man was a licensed plumber. The superintendent told plaintiff: "By mistake we broke the pipe . . . We try to fix the fixture, and the guy by mistake break the pipe." He was apparently referring to a pipe in a third-floor apartment with a "hair-clogged tub." After the incident, defendant called a licensed plumber to fix the problem, but the damage caused plaintiff to have to close his restaurant several days for repairs.

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New York Court: “Happy Wife, Happy Life” Will Not Shield You From A Wrongful Termination Lawsuit

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I do not have these mugs at home, but I should. Most married men will tell you that the easiest way to avoid trouble at home is to remember that your wife is always right (even on those rare occasions when she is obviously wrong). Sometimes this policy of gratuitous appeasement fails, however, as was the case in a recent decision, Edwards v. Nicolai, from the New York Appellate Division (First Department).

In Edwards, defendants were husband and wife, and co-owners of Wall Street Chiropractic and Wellness. The husband was head chiropractor, while the wife was the chief operating officer. The husband hired defendant as a "yoga and massage therapist," and was her direct supervisor. According to plaintiff, her relationship with the husband was entirely professional and he "regularly praised" her work performance.

A little more than one year after hiring plaintiff, the husband allegedly "informed Plaintiff that his wife might become jealous of Plaintiff, because Plaintiff was too cute." This apparently proved to be a prescient statement. Approximately four months later, at 1:30 in the morning, plaintiff received a text from the wife, stating that plaintiff was not "welcome any longer" at the office, that plaintiff should "NOT ever step foot in [the office] again," and that plaintiff should "stay the [expletive] away from [the wife's] husband." A few hours later, at around 8:30 am, plaintiff received a text from the husband notifying her that she was "fired and no longer welcome in [the] office," and that if she called or tried to come back, defendants would call the police.

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Exception To The Rule: Ambulance Service Providers Are “Learned Professionals” And Not Subject To New Jersey’s Consumer Fraud Act

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

New Jersey's Consumer Fraud Act ("CFA") is generally recognized as one of the strongest consumer protection laws in the country. It prohibits "any unconscionable commercial practice, deception, fraud, false pretense, false promise or misrepresentation" that leads to an "ascertainable loss." But, certain "learned professionals" — doctors, lawyers, hospitals, etc. — are insulated from liability under the CFA. In Atlantic Ambulance Corporation v. Cullum, the Appellate Division added ambulance service providers to the list of "learned professionals" who are not subject to the CFA.

In Atlantic Ambulance, defendants received services from plaintiff, an ambulance service provider. After they failed to pay the bills for those services, plaintiff sued. In response, defendants filed a counterclaim alleging that they were overbilled by plaintiff in violation of the CFA. Defendants sought to bring their counterclaim as a class action on behalf of themselves and all other similarly situated people who were allegedly overcharged during a six-year period.

After five years of discovery, defendants moved for class certification. The trial court denied the motion for a number of reasons, only one of which is relevant for this post. Plaintiff argued that defendants could not maintain a cause of action under the CFA because they did not pay their bills, therefore they had not suffered any "ascertainable loss." The trial court agreed, expressly rejecting defendants' argument that an excessive bill from plaintiff, by itself, was enough to prove an ascertainable loss. Defendants appealed.

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Do Lawyers Have A Duty To Disclose, To The Client, Significant Errors Committed By Co-Counsel?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

This was the question posed to the Committee on Professional Ethics of the New York State Bar Association. Its answer was a qualified yes — counsel has a duty to disclose the alleged error to the client but only if it was a significant error that could give rise to a malpractice claim.

The issue presented to the Committee was the following:

The inquirer was engaged to represent a client on the eve of trial. The client’s prior counsel is serving as co-counsel. In preparing the case, the inquirer has learned that co-counsel conducted virtually no discovery and made no document requests, although the inquirer believes correspondence and emails between the parties could be critical to the case. The inquirer believes this was a significant error or omission that may give rise to a malpractice claim against co-counsel. The outcome of the case, however, has yet to be decided. The inquirer is concerned about disclosing this situation to the client because it would undermine inquirer’s relationship with co-counsel, but the inquirer also believes it is in the client’s best interests to disclose the facts as soon as possible.

It is already established in New York (and several other jurisdictions, including New Jersey) that lawyers must report their own significant errors or omissions to clients. This requirement is based partly on Rule 1.4 and partly on Rule 1.7, each of which the Committee discussed in its opinion.

Rule 1.4 requires lawyers to keep clients informed about any material developments in their representation, and to explain issues "to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." A client may decide not to continue to retain a lawyer who makes significant errors or omissions, and the client cannot make an informed decision on this issue unless the lawyer self-reports his own errors. Accordingly, clients must self-report their own significant errors or omissions to their clients. The Committee held that this rationale applied equally to lawyers reporting significant errors or omissions committed by co-counsel because the decision facing the client in both situations was the same — whether to continue to retain the lawyer who committed the errors or omissions — and the client cannot make an informed decision on that issue without full disclosure.

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NJ Supreme Court: LLP Cannot Be Converted To General Partnership For Failing To Maintain Liability Insurance

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

On June 23, 2016, the New Jersey Supreme Court released its decision in Mortgage Grader, Inc. v. Ward & Olivo, LLP, a case in which I had the privilege of representing the New Jersey State Bar Association as amicus curiae. (I previously wrote about the case here.) As discussed below, the Supreme Court agreed with our arguments.

In Mortgage Grader, a former client sued the defendant law firm and each of its partners after the firm dissolved. While the firm had maintained professional liability insurance while it was actively practicing, it did not purchase a "tail" policy to cover claims that arose after it dissolved. The trial court held that this violated Rule 1:21-1C(a)(3), which requires attorneys practicing as an LLP to "obtain and maintain in good standing one or more policies of lawyers' professional liability insurance which shall insure the [LLP] against liability imposed upon it by law for damages resulting from any claim made against the [LLP] by its clients." Accordingly, the trial court held that the individual partners were not shielded from liability as they would normally be as members of an LLP and were instead vicariously liable for their partners' negligence. In other words, the trial court effectively converted the LLP to a general partnership because it failed to maintain liability insurance. The Appellate Division reversed, holding that the trial court did not have the authority to strip the individual partners of their liability protections under either Rule 1:21-1C(a)(3) or the Uniform Partnership Act.

The NJSBA asked the New Jersey Supreme Court to affirm the Appellate Division's decision. The Supreme Court agreed, holding that: (1) the insurance requirements for LLPs did not extend to the period when a firm is "winding up" its business — i.e., when it is collecting receivables but no longer providing legal services; and (2) even if they did, an LLP could not be converted to a general partnership as a "sanction" for failing to maintain liability insurance. Justice Albin wrote a separate opinion, concurring with the judgment of the majority, but suggesting that the Court Rules be amended to provide that an LLP would lose its liability protection if it failed to meet the insurance requirements, and to require LLPs to purchase tail insurance for six years following their dissolution.

The Supreme Court's opinion can be found here.