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The Type of Transaction Negotiated by the Lawyer: Form or Substance When it Comes to "Actual Damage"?

Baccash v. Sayegh, 862 N.Y.S.2d 564 (App. Div. 2008); 53 A.D.3d 636.

Student contributor: Cheryl Neuman

N.Y. underlying business acquisition

Facts: Plaintiff owned Iman Bridal Couture, Inc. and retained Defendant lawyer to represent her in connection with buying the “Peggy Peters’” trade name. Peggy Peters was another bridal boutique located near plaintiff’s store. Plaintiff wanted to buy the trade name so that she could open a bridal boutique under the Peggy Peters name. The defendant, however, told plaintiff that she would have to buy all the inventory in order to buy the Peggy Peters trade name. The plaintiff agreed to that arrangement, but unbeknownst to the plaintiff, defendant negotiated a stock purchase rather than an asset purchase of Peggy Peters. The plaintiff didn’t read the stock purchase agreement because she trusted and relied on defendant. Plaintiff subsequently sued defendant for legal malpractice because he negotiated a stock purchase agreement rather than an asset agreement, as they had agreed.

Issue: Whether defendant is liable to plaintiff for legal malpractice because he negotiated a stock purchase agreement instead of an asset purchase agreement?

Ruling: Defendant is not liable to plaintiff for legal malpractice because the plaintiff’s proof was insufficient to establish that she sustained actual damages as a result of the defendant’s conduct.

In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages.  (citing, Rudolf v. Shayne, Dachs, Stanisci, Corker, & Sauer, 8 N.Y.3d 483 (App. Div. 2007).

Lesson:  The plaintiff paid off the debts of Peggy Peters through Iman Bridal Couture. This fact, however, was not dispositive in ascertaining damages because the court stated, “Although it is undisputed that the plaintiff is Bridal Couture’s sole officer and shareholder, a corporation has a separate legal existence from its shareholder even when the corporation is wholly owned by a single individual,” such as in this case. 

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Posted in: Commercial, New York