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NY: No Liability to Third-Parties Absent Bad Faith

Ramirez v. 164 W 146 Street, LLC et al., 2010 NY Slip Op 32323, Supreme Court, New York County, August 27, 2010.

Facts:  A temporary receiver commenced a nonpayment proceeding against Plaintiff, a rent-stabilized tenant.  After the temporary receiver obtained a money judgment against Plaintiff and executed its eviction warrant, Plaintiff brought an action to invalidate the warrant on the basis that it was not in the name of the new owner of the apartment building.  The Court agreed and held that the warrant was invalid because the new owner’s attorney, Cornicello, had failed to seek a new warrant in his client’s name or substitute his client ‘s name in place of the temporary receiver.

Plaintiff subsequently commenced an action against the new owner’s attorney seeking damages associated with her illegal lockout. 

Issue:  Was Cornicello liable for damages sustained by his client’s adversary as a result of his alleged negligence? 

Ruling:  No. 

In this State, the general rule is that absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties, not in privity, for harm caused by professional negligence.  In order to state a valid cause of action for legal malpractice with an attorney or law firm one is not in privity with, one must allege that the attorney committed more than a mistake; an allegation of bad faith is necessary in that situation.  Ramirez was never a client of or in privity with Cornicello.  Thus, In order to survive the instant motion to dismiss, Ramirez’s complaint must have alleged that Cornicello acted in bad faith or acted fraudulently.  Plaintiffs’ complaint only alleges that Cornicello helped procure the eviction and that Cornicello is liable for [the] illegal lockout.  Plaintiffs’ complaint does not allege that Cornicello acted in bad faith.

Note, however, that the showing of "bad-faith" has not been difficult to fulfill in similar matters.  In another case, Mayes v. UVI Holding, Inc., the Court found bad faith where the law firm admitted to a "major screw-up" in handling an eviction proceeding.  Since Cornicello "believed" he was executing a valid warrant, the Court did not label his actions as tortious or malicious.  The Court indicated that the result would have been different had he known the warrant was invalid before the eviction took place.

Lesson:  Attorneys will not be liable to non-clients in New York for alleged professional negligence absent knowing misconduct, fraud, bad faith, collusion, or other malicious act.

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Posted in: New York, Privity