Melnick v. Farrell

128 A.D.3d 1371, 7 N.Y.S.3d 784
CourtAppellate Division of the Supreme Court of the State of New York
DecidedMay 1, 2015
StatusPublished
Cited by2 cases

This text of 128 A.D.3d 1371 (Melnick v. Farrell) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Melnick v. Farrell, 128 A.D.3d 1371, 7 N.Y.S.3d 784 (N.Y. Ct. App. 2015).

Opinion

Appeal from an order of the Supreme Court, Oneida County (Norman I. Siegel, J.), entered February 10, 2014. The order granted the motion of defendants for summary judgment, dismissed the amended complaint and awarded defendants judgment for costs and disbursements.

It is hereby ordered that the order so appealed from is unanimously affirmed without costs.

Memorandum: Plaintiffs commenced this legal malpractice [1372]*1372action alleging that defendants were negligent with respect to the negotiation of an agreement to license and sell intellectual property for a medical device developed by plaintiffs Frank H. Boehm, Jr. and Benedetta D. Melnick and transferred to plaintiff Creative Neuroscience Applications, LLC (CNA). Supreme Court granted defendants’ motion seeking summary judgment dismissing the amended complaint both as time-barred and on the merits. Although we conclude that the court erred in determining that the action is time-barred, we agree with the court on the merits, and we therefore affirm.

“An action to recover damages for legal malpractice accrues when the malpractice is committed” (Shumsky v Eisenstein, 96 NY2d 164, 166 [2001]). It is undisputed that defendants represented plaintiffs with respect to the agreement, executed on December 31, 2004 and the first amendment of the agreement, executed on June 28, 2005, and that the action was commenced on October 10, 2010. Defendants thus met their initial burden with respect to the statute of limitations by establishing that the action was commenced more than three years after the alleged malpractice (see CPLR 214 [6]). We nevertheless conclude that plaintiffs raised an issue of fact whether the continuous representation doctrine tolled the statute of limitations (see International Electron Devices [USA] LLC v Menter, Rudin & Trivelpiece, P.C., 71 AD3d 1512, 1512-1513 [2010]). Plaintiffs established that, in May 2008, Boehm and Melnick discussed with Paul J. Farrell, Esq. (defendant) their concerns regarding whether certain events would occur so as to trigger the future payments provisions of the first amendment of the agreement.

On the merits, plaintiffs allege that defendants engaged in legal malpractice by failing to include in the agreement, or in the first amendment of the agreement, a provision protecting their financial interest in the intellectual property in the event that the buyer became insolvent or filed for bankruptcy protection (bankruptcy/buyback provision). In order to establish a cause of action for legal malpractice, plaintiffs must prove that the attorney failed to exercise the degree of care, skill and diligence commonly possessed by a member of the legal community; that the failure to do so proximately caused plaintiffs’ damages; and that plaintiffs would have been successful in the underlying action if the attorney had exercised due care (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; Phillips v Moran & Kufta, P.C., 53 AD3d 1044, 1044-1045 [2008]). “To succeed on a motion for summary judgment dismissing the complaint in a legal malpractice action, the defendant must present evidence in admissible form [1373]*1373establishing that the plaintiff is unable to prove at least one essential element of his or her cause of action alleging legal malpractice” (Scartozzi v Potruch, 72 AD3d 787, 789-790 [2010]).

It is undisputed that the agreement and subsequent amendments, some of which were negotiated solely by Boehm, did not provide for the financial protection of plaintiffs with respect to the intellectual property in the event that the buyer filed for bankruptcy protection, which occurred here. It is also undisputed that plaintiffs received the scheduled payments pursuant to the agreement and subsequent amendments, but they did not receive any future payments pursuant to the amended agreement because the necessary triggering events did not occur. Further, it is undisputed that, in July 2008, plaintiffs retained different counsel and engaged in mediation with the buyer, which resulted in a settlement agreement that superseded the original agreement and amendments. The settlement agreement also did not contain a bankruptcy/buyback provision. Plaintiffs thereafter commenced a breach of contract action with respect to the settlement agreement in federal court, which ultimately was dismissed, and, while that action was pending, the buyer applied for bankruptcy protection. Although CNA was listed as an unsecured creditor in the bankruptcy proceeding, plaintiffs did not receive any proceeds from the sale of the buyer’s assets. Those assets included over 50 patents, including the patent assigned by plaintiffs, products and inventory. The assets were sold for $9.2 million, which was not sufficient to satisfy the claims of secured creditors. Plaintiffs thereafter commenced this action seeking damages in the amount of $9.2 million.

In support of their motion seeking summary judgment dismissing the amended complaint, defendants provided, inter alia, the deposition testimony of defendant in which he stated that he had previously represented plaintiffs with respect to a license and assignment agreement for a different patent in which a bankruptcy/buyback provision was included. He testified that Boehm was primarily responsible for negotiating and structuring the agreement and first amendment thereof with the buyer and that he advised Boehm to include a bankruptcy/ buyback provision similar to what had been included in the previous agreement. Defendant testified that, when he spoke to the buyer while drafting the agreement for plaintiffs, he “pushed” for such a provision, but the buyer refused to include the provision. Defendants also provided the affidavit of the buyer’s chief executive officer, stating that Boehm was primar[1374]*1374ily responsible for negotiating the agreement and that, although Boehm raised the issue of the bankruptcy/buyback provision several times, he informed Boehm and defendant that a bankruptcy/buyback provision “would be an absolute deal breaker.” In addition, defendants provided the affidavit of a nonparty attorney with whom Boehm consulted, who stated that he knew that defendant explicitly addressed the issue of a bankruptcy/buyback provision with Boehm and that both defendant and Boehm advised him that the buyer “adamantly refused” to include such a provision in the agreement.

Defendants also presented excerpts from the depositions of Boehm and Melnick. Boehm testified that he knew that the buyer refused to include a bankruptcy/buyback provision in the agreement and that plaintiffs “were okay with that” because “it was a good deal, and we didn’t want to have that as a sticking point.” Melnick testified that she had concerns that the agreement provided that the licensing agreement converted to an assignment after a certain sum had been paid by the buyer and plaintiffs therefore would not have use of the technology, but that she was “outvoted” by Boehm. Both Boehm and Melnick testified that defendant advised them to sign the agreement if they wanted to close the deal with the buyer.

We conclude that defendants met their initial burden by establishing that they did not fail to exercise the degree of care, skill and diligence commonly possessed by members of the legal community with respect to their representation of plaintiffs (cf. Scartozzi, 72 AD3d at 790; see generally Rudolf, 8 NY3d at 442).

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Cite This Page — Counsel Stack

Bluebook (online)
128 A.D.3d 1371, 7 N.Y.S.3d 784, Counsel Stack Legal Research, https://law.counselstack.com/opinion/melnick-v-farrell-nyappdiv-2015.