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Proximate Causation Defeats Conflict of Interest Legal Malpractice Claim 

The plaintiff, Cynthia O’Neal, brought a legal malpractice claim against her former lawyers. O’Neal, an owner of a restaurant chain that fell on hard times, alleged that her former lawyers had a conflict of interest when the represented her company and the opposing party in an assumption of a lease. The court rejected her claim on the grounds that she was unable to establish proximate causation.

In my experience, proximate causation can be difficult to prove. Lawyers make mistakes. Sometimes those mistakes breach the duty of care. The plaintiff must tie the negligent act to the damages suffered by plaintiff and come up with a plausible theory as to how the lawyers made things worse and caused the damage.

One area where it is very difficult to prove proximate causation is a legal malpractice claim in the foreclosure setting. The lawyer who defends the foreclosure may miss a deadline or make a legal error. However, that lawyer did not cause the default and did not proximately cause any damages.

O’Neal’s case is similar to a foreclosure. The lawyers for her company negotiated a transaction in which her company assumed a lease for a restaurant. The lawyers evidently negotiated with themselves as they represented the prior lessee of the real estate.

Ultimately the restaurant fell on hard times and the landlord obtained a huge judgment against the plaintiff, Ms. O’Neal. She then sued the lawyers alleging that they had a conflict of interest in negotiating the assumption of the lease. She also claimed that the lawyers did not do enough to resist the collection actions that were filed by her creditors.

This is a good liability theory. The problem is that there are no damages that can be traced to the conflict of interest. The court dismissed the complaint on the ground that plaintiff had not alleged proximate causation. The court explained:

Plaintiff’s valuation of the lease is based on pure speculation and not supported by any facts. Furthermore, there is nothing in the record that shows any negligence by defendants during the assumption of lease process. Even if a conflict of interest existed, “[a] conflict of interest, even [in] violation of the Code of Professional Responsibility, does not by itself support a legal malpractice cause of action.”Schafrann v N.V. Famka, Inc., 14 AD3d 363, 364 (1st Dept 2005).

Even assuming arguendo that there was a deviation from the accepted standards, plaintiff must establish that the malpractice was the proximate cause of her damages. Her claim that a defunct restaurant, with assets consisting of its fixtures and lease, was worth enough to discharge debts amounting to approximately $1.8 million dollars is incredible and based upon mere speculation and unsupported by an appraisal or any other facts alleged in the four corners of the complaint. Even accepting everything in the complaint and opposition to the motion as true as required in a motion pursuant to CPLR § 3211, the complaint does not state a cause of action of legal malpractice in conjunction with defendants’ actions during the assumption of lease representation.

In sum, this looked like a great legal malpractice case, but it had no staying power because the conflict of interest did not cause the restaurant to default on its contracts. The required element of proximate causation was absent and the case was, in my opinion, correctly dismissed.

Edward X. Clinton, Jr.

Source: O’NEAL v. MUCHNICK GOLIEB & GOLIEB, PC, 2016 NY Slip Op 30268 – NY: Supreme Court 2016 – Google Scholar