This case, Ostrolenk Faber LLP v. Sakar International, Inc., 2019 NY Slip Op 31303(U), holds that a counterclaim for legal malpractice against an intellectual property firm stated a claim. Sakar retained Ostrolenk to defend it in a patent infringement lawsuit. In the underlying case, a plaintiff alleged that a product manufactured and sold by Sakar to Office Depot violated plaintiff’s patent.The case was eventually settled.
The current case involved (a) the law firm suing for legal fees; and (b) the former client, Sakar, filing a counterclaim for legal malpractice. The counterclaim alleged that the law firm failed to promptly research the “prior art” in the particular invention. Had it done so, the law firm would have realized that the patent infringement claim against Sakar had no merit. Instead, the firm engaged in other litigation activity which, in Sakar’s view, ran up costs.
The court held that the counterclaim stated a claim and reasoned as follows:
Here, accepting the counterclaim’s allegations as true and according Sakar the benefit of every favorable inference, Sakar states a claim for legal malpractice. The answer specifically alleges that Ostrolenk “reasonably should have located [the] prior art at the commencement of the Underlying Action” (answer, ¶ 46) and that its failure to do so constitutes malpractice. Id., ¶ 55. In addition, the answer alleges that the discovery of this prior art resulted in a favorable settlement of the Underlying Action, which could have been accomplished sooner had Ostrolenk been more prompt in conducting the prior art search. See id., ¶ 46. Sakar is, therefore, not merely second-guessing Ostrolenk’s litigation strategy and speculating about alternative results, which would be insufficient to state a malpractice claim. See Dweck Law Firm, 283 AD2d at 293 (“[a]ttorneys may select among reasonable courses of action in prosecuting their clients’ cases . . . so that a purported malpractice claim that amounts only to a client’s criticism of counsel’s strategy may be dismissed”). Rather, Sakar is alleging that, but for Ostrolenk’s unreasonable delay in locating the prior art, the same result could have been achieved sooner, thus avoiding unnecessary legal expenses. Therefore, the counterclaim sufficiently alleges that Ostrolenk was negligent. Compare AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 436 (2007) (internal quotation marks and citations omitted) (affirming dismissal of legal malpractice claim based on allegations that an underlying action could have been resolved more expeditiously, where “there [was] no way to know whether the advice not given . . . would have altered the [duration] of the [underlying] action”), with Lieberman v Green, 139 AD3d 815, 817 (2d Dept 2016) (denying motion to dismiss counterclaim for legal malpractice, where the defendant alleged that the plaintiffs “were negligent in failing to have a written stipulation of settlement signed by the parties and in failing to have the settlement so-ordered by the Supreme Court” and that, “as a result, he incurred additional legal fees in having to continue litigating the divorce action”).
In addition, the answer sufficiently alleges that but for Ostrolenk’s negligence, Sakar would have avoided damages. Sakar states that the settlement of the Underlying Action was unnecessarily delayed by Ostrolenk’s inaction and that this proximately caused it to incur additional legal expenses. These allegations are sufficient at this stage of the litigation to maintain a claim for malpractice.
Comment: this is a decision that a counterclaim for legal malpractice stated a claim against a law firm. The allegations in the counterclaim have not been proven before a jury or other finder of fact. They are merely unproven allegations at this time. The court’s decision is significant because it recognizes that a bungled and wasteful defense of a case may constitute legal malpractice.
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Ed Clinton, Jr.