Izko Sportswear Co., Inc. v. Flaum

• Decision Date: 10 January 2006
• Docket Number: 2004-05260.,2004-00279.,2004-01167.
• Citation: 809 N.Y.S.2d 119,25 A.D.3d 534,2006 NY Slip Op 00142
• Parties: IZKO SPORTSWEAR CO., INC., et al., Appellants, v. NEIL R. FLAUM et al., Respondents.
• Court: New York Supreme Court — Appellate Division

25 A.D.3d 534

809 N.Y.S.2d 119

2006 NY Slip Op 00142

IZKO SPORTSWEAR CO., INC., et al., Appellants, v. NEIL R. FLAUM et al., Respondents.

2004-00279.

2004-01167.

2004-05260.

Appellate Division of the Supreme Court of the State of New York, Second Department.

January 10, 2006.

Motion by the appellants for reargument of appeals from an order of the Supreme Court, Suffolk County, dated December 9, 2003, a judgment of the same court entered January 9, 2004, and an order of the same court dated April 20, 2004, which were determined by decision and order of this Court dated July 5, 2005 (see Izko Sportswear Co., Inc. v Flaum, 20 AD3d 392 [2005]).

Upon the papers filed in support of the motion and the papers filed in opposition thereto, it is

Ordered that the motion is granted to the extent that the decision and order of this Court dated July 5, 2005, is recalled and vacated, and the following decision and order is substituted therefor, and the motion is otherwise denied:

In an action, inter alia, to recover damages for legal malpractice and violation of Judiciary Law § 487, the plaintiffs appeal from (1) an order of the Supreme Court, Suffolk County (Pitts, J.), dated December 9, 2003, which granted the defendants' motion pursuant to CPLR 3211 (a) (7) to dismiss the complaint, (2) a judgment of the same court entered January 9, 2004, which, upon the order, dismissed the complaint, and (3) so much of an order of the same court dated April 20, 2004, as, upon reargument, adhered to its original determination.

Ordered that the appeal from the order dated December 9, 2003, is dismissed, without costs or disbursements; and it is further,

Ordered that the judgment is modified, on the law, by deleting the provision thereof dismissing the plaintiffs' third cause of action alleging a violation of Judiciary Law § 487 and substituting therefor a provision severing the third cause of action from the other two causes of action; as so modified, the judgment is affirmed, without costs or disbursements, the provision of the order dated December 9, 2003, granting that branch of the defendants' motion which was to dismiss the plaintiffs' third cause of action alleging a violation of Judiciary Law § 487 is vacated, that branch of the motion is denied, and the third cause of action is reinstated; and it is further,

Ordered that the appeal from so much of the order dated April 20, 2004, as, upon reargument, adhered to so much of the original determination as granted that branch of the defendants' motion which was to dismiss the third cause of action is dismissed as academic, without costs or disbursements; and it is further Ordered that the order dated April 20, 2004, is affirmed insofar as reviewed, without costs or disbursements.

The appeal from the intermediate order dated December 9, 2003, must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248 [1976]). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501 [a] [1]).

On August 9, 1997, the plaintiffs' business sustained damage from a fire. As a result, the corporate plaintiff Izko Sportswear Co., Inc. (hereinafter Izko), was unable to pay its rent to its landlord Heartland Rental Properties Partnership (hereinafter Heartland), and Heartland sued Izko to recover for unpaid rent. In November 1997 Izko's president, the plaintiff Ira Soblick, consulted the defendant bankruptcy attorneys, Neil R. Flaum and Neil R. Flaum, P.C. In January 1998 the defendants filed a petition for reorganization of Izko pursuant to chapter 11 of the Bankruptcy Code.

On or about February 17, 1998, Izko sought permission from the Bankruptcy Court to retain the defendants to prosecute the bankruptcy proceeding. In support of the application to the Bankruptcy Court, the defendant Neil R. Flaum submitted an affirmation stating that "[n]either I nor any members of my firm have any connection with [Izko], its creditors, or any other party in interest or their respective attorneys or accountants." By order dated March 24, 1998, the Bankruptcy Court granted the application.

The defendants continued to act as Izko's bankruptcy attorneys until May 8, 2000, when they consented to substitution of new counsel for Izko, as the debtor. The parties stipulated to the defendants' fee, which was approved by the Bankruptcy Court on May 31, 2000.

The plaintiff Ira Soblick claims that over two years later, in June 2002, the plaintiffs first learned that the defendants previously represented their creditor Heartland in several bankruptcy matters in the 1990's. According to Soblick, in June 2002 the plaintiffs discovered that the defendant Neil R. Flaum advised Heartland in late 1997 that Izko was contemplating declaring bankruptcy and secured Heartland's opinion that it did not deem...