Lappin v. Greenberg

• Decision Date: 14 November 2006
• Docket Number: 9111.
• Citation: 34 A.D.3d 277,2006 NY Slip Op 08168,825 N.Y.S.2d 18
• Parties: GRACE LAPPIN, Appellant, v. MARGERY A. GREENBERG et al., Respondents.
• Court: New York Supreme Court — Appellate Division

34 A.D.3d 277

825 N.Y.S.2d 18

2006 NY Slip Op 08168

GRACE LAPPIN, Appellant, v. MARGERY A. GREENBERG et al., Respondents.

9111.

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

Decided November 14, 2006.

Judgment, Supreme Court, New York County (Walter B. Tolub, J.), entered July 25, 2005, which, to the extent appealed from as limited by the briefs, granted defendants' pre-answer motion to dismiss plaintiff's first cause of action, alleging legal malpractice, for failure to state a cause of action, unanimously reversed, on the law, without costs, the motion denied and the first cause of action reinstated.

This dispute arises out of a divorce action commenced in 1991. During the proceedings, plaintiff was represented by several different attorneys, ultimately retaining defendant Margery A. Greenberg in June 1996. In November 1998, plaintiff and her then husband, William Warhurst, entered into a stipulation prepared by said defendant resolving all issues between them. The agreement provides that each party waives any claim for maintenance and any interest in any individual retirement account the other might have established. The agreement acknowledges that when the divorce action was commenced, William Warhurst "was the title owner of a 401K Plan and Employee Stock Option Plan Account from US Trust" (the Plan), and states that he agreed, within 10 days, to "request that all monies in The Plan be deposited into his attorney's escrow account." Within 10 days after receipt of the funds, his attorney was to distribute 80% of the balance, after payment of taxes, to plaintiff and an additional $4,000 to her attorneys for legal expenses. The stipulation also provides that plaintiff waives her right to a 401 (k) plan owned by Warhurst. The terms of the stipulated agreement are incorporated into a judgment of divorce entered in August 1999.

The complaint alleges that, prior to submitting a proposed judgment of divorce, Ms. Greenberg failed to make appropriate inquiries to determine the Plan's requirements for distribution of the funds or whether the proposed division of proceeds was even permissible under the Plan.

On August 13, 1999, a judgment of divorce was granted. However, the judgment did not contain language sufficient to constitute a qualified domestic relations order (QDRO) acceptable to the Plan administrator for the distribution of the pension funds. In or about December 1999, Ms. Greenberg was notified that the Plan administrator was unable to distribute its proceeds because there was no QDRO and the intended distribution violated its terms.

In or about February 2000, Ms. Greenberg submitted the requisite QDRO, but failed to address whether the proposed distribution was permitted under the terms of the Plan. In or about October 2000, the pension administrator again notified her that the proposed distribution could not be approved because it violated the Plan's terms. She was also informed that the Plan and Warhurst's 401 (k) were a single plan, and not two separate plans as she had allegedly advised plaintiff. She also learned that Warhurst had another retirement plan, the "Employee Retirement Plan of US Trust Company of New York and affiliated companies" (ERP).

Ms. Greenberg and defendant Philip C. Segal formed defendant law firm Segal & Greenberg, LLP, in 2001. In or about November 2001, defendants obtained an order modifying the stipulation of settlement and judgment of divorce so as to give plaintiff 100% of the Plan balance. In September 2003, defendants finally obtained a QDRO directing the distribution of the entire proceeds of the Plan to plaintiff. However, defendants allegedly did not serve that order on the pension administrator until on or about March 1, 2004. It is further alleged that defendants failed to advise either plaintiff or the court of the existence of Warhurst's ERP.

The complaint states that, at the time the parties entered into the stipulation, plaintiff's interest in the plan was in excess of $300,000 and that, by the time the plan funds were transferred in March 2004, the value of her interest had fallen to approximately $131,000.

Plaintiff commenced this action for legal malpractice and breach of contract. The first cause of action alleges that "had defendants acted with reasonable professional diligence in effecting the division of marital assets, plaintiff would have received from the US Trust ESOP in excess of [$300,000] in pension funds, which she would have invested in a more suitable retirement plan, and thus been able to avoid the losses sustained by US Trust between May, 1999 and March, 2004." Supreme Court dismissed the malpractice cause of action, holding that plaintiff's damages were speculative and that the decline in value of the securities held by the Plan and not defendants' negligence was the cause of plaintiff's loss.

Defendants predicate dismissal on plaintiff's inability to...