When a Client Dies, the Attorney Must Protect the Interests of the Client’s Estate

Russo v. Rozenholc, 2015 N.Y. App. DIV LEXIS 5885, 2015 NY Slip Op 06029 (N.Y. App. Div. July 9, 2015)

While New York law generally requires privity between a client and attorney in order to assert a claim for legal malpractice, in Schneider v. Finmann, 15 N.Y.3d 306, 907 N.Y.S.2d 119 (2010), the New York Court of Appeals set forth an exception to that general rule and recognized that, as a legal matter, a decedent’s estate steps into the shoes of the decedent, and that accordingly, an executor of an estate is authorized to assert a claim of legal malpractice against a decedent’s attorney.

In a recent decision, Russo v. Rozenholc, 2015 N.Y. App. Div. LEXIS 5885, 2015 NY Slip Op 06029 (N.Y. App. Div. July 9, 2015), the Court had the opportunity to consider the application of Schneider’s holding. The decedent Ronald Pecunies (“decedent”) had been a tenant in a rent-stabilized apartment building, and lived with his girlfriend Emel Dilek (“Dilek”) in a large apartment unit created by converting two apartments into one. When the building’s owner sought to demolish the building and evict the tenants, decedent, together with the building’s other rent-stabilized tenants, retained defendants David Rozenholc and his firm David Rozenholc and Associates (“DR & A”) to oppose the demolition and negotiate with the building owner. The tenants signed a retainer agreement warranting that they would share equally in any settlement offer made by the owner, but providing that the decedent would receive two shares of the settlement and would pay two shares of any legal fees owed.

While the tenants’ challenge to the demolition was proceeding but before any settlement could be reached, the decedent died. Plaintiff Louis A. Russo (“Russo”), the executor of decedent’s estate, authorized DR & A to continue to represent the estate’s interest. The building owner took the position that neither the decedent’s estate nor Dilek had any succession rights to the apartment under the Rent Stabilization Code. However, when the tenants and the building owner ultimately entered into a settlement, the building owner entered into a separate buyout agreement with Dilek, wherein the building owner agreed to pay Dilek the equivalent of a single share of the settlement which was being paid to the other tenants. Pursuant to that buyout agreement, Russo signed a document stating that as the executor of the estate, he had no claim to the apartment after the decedent died, and that Dilek (rather than the estate) had succeeded the decedent’s tenancy. DR & A purported to represent both Russo and Dilek in connection with the buyout agreement.

Russo subsequently commenced an action on behalf of the decedent’s estate for legal malpractice and breach of contract against DR & A. Russo alleged that DR & A committed legal malpractice when it failed to advise Russo of the terms of the retainer agreement, which would have afforded the estate a right to its double share of the settlement proceeds, irrespective of the fact that the estate did not have succession rights in the apartment under the Rent Stabilization Code. Russo alleged that DR & A’s failure to disclose the retainer agreement caused him to forfeit the estate’s rights to the settlement proceeds. Russo also alleged a claim for breach of contract, alleging that DR & A and the other tenants had failed to distribute decedent’s share of the proceeds to the estate, as required by the retainer agreement.

The Court held that Russo had stated causes of action for breach of contract and legal malpractice. The Court held that, regardless of whether the estate’s rights to the apartment would be relinquished under the Rent Stabilization Code, the estate succeeded the decedent’s rights in the retainer agreement, and that accordingly, Russo stated a claim for breach of contract. Similarly, the Court held that Russo had stated a claim for legal malpractice, finding that the allegation that, but for DR & A’s failure to disclose the terms of the retainer agreement, Russo would not have agreed to sign the buyout agreement with Dilek and would have insisted that the estate be paid its two shares of the settlement proceeds, adequately stated a cause of action.

Practice Note: When an attorney represents a client who dies in the middle of representation, the attorney must protect the estate’s interests and provide full disclosure of all relevant facts to the estate’s executor.

Reprinted with permission from the July 2015 lpl eAdvisory – ABA Standing Committee on Lawyer’s Professional Liability.  All rights reserved.