Olshan Frome Wolosky LLP v Kestenbaum 2025 NY Slip Op 31695(U) May 9, 2025 Supreme Court, New York County Docket Number: Index No. 656174/2023 Judge: Lyle E. Frank represents a very common situation in the NY legal malpractice world. Client is involved in expensive legal proceedings, (here, they were both defendants and plaintiffs in legal proceedings), and payments go awry. When client is sued for fees, it responds with a legal malpractice defense. Often, details are threadbare.
“This action arises out of alleged unpaid legal fees. Defendants previously moved to dismiss the complaint; the application was granted in part. Defendants then submitted an answer with counterclaims. Plaintiff (“Olshan”) now moves to dismiss defendants’ counterclaims, and defendants oppose the instant motion. Upon the foregoing documents and after oral argument, plaintiff’s motion to dismiss the counterclaims is granted.
Background
Olshan is a New York limited liability partnership engaged in the practice of law. Defendant Fortis owns and/or controls defendants FPG Maiden Holdings and FPG Maiden Lane2. Defendant Joel Kestenbaum is the president of FPG Maiden Lane, as well as the president and a member of Fortis.
Olshan’s complaint alleges that the fees owed arise from their representation of Defendants in three pending commercial actions in New York County Supreme Court: (1) Valley National Bank, as successor by merger to Bank Leumi USA v. FPG Maiden Lane, LLC et al., Index No. 657252/2020 (the “Foreclosure Action”), in which Olshan appeared on behalf of and represented Fortis, FPG Maiden Lane, Joel Kestenbaum and other related entities; (2) FPG Maiden Lane, LLC et al. v. Bank Leumi USA et al., Index No. 653584/2020 (the “Lender
Liability Action”), in which Olshan appeared on behalf of and represented Fortis, FPG Maiden Lane and Joel Kestenbaum; and (3) MREF REIT Lender 2 LLC v. FPG Maiden Holdings et al., Index No. 653189/2022 (the “Mezz Lender Action”), in which Olshan appeared on behalf of and represented Fortis, FPG Maiden Holdings, FPG Maiden Lane and Joel Kestenbaum, (collectively, the “Actions”).”
“Throughout that time, Olshan alleges that Defendants defaulted on payments multiple times under the payment procedure clause of the Engagement Agreement, but that Olshan had continued representing Defendants because they had promised to pay. The most notable of these promises asserted in the complaint occurred on July 12, 2023, when Regan, acting as Fortis’ General Counsel, informed Olshan that “Louis [Kestenbaum] has approved payment of $425k to fully resolve the open invoices from November through April,” and further set out new guidelines regarding how Defendants’ would handle payments from thereon out.”
“Defendants assert four counterclaims against plaintiff: breach of contract, breach of fiduciary duty, legal malpractice and unjust enrichment. The Court will discuss each counterclaim in turn.
Breach of Contract
To state a claim for breach of contract, a party must allege: (1) the parties entered into a valid agreement, (2) plaintiff performed, (3) defendant failed to perform, and (4) damages. VisionChina Media Inc. v Shareholder Representative Servs., LLC, 109 AD3d 49, 58 [1st Dept [2013]. In support of its breach of contract counterclaim, defendants assert that plaintiffs terminated their representation “prematurely” and unilaterally and did not allow defendants sufficient time to obtain substitute counsel, which resulted in unspecified damages and prejudice
to defendants. Notably, the counterclaim does not allege that defendants have performed pursuant to the contract.
Plaintiff submits the termination email as well as the stipulation of substitution of counsel, as documentary evidence to defeat this claim. Further, plaintiffs cite to the letter submitted by Joel Kestenbaum, in the Mezz Lender Action, to establish that defendants should be estopped from claiming that plaintiff, rather than themselves, and former counsel caused delay in the underlying matters.
Here, the defendants do not contest the use of the email, that undoubtedly terminates plaintiff, as documentary evidence, pursuant to CPLR § 3211 (a)(1), nor do they dispute the emails authenticity. Rather defendants attempt to use the email to support their counterclaims. The Court will not rely on the email as documentary evidence, rather the substitution of counsel stipulation, sufficiently defeat the allegations in defendants’ counterclaims. The stipulations conclusively establish, that contrary to the allegations in the counterclaims, defendants were not
abruptly left without counsel or prejudiced because they lacked a sufficient time to find replacement counsel. To the contrary, the stipulations establish that defendants were not left without counsel and had no need to find replacement counsel. Accordingly, the breach of contract counterclaim is dismissed.”
“Legal Malpractice
“In order to state a cause of action for legal malpractice, the complaint must set forth three elements: the negligence of the attorney; that the negligence was the proximate cause of the loss sustained; and actual damages” (Mamoon v Dot Net Inc., 135 AD3d 656, 658 [1st Dept 2016] internal citations omitted).
The counterclaim fails to allege any specific factual negligent conduct by plaintiff. Further, the counterclaim is silent as to what, if any, loss was sustained, and further fails to allege any actual damages. Accordingly, the counterclaim alleging legal malpractice fails to state a viable cause of action.”