Court Denies Motions For Summary Judgment In Legal Malpractice Action

On September 6, 2024, Justice Margaret A. Chan issued a Decision and Order in FTF Lending, LLC v. Mavrides, Moyal, Packman & Sadkin, LLP, Index No. 153620, denying both plaintiff’s and defendants’ motions for summary judgment. Plaintiff asserted claims against defendants for legal malpractice arising out of defendants’ representation of plaintiff in a loan transaction. The Court explained:

Nevertheless, summary judgment in FTF's favor is not warranted.[] The record undoubtedly supports a conclusion that defendants had a duty to properly review the Title Reports and ensure FTF's security interest in the Property. But there is also evidence in the record that FTF had its own due diligence obligations as part of the Loan Transaction (see Term Sheet at 3-4; Defts 19·a ¶86; Packman aff ¶¶ 8·9). It was through this diligence that FTF seemingly obtained the credit reports and background checks identifying certain details about Samuels's checkered financial history and potential liens/foreclosure actions on the Property (see Defts 19-a ¶¶ 56[A], [D]-[E], 57; Rodak Reply aff ¶¶ 6·10). Yet, despite being on notice of these issues-which seemingly conflicted with its own underwriting requirements for approving borrowers (see Hughes Report Ex. U)-FTF nevertheless approved the Loan. Presented with this evidence and testimony, a trier of fact could determine that, notwithstanding defendants' negligent conduct, the proximate cause of FTF's losses following Borrowers' default was its own deficient diligence efforts (cf Garten v Shearman & Sterling LLP, 102 AD3d 436, 437 [1st Dept 2013] [affirming dismissal of complaint on summary judgment where defendant established that plaintiffs losses were caused by a borrower's "poor financial condition" and plaintiffs "misjudgment of risk," rather than defendant's failure to prepare and procure documents necessary to provide plaintiff with a first-priority security interest]). As a result, although a close call, defendants proffered just enough evidence in admissible form to create a material issue of fact as to proximate causation.

In sum, although FTF has established defendants' negligence, material issues of fact on the issue of proximate causation preclude summary judgment. Accordingly, both motions are denied.

The attorneys at Schlam Stone & Dolan frequently litigate malpractice issues and summary judgment motions. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues or motions.