        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

452
CA 14-02068
PRESENT: SCUDDER, P.J., CENTRA, PERADOTTO, VALENTINO, AND WHALEN, JJ.


BENEDETTA MELNICK, FRANK H. BOEHM, JR.
AND CREATIVE NEUROSCIENCE APPLICATIONS, LLC,
PLAINTIFFS-APPELLANTS,

                    V                               MEMORANDUM AND ORDER

PAUL J. FARRELL, ESQ., THE FARRELL LAW FIRM, LLP,
AND DILWORTH & BARRESE, LLP,
DEFENDANTS-RESPONDENTS.


SMITH, SOVIK, KENDRICK & SUGNET, P.C., SYRACUSE (KEVIN HULSLANDER OF
COUNSEL), FOR PLAINTIFFS-APPELLANTS.

COSTELLO, COONEY & FEARON, PLLC, SYRACUSE (ROBERT J. SMITH OF
COUNSEL), FOR DEFENDANTS-RESPONDENTS.


     Appeal from an order of the   Supreme Court, Oneida County (Norman
I. Siegel, J.), entered February   10, 2014. The order granted the
motion of defendants for summary   judgment, dismissed the amended
complaint and awarded defendants   judgment for costs and disbursements.

     It is hereby ORDERED that the order so appealed from is
unanimously affirmed without costs.

     Memorandum: Plaintiffs commenced this legal malpractice action
alleging that defendants were negligent with respect to the
negotiation of an agreement to license and sell intellectual property
for a medical device developed by plaintiffs Frank H. Boehm, Jr. and
Benedetta D. Melnick and transferred to plaintiff Creative
Neuroscience Applications, LLC (CNA). Supreme Court granted
defendants’ motion seeking summary judgment dismissing the amended
complaint both as time-barred and on the merits. Although we conclude
that the court erred in determining that the action is time-barred, we
agree with the court on the merits, and we therefore affirm.

     “An action to recover damages for legal malpractice accrues when
the malpractice is committed” (Shumsky v Eisenstein, 96 NY2d 164,
166). It is undisputed that defendants represented plaintiffs with
respect to the agreement, executed on December 31, 2004 and the first
amendment of the agreement, executed on June 28, 2005, and that the
action was commenced on October 10, 2010. Defendants thus met their
initial burden with respect to the statute of limitations by
establishing that the action was commenced more than three years after
the alleged malpractice (see CPLR 214 [6]). We nevertheless conclude
                                 -2-                           452
                                                         CA 14-02068

that plaintiffs raised an issue of fact whether the continuous
representation doctrine tolled the statute of limitations (see
Electron Devices [USA] LLC v Menter, Rudin & Trivelpiece, P.C., 71
AD3d 1512, 1512-1513). Plaintiffs established that, in May 2008,
Boehm and Melnick discussed with Paul J. Farrell, Esq. (defendant)
their concerns regarding whether certain events would occur so as to
trigger the future payments provisions of the first amendment of the
agreement.

     On the merits, plaintiffs allege that defendants engaged in legal
malpractice by failing to include in the agreement, or in the first
amendment of the agreement, a provision protecting their financial
interest in the intellectual property in the event that the buyer
became insolvent or filed for bankruptcy protection
(bankruptcy/buyback provision). In order to establish a cause of
action for legal malpractice, plaintiffs must prove that the attorney
failed to exercise the degree of care, skill and diligence commonly
possessed by a member of the legal community; that the failure to do
so proximately caused plaintiffs’ damages; and that plaintiffs would
have been successful in the underlying action if the attorney had
exercised due care (see Rudolf v Shayne, Dachs, Stanisci, Corker &
Sauer, 8 NY3d 438, 442; Phillips v Moran & Kufta, P.C., 53 AD3d 1044,
1044-1045). “To succeed on a motion for summary judgment dismissing
the complaint in a legal malpractice action, the defendant must
present evidence in admissible form establishing that the plaintiff is
unable to prove at least one essential element of his or her cause of
action alleging legal malpractice” (Scartozzi v Potruch, 72 AD3d 787,
789-790).

     It is undisputed that the agreement and subsequent amendments,
some of which were negotiated solely by Boehm, did not provide for the
financial protection of plaintiffs with respect to the intellectual
property in the event that the buyer filed for bankruptcy protection,
which occurred here. It is also undisputed that plaintiffs received
the scheduled payments pursuant to the agreement and subsequent
amendments, but they did not receive any future payments pursuant to
the amended agreement because the necessary triggering events did not
occur. Further, it is undisputed that, in July 2008, plaintiffs
retained different counsel and engaged in mediation with the buyer,
which resulted in a settlement agreement that superseded the original
agreement and amendments. The settlement agreement also did not
contain a bankruptcy/buyback provision. Plaintiffs thereafter
commenced a breach of contract action with respect to the settlement
agreement in federal court, which ultimately was dismissed, and, while
that action was pending, the buyer applied for bankruptcy protection.
Although CNA was listed as an unsecured creditor in the bankruptcy
proceeding, plaintiffs did not receive any proceeds from the sale of
the buyer’s assets. Those assets included over 50 patents, including
the patent assigned by plaintiffs, products and inventory. The assets
were sold for $9.2 million, which was not sufficient to satisfy the
claims of secured creditors. Plaintiffs thereafter commenced this
action seeking damages in the amount of $9.2 million.

     In support of their motion seeking summary judgment dismissing
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                                                         CA 14-02068

the amended complaint, defendants provided, inter alia, the deposition
testimony of defendant in which he stated that he had previously
represented plaintiffs with respect to a license and assignment
agreement for a different patent in which a bankruptcy/buyback
provision was included. He testified that Boehm was primarily
responsible for negotiating and structuring the agreement and first
amendment thereof with the buyer and that he advised Boehm to include
a bankruptcy/buyback provision similar to what had been included in
the previous agreement. Defendant testified that, when he spoke to
the buyer while drafting the agreement for plaintiffs, he “pushed” for
such a provision, but the buyer refused to include the provision.
Defendants also provided the affidavit of the buyer’s chief executive
officer, stating that Boehm was primarily responsible for negotiating
the agreement and that, although Boehm raised the issue of the
bankruptcy/buyback provision several times, he informed Boehm and
defendant that a bankruptcy/buyback provision “would be an absolute
deal breaker.” In addition, defendants provided the affidavit of a
nonparty attorney with whom Boehm consulted, who stated that he knew
that defendant explicitly addressed the issue of a bankruptcy/buyback
provision with Boehm and that both defendant and Boehm advised him
that the buyer “adamantly refused” to include such a provision in the
agreement.

     Defendants also presented excerpts from the depositions of Boehm
and Melnick. Boehm testified that he knew that the buyer refused to
include a bankruptcy/buyback provision in the agreement and that
plaintiffs “were okay with that” because “it was a good deal, and we
didn’t want to have that as a sticking point.” Melnick testified that
she had concerns that the agreement provided that the licensing
agreement converted to an assignment after a certain sum had been paid
by the buyer and plaintiffs therefore would not have use of the
technology, but that she was “outvoted” by Boehm. Both Boehm and
Melnick testified that defendant advised them to sign the agreement if
they wanted to close the deal with the buyer.

     We conclude that defendants met their initial burden by
establishing that they did not fail to exercise the degree of care,
skill and diligence commonly possessed by members of the legal
community with respect to their representation of plaintiffs (cf.
Scartozzi, 72 AD3d at 790; generally Rudolf, 8 NY3d at 442).
Defendants established that defendant recommended that a
bankruptcy/buyback provision be included in the agreement, that the
buyer refused to include the provision, and that plaintiffs were aware
of the buyer’s refusal and nevertheless executed the agreement and the
first amendment without it. Even assuming, arguendo, that defendant
should have advised plaintiffs not to execute the agreement without
the bankruptcy/buyback provision, we conclude that defendants
established “a ‘reasonable strategic explanation’ for the alleged
negligence” (Ackerman v Kesselman, 100 AD3d 577, 579). We further
conclude that defendants established that any negligence was not a
proximate cause of plaintiffs’ alleged damages because plaintiffs
previously had entered into a similar agreement that included the
relevant provision, and Boehm and Melnick knew that the agreement with
this buyer would not include such a provision. Further, defendants
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                                                         CA 14-02068

established that plaintiffs would not have prevailed in the underlying
bankruptcy proceeding, even with a provision placing them in a secured
creditor position, because they had been paid $885,000 pursuant to the
terms of the agreement and the first amendment of the agreement, and
none of the triggering events for future payments had occurred. We
therefore conclude that defendants established that plaintiffs would
be “unable to prove at least one essential element of [their] cause of
action alleging legal malpractice” (Scartozzi, 72 AD3d at 790).

     In opposition to the motion, plaintiffs failed to raise an issue
of fact. They provided the deposition testimony of Boehm, Melnick and
defendant, as well as the affidavits of Boehm and Melnick. Contrary
to plaintiffs’ contention, where, as here, the underlying facts are
essentially undisputed and the “issue of proximate cause turns on the
discrete factual question” whether plaintiffs’ decision to execute the
agreement and first amendment was based upon defendant’s advice, or
lack thereof, regarding the consequences of executing the agreement
without the bankruptcy/buyback provision, the failure of defendants to
provide an expert affidavit on the degree of care, skill and diligence
commonly possessed by a member of the legal community was not fatal to
their motion (Wo Yee Hing Realty Corp. v Stern, 99 AD3d 58, 63; cf.
Suppiah v Kalish, 76 AD3d 829, 832; see generally Cosmetics Plus
Group, Ltd. v Traub, 105 AD3d 134, 141, lv denied 22 NY3d 855). The
respective affidavits of Boehm and Melnick stating that, if they had
known that the inclusion of a bankruptcy/buyback provision was a “deal
breaker,” CNA may not have executed the agreement or the first
amendment are not sufficient to defeat the motion inasmuch as they are
self-serving and contradicted by prior sworn deposition testimony (see
Richmond Farms Dairy, LLC v National Grange Mut. Ins. Co., 60 AD3d
1411, 1415). We therefore conclude that plaintiffs failed to raise an
issue of fact sufficient to defeat the motion.




Entered:   May 1, 2015                          Frances E. Cafarell
                                                Clerk of the Court
