Malpractice Claim Not Dismissed

The New York Appellate Division for the First Judicial Department affirmed a trial court order refusing to dismiss a legal malpractice claim in a case arising out of the law firm’s preparation of loan closing documents:

defendant was obligated not only to prepare the loan documents, but also to protect plaintiff’s expectation that the agreement that he would hold a senior security interest was effective. However, defendant allegedly neither attempted to obtain such documentation from the senior creditors nor advised plaintiff of the hazards of proceeding with the loan without it.

Neither the borrower’s failure to repay the loan nor the senior creditors’ eventual failure to act honorably and adhere to the understanding that their liens were to be junior to plaintiff’s relieves defendant of potential liability for its negligence. Nor is plaintiff responsible for his own loss simply because he executed the documents that defendant prepared for him.

(Mike Frisch)