Pryor Cashman has been ordered to pay more than $21,000 in legal fees for filing a “frivolous” motion in a legal malpractice lawsuit filed by the trustees of employee benefit funds accusing the firm of failing to provide advice that would have prevented the funds’ third-party administrator from embezzling $42 million.
The Nov. 13 order came from an Appellate Division, First Department, panel consisting of Presiding Justice Luis Gonzalez (See Profile) and Justices Peter Tom (See Profile), James Catterson (See Profile), Rosalyn Richter (See Profile) and Nelson Roman (See Profile).
A year earlier, the same panel had affirmed Manhattan Supreme Court Justice Barbara Kapnick’s (See Profile) order denying Pryor Cashman’s motion to dismiss, allowing the lawsuit to go forward (NYLJ, Nov. 21, 2011). That order prompted two consecutive attempts by the law firm to bring the case before the Court of Appeals, ultimately leading to this week’s sanction.
The lawsuit, Fitzsimmons v. Pryor Cashman, 651360/10, was filed in August 2010. The plaintiffs are the trustees of three benefit funds for the Construction Workers Local 147, better known as the Sandhogs. The plaintiffs allege Pryor Cashman’s malpractice allowed Melissa King, former administrator of the funds, to embezzle $42 million before she was caught. King was arrested in December 2009 and sentenced in June 2012 to six years in prison.
Pryor Cashman had been counsel to the funds for over a decade when the embezzlement came to light. The trustees allege the law firm should have noticed that the administrative fees were unusually high, and counseled the trustees to investigate and to hire an independent auditor.
In a memorandum supporting its motion to dismiss, Pryor Cashman argued that the trustees’ “allegations do not deal with failing to perform legal services as such—they are a litany of failures that fall within the province of financial auditors, accountants, perhaps forensic and security accountants and, lastly, business managers.”
After last year’s First Department order denying its motion, Pryor Cashman filed a motion for leave to appeal that order to the Court of Appeals.
The First Department panel denied that motion this past March (NYLJ, Mar. 16). At the same time, it amended its earlier order denying the motion to dismiss the case, adding more detail about why it believed the trustees had pleaded their case sufficiently to survive a motion to dismiss.
Among other things, the panel said that the trustees did not have to plead the “specific scope of defendants’ legal representation” in order to plead their claim.
In response to the amended order, Pryor Cashman once again moved for leave to appeal. The First Department denied that request in July.
The plaintiffs then moved to compel Pryor Cashman to pay the attorney fees they incurred in opposing the firm’s second motion for leave to appeal. The plaintiffs argued that the second motion introduced no new arguments or facts and was frivolous.
The First Department agreed.
“The motion by defendants-appellants for leave to appeal to the Court of Appeals was their second motion seeking identical relief, and insofar as the denial of the first motion made it clear that their arguments were without merit and unavailing, the second motion, raising substantially identical arguments, was therefore completely without merit in law, could not be supported by a reasonable argument for an extension, modification or reversal of existing law, and was thus frivolous,” the panel wrote.
Cooley partner Alan Levine, who was hired to represent Pryor Cashman in August, declined to comment on the decision.
Pryor Cashman founding partner Gideon Cashman, who previously led the firm’s defense, could not be reached.
Schulte Roth & Zabel partner Ronald Richman, who represents the plaintiffs, also could not be reached.
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