Court: Appellate Division of the Supreme Court of the State of New York; September 21, 1995; New York; State Appellate Court
The court opinion addresses a lawsuit stemming from a medical malpractice settlement involving an infant, Michael Aglira, and his father, who is also his guardian. The defendants, Julien Schlesinger, P.C. and Stuart A. Schlesinger, represented the infant and his father in the malpractice action and are now being sued by the infant and his mother for alleged malpractice concerning the failure to secure an appropriate annuity from the settlement proceeds. The defendants have impleaded third parties, including Martin, Clearwater, Bell, who represented two settling defendants and arranged for the payment of settlement funds through Employers Insurance of Wausau, also a third-party defendant.
The underlying medical malpractice case was settled for $1,000,000, with $600,000 designated for an annuity for the infant. Following the settlement, Martin, Clearwater, Bell proposed two annuity options, which Julien Schlesinger rejected. Subsequently, the court approved the settlement terms and directed the purchase of the annuity from a licensed New York life insurance company. Litigation Support Corporation, acting on behalf of Julien Schlesinger, later communicated with the attorneys representing Bronx Lebanon Hospital to draft a structured settlement, which was approved by the court and directed to be purchased from Executive Life Insurance Company of New York.
However, Litigation Support later confirmed that the annuities would be underwritten by Executive Life Insurance Company, not Executive Life Insurance Company of New York, and that the policy would be owned by First Executive Insurance Company, its reinsurer. The selection of Litigation Support for the annuity purchase and administration was solely made by Julien Schlesinger.
A draft annuity agreement regarding settlement funds was forwarded by Litigation Support to Martin, Clearwater. Bell, who later sent it unchanged to Bronx Lebanon's counsel. On the same day, Martin, Clearwater. Bell revised the draft to reflect court orders for purchasing the annuity from Executive Life Insurance Company of New York. The initial draft stated that Litigation Support would purchase the annuity for a lump sum premium, with the checks payable to Executive Life Corporation. The corrected draft changed the payee to Litigation Support Corporation, clarifying that Litigation Support is a California corporation while Executive Life is not. The final draft also inaccurately referred to "Executive Life Corporation" instead of "Executive Life Insurance Company of New York," as specified in the court’s January 16, 1984 order, which was attached to the final agreement signed in April 1984. This agreement released the insurers from obligations upon payment and established that Litigation Support would be solely responsible for payments to the plaintiff. On May 15, 1984, a $275,000 draft was sent to Litigation Support, confirming the settlement terms and the purchase of the annuity. Litigation Support acknowledged this draft but ultimately purchased the annuity from Executive Life Insurance Company of California, rather than the designated insurer in New York, leading to an estimated 30% loss in value for the infant involved. The records do not clarify why Litigation Support deviated from the court's specific instructions regarding the insurer.
Julien Schlesinger asserts claims of negligence, breach of contract, and fraud against third-party defendants Martin, Clearwater, Bell, and Employers, seeking contribution or indemnification. Martin, Clearwater, Bell, as counsel for the defendants in the underlying case, argue they owed no duty to the infant plaintiff or his counsel and moved to dismiss the third-party complaint based on a contractual release. Julien Schlesinger contends that the settlement agreement should be invalidated due to mutual mistake or fraud, highlighting a correction regarding the entity involved in the annuity agreement. However, the IAS Court denied the motions without addressing the established principle that attorneys do not owe a duty to the opposing party’s client. The court found a statement from Martin, Clearwater, Bell’s attorney supported Julien Schlesinger’s claims of mutual mistake or fraud. Ultimately, the court reversed the IAS Court's decision, granting the motion and cross motion to dismiss the claims against Martin, Clearwater, Bell, and Employers, noting these third-party defendants owed no duty to the infant plaintiff. The ruling clarified that attorneys only owe a duty of care to their clients and not to adversaries or non-privity parties. The court distinguished this case from Prudential Ins. Co. v. Dewey, Ballantine, asserting that liability exists only with actual privity or a sufficiently close relationship, which was not present here. The evidence indicated no misrepresentation in the April 1984 agreement regarding the annuity purchase.
Martin, Clearwater. Bell appropriately revised the original draft of the agreement by removing the erroneous designation "a California corporation" for "Executive Life Corporation." Although the phrase "of New York" was not added and "Corporation" was not replaced with "Insurance Company," the firm could reference court orders and a letter from Litigation Support confirming that the annuity was to be underwritten by "Executive Life Insurance Company of New York." Consequently, Martin, Clearwater. Bell did not engage in misrepresentation, nor did it make representations intended for third-party reliance. The firm acted solely to protect its client, Employers, ensuring the client was released from liability regarding the annuity’s purchase and maintenance. Julien. Schlesinger was responsible for ensuring the agreement specified the appropriate settlement payment and annuity purchase, and could not shift this responsibility to Martin, Clearwater. Bell. Neither the infant nor Julien. Schlesinger could bring a breach of contract claim against the firm, as such claims against attorneys require an express promise to achieve a specific result, which was absent here. The April 1984 agreement did not constitute such a promise, mandating instead that Litigation Support purchase the annuity and requiring the client to deliver settlement funds, which were duly provided. Thus, claims of legal malpractice and breach of contract against Martin, Clearwater. Bell should be dismissed based on documentary evidence. Additionally, any fraud or misrepresentation claims lack merit because they require a material misrepresentation, knowledge of its falsity, intent to deceive, justifiable reliance, and damages. Legal precedent establishes that reliance on an adversary's legal opinions is unjustifiable, as demonstrated in relevant case law where attorneys cannot rely on representations that contradict existing law or contractual terms.
Julien and Schlesinger did not adequately plead any misrepresentation by Martin, Clearwater, Bell, with the only relevant statement being made by their agent, Litigation Support, regarding the purchase of an annuity for the infant. A party cannot claim fraud if their own lack of due care led to their situation. Claims of fraud or misrepresentation fail if the documents in question contradict those claims. The April 1984 agreement does not contain any misrepresentation by Martin, Clearwater, Bell, and the third-party complaint against Employers should also be dismissed due to a release in the agreement that absolves the insurers of further obligations from the underlying medical malpractice litigation. A clear release is enforceable regardless of one party's interpretation. The agreement did not require Employers to purchase or oversee the annuity, and any failure by Litigation Support to fulfill its role does not constitute a mutual mistake. The unexplained actions of Litigation Support cannot affect parties for whom it did not act. There is no evidence of fraud by Employers related to the agreement. Consequently, the Supreme Court's order denying the dismissal of the third-party complaint is to be reversed, with costs awarded and the complaint dismissed against Martin, Clearwater, Bell, and Employers Insurance of Wausau. After the appeal, it was noted that the infant plaintiff and his mother have filed an amended complaint asserting direct claims of fraud and breach of contract against the third-party defendants.
