On July 28, 2021, the Appellate Division, Second Department reversed a Kings County Justice who had dismissed a legal malpractice claim as untimely and for plaintiffs alleged lack of standing. In the year prior to suit the plaintiff had filed a bankruptcy petition and neglected to list the potential legal malpractice claim as an asset. Normally, when a plaintiff had been “discharged” in bankruptcy with an undisclosed potential claim, that would be fatal to a subsequent lawsuit and deprive the plaintiff of standing to sue for legal malpractice. However, 11 months prior to filing the legal malpractice action, the plaintiff's bankruptcy Petition was “dismissed”. The appeals court held that upon dismissal of the Bankruptcy Petition, "standing" to file the legal malpractice claim was "revested" in plaintiff.
The appeals court also overruled the lower court with respect to its holding that plaintiff's claim was filed more than 3 years after the alleged act of legal malpractice. The essence of the claim was that the defendant attorney drafted and executed a contract to effectuate the sale of real property owned by the plaintiff, Limited Liability Company (LLC), without the approval of all members and in violation of its operating agreement and the Limited Liability Company Law. When the plaintiff was sued by the buyer for specific performance to force it to close on the sale of the real property, the plaintiff LLC claimed that the defendant attorney was conflicted and negligently failed to assert a meritorious defense that the contract of sale he drafted and executed was done without the approval of all members of the LLC.
The Second Department held that the action was timely because the 3 year statute of limitations for legal malpractice didn't accrue, (begin to run) until a Court granted the buyers action for specific performance some 2- 3 years after the alleged acts of professional negligence. The appeals court noted: "A legal malpractice claim accrues when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court". Accordingly, the three year countdown didn't start to run as of the date the contract was drafted and signed, but when the plaintiff was compelled to close on the sale of the property by an order granting the buyer specific performance. Golden Jubilee Realty, LLC v Castro, 2021 WL 3177630