On July 2, 2019, the appellate court covering Manhattan upheld the dismissal of a legal malpractice claim alleging that the attorney representing the purchaser of a property for $1.4M was negligent for failing to secure court approval for the sale. The property was being sold by a not-for-profit corporation located in Manhattan and the sale was closed without incident. However, after the sale the buyer was sued by a local community organization in an attempt to rescind the sale alleging that as a not-for-profit corporation the seller failed to obtain approval for the sale from the Court or the NYS Attorney General's Office as required by state law.
The attorney for the purchaser (now the legal malpractice defendant) successfully argued that he did nothing wrong as the seller's attorney provided him with a letter representing that it did not require court approval because the sale of the property was not "substantially all of our assets". In that event prior approval for the sale is not required. As such the Court dismissed the legal malpractice claim as: 1) it was speculative to assume that the purchaser would suffer actual damages as the sale gad not been aside and the suit against it for rescission had been discontinued; 2) the buyer's attorney had properly relied on the sellers attorney's written representation that no prior approval was necessary (how would the buyer's attorney determine the extent of the seller's assets) ; and, 3) there was no proof that the sale of the property constituted substantially all of the assets of the not-for-profit seller. This suit was premature (no damages to date), speculative (unlikely to suffer damages in the future) and assumed the buyer's attorney had a greater duty than required by law or standard in the legal industry.