Posted by: Patricia Salkin | April 7, 2013

NY Appellate Court Remands Alleged Malpractice Case on Zoning Advice to Determine Causation

Arbor Realty Funding, LLC (“Arbor”) brought a legal malpractice action against its former attorneys as a result of the attorneys providing erroneous legal advice. The trial court dismissed and an appeal ensured. The defendants argued that their allegedly erroneous legal advice relating to zoning issues did not proximately cause its client’s loss on defaulted loans to a developer. Arbor countered by arguing that but for this advice, it would not have made any bridge loan to the developer, who at the time was constructing a residential tower. The developer encountered serious economic difficulties when, a year later after being issued the loan, a crane collapse killed seven people. Furthermore, the market collapse from 2007-2008, and Arbor’s insufficient responses to the Department of Buildings letters notifying them of the revocation of the project’s building permits, are two additional factors the attorneys argued constituted “intervening events that severed the causal link between [their] zoning advice and [Arbor’s] loss.”

The Appellate Division found that there were issues of fact in the record relating to causation which led them to affirm the ruling of the Supreme Court. The court noted that takeout lenders also had suspicions about the zoning issues before the crane collapse, and that all the later events contributing to the plaintiff’s loss should be considered by a fact-finder.

Arbor Realty Funding, LLC v. Herrick, Feinstein LLP, 103 A.D.3d 576 (A.D. 1st Dep’t. 3/26/2013)

The opinion can be accessed at: http://www.nycourts.gov/reporter/3dseries/2013/2013_01216.htm


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