Reid v. Sack

Background

Bruce Reid sued Jonathan S. Sack, Michael H. Mui, and Sack & Sack, LLP, alleging that they mishandled his potential claims against ICAP Capital Markets LLP after ICAP terminated him. Reid alleged that he was terminated in retaliation for cooperating with investigations by the United States Department of Justice and the Commodity Futures Trading Commission.

Reid alleged that he retained the defendants to pursue claims against ICAP. According to the complaint, the defendants delayed filing a Financial Industry Regulatory Authority arbitration proceeding, told Reid that the proceeding had been filed when it had not been, and later represented that they had filed and served a state-court lawsuit. Reid alleged that he learned in February 2020 that no state-court action had been filed and that the claimed discovery and court conferences had not occurred. He then discharged the defendants.

Reid asserted six claims: fraud, negligent misrepresentation, legal malpractice, breach of fiduciary duty, violation of New York Judiciary Law § 487, and intentional infliction of emotional distress. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court treated the defendants’ correspondence as that motion and accepted the complaint’s well-pleaded factual allegations as true for purposes of the motion.

Fraud, Negligent Misrepresentation, and Breach of Fiduciary Duty

The court denied dismissal of the fraud and negligent-misrepresentation claims. It concluded that dismissal would be premature because Reid identified allegations—such as the alleged misrepresentations about filings and proceedings—that could provide factual bases separate from the legal-malpractice claim. The court also found that Reid adequately alleged damages separate from the damages associated with failing to prevail in the attempted arbitration or state-court action. The court stated that further factual development was needed to determine the extent of the alleged damages and which claims could support them.

The court granted the motion as to the breach-of-fiduciary-duty claim. It held that Reid alleged no duty separate from the defendants’ duty to pursue his claims as attorneys. Because the alleged fiduciary-duty claim was therefore coextensive with the legal-malpractice claim, the court concluded that it was duplicative.

Legal Malpractice

The court denied dismissal of the legal-malpractice claim. A legal-malpractice plaintiff must allege that the attorney breached the required professional standard, that the breach proximately caused an injury, and that the plaintiff suffered actual damages. The court explained that, at the motion-to-dismiss stage, Reid needed to allege—not prove—that he would have prevailed in the underlying matter but for the defendants’ negligence.

Although the complaint was brief about the claims Reid might have won, the proposed amended complaint supplied additional allegations concerning New Jersey’s Conscientious Employee Protection Act and ICAP’s alleged wrongful termination of Reid. Because those allegations were consistent with the complaint, and because the court accepted the allegations about Reid’s termination and the defendants’ negligence as true, it found that Reid plausibly alleged that he could have recovered damages under theories that were now time-barred. The court noted that it could reconsider the issue later if discovery showed that Reid could not prevail on those theories.

Intentional Infliction of Emotional Distress

The court granted the motion as to the intentional-infliction-of-emotional-distress claim. Under New York law, this claim requires extreme and outrageous conduct, an intent to cause severe emotional distress, a causal connection, and severe emotional distress. The court held that the alleged misrepresentations about the status of a lawsuit, arbitration filings, and a court conference did not rise to the required level of extreme and outrageous conduct. It also held that alleged breaches of lawyers’ professional and ethical duties, without similar allegations involving a position of power, did not satisfy that standard. Because it dismissed the claim on that basis, the court did not address the statute-of-limitations arguments.

Judiciary Law § 487

The court granted the motion as to the Judiciary Law § 487 claim. It explained that the statute applies to attorney deceit or collusion intended to deceive a court or party during the pendency of litigation. Reid conceded that the defendants never initiated a lawsuit on his behalf. The court therefore held that the alleged conduct did not occur during pending litigation and rejected Reid’s argument that being falsely told he was a party to an action changed that result.

Disposition

The court ordered that the defendants’ motion be granted as to Counts IV, V, and VI—breach of fiduciary duty, Judiciary Law § 487, and intentional infliction of emotional distress—and denied as to the remaining claims. The opinion did not state that any dismissal was with or without prejudice.