Appeals Court Overturns $731K Legal Malpractice Judgment Against Manhattan Law Firm

A state appeals court has overturned a summary judgment ruling that had awarded a plaintiff in a legal malpractice action $731,156 against the Manhattan-based transaction and commercial litigation firm of Alonso, Andalkar & Facher.

The Appellate Division, First Department court has ruled, in part, that “issues of fact exist” regarding the soundness of the law firm’s advice given to a former client about nonsolicitation of customers after the client was bought out of her partnership in a high-value investment and financial management group.

“Issues of fact exist as to whether, inter alia, AAF’s [Alonso Andalkar’s] advice regarding solicitation was reasonable under the circumstances and in harmony with Bessemer Trust Co., N.A. v Branin (16 NY3d 549),” wrote a five-justice First Department panel in an opinion.

The underlying suit, filed in 2019 by malpractice plaintiff and former Alonso Andalkar client Rosa Mazzone, focused in part on allegations that Alonso Andalkar and co-defendants Mark Alonso and Catania Facher, two of the firm’s current partners, gave Mazzone wrongful advice with regard to express contractual obligations tied to the buy-out centering on nonsolicitation of customers.

According to a complaint filed in the suit, Mazzone, a certified financial planner and securities representative, began working in 2003 with Tracey Schusterman, who was also a certified financial planner and securities representative, when they were at the bank Advest.

While at Advest, the two formed a partnership and financial advisory group that eventually became known as the Schusterman Group, the complaint said.

Over the years, Mazzone and Schusterman moved their high-value brokerage house group to different banks. Also their personal working relationship eventually became strained, according to the complaint.

Still, in 2016 they discussed moving the group, once again, this time from their-then current bank to Royal Bank of Canada, or RBC, the complaint said.

But for this move Mazzone insisted the two partners reach an agreement memorializing the terms of their business relationship before she’d make and assist in the move, the complaint said.

Mazzone and Schusterman each retained separate counsel to negotiate the terms of such a written agreement containing each party’s respective rights and obligations vis-à-vis each other and the group, the complaint said.

Mazzone retained Alonso Andalkar to negotiate the agreement on her behalf, and she allegedly informed Alonso and Alonso Andalkar that “her primary objectives in reaching an agreement with Schusterman were for plaintiff to be fairly compensated in the event that Schusterman were to terminate her from the group and to be protected from any personal financial obligations that plaintiff would incur to RBC upon the group joining RBC,” according to the complaint.

After Mazzone and Schusterman reached an agreement, they then moved their group to Royal Bank of Canada. But their acrimonious relationship continued, and ultimately the two split apart, according to the complaint, and at some point Mazzone and Schusterman entered into arbitration before FINRA regarding matters tied to the end of the business partnership.

Under the agreement that had been reached before moving the group to RBC, Schusterman was to buy out Mazzone for a cost of $1 million, the complaint said. And on Sept. 28, 2017, Schusterman authorized $1 million being held in escrow by Alonso Andalkar to go to Mazzone, which satisfied Schusterman’s obligation to pay the buy-out price upon termination of the agreement, the complaint said.

Later, in December 2018, an arbitration panel issued a unanimous award in the FINRA arbitrations, the complaint said. It entitled Mazzone to retain the $1 million buy-out price payment, representing her interest in the group, and it denied Schusterman’s reciprocal request to recover any or all of that payment, the complaint said.

The arbitrators’ award also said, though, that Schusterman would get damages of $548,488 from Mazzone “based on the arbitrators’ finding that plaintiff breached her express contractual obligations under the agreement not to solicit customers of the group and to refrain from disparaging Schusterman, as well as her breach of an implied covenant under the common law not to solicit clients under the circumstances that the agreement was terminated,” the complaint said.

Subsequently, Mazzone sued Alonso Andalkar and Alzonzo and Facher for legal malpractice and other alleged claims, in effort to recover the $548,488 from them.

Mazzone alleged in her action that “AAF and its shareholders breached their duty of care to [her] by, among other things, providing her with erroneous and inaccurate advice with respect to the termination and non-solicitation clauses in the agreement, which unnecessarily exposed plaintiff to liability for soliciting the group’s customers in violation of her contractual and common law duties and obligations,” according to the complaint.

In addition, she contended that “AAF and its shareholders breached their duty of care to plaintiff by, among other things, failing to timely produce voice recordings that plaintiff had supplied to AAF in accordance with the FINRA rules, despite AAF’s understanding that such voice recordings were responsive to discovery demands made by Schusterman’s counsel.”

In March 2022, Manhattan Supreme Court Andrew Borrok, in a ruling delivered from the bench during a lengthy hearing, among other orders handed down, granted summary judgment to Mazzone on her legal malpractice claims against the Alonso Andalkar defendants.

Subsequently, Borrok also put in a written order saying the Alonso Andalkar defendants must pay Mazzone $731,156 in damages. The order broke down that amount as 554,401 as the base sum plus $176,755 in statutory interest owed.

The Alonso Andalkar defendants appealed Borrok’s summary judgment ruling against them.

In addition to finding that issues of fact exist regarding whether the law firm’s advice was in harmony with Bessemer, the appeals panel also said factual issues exist regarding “whether plaintiff has shown the requisite injury, given that she faced greater losses had she been fired by RBC, which would have triggered her obligation to repay a $741,827 loan,” and regarding “whether AAF’s advice was in any event a proximate cause of plaintiff’s injury, given that she is alleged to have disregarded it”; and regarding “whether Schusterman materially breached their arrangement thereby excusing plaintiff’s continued performance thereunder.”

Erin Eileen MacAvoy, an attorney at Alonso Andalkar, helped to represent Alonso Andalkar and firm partner Facher in the appeal, according to the complaint. MacAvoy couldn’t be reached for comment.

Alonso represented himself pro se, according to the complaint. He couldn’t be reached.

Michael Freeman of Greenberg Freeman in Manhattan represented Mazzone, according to the complaint.

In an email, he said, “We believe that the trial judge had correctly analyzed the facts and the law in granting summary judgment, and are disappointed in the appellate court’s decision. We look forward to the opportunity to prove our client’s claims at trial.”