Continuous Representation III: A gap in consultation does not preclude the rule

Red Zone LLC v Cadwalader, Wickersham & Taft LLP,

118 A.D.3d 581, 988 N.Y.S.2d 588 [1st Dept., 2014], lv. app. gtd., ___ NY3d ___, ___ NYS2d ___, 2014 N.Y. Slip Op. 90722 [2014]
This the third of a three-part series of recent cases illustrating the continuous representation toll in legal malpractice actions. Here, the period of representation was held to continue despite the completion of the specific task for which the defendant firm had been hired, and the passage of some two years before the next consultation between the client and the firm. It also illustrates the specific rationale for the rule: the client looked to the firm to attempt to avoid or ameliorate the effects of the alleged malpractice.
When plaintiff attempted a takeover bid for Six Flags, Inc., its financial advisor was UBS Securities LLC. The defendant law firm had represented plaintiff in its negotiations with UBS, and drafted an agreement which aimed, in part, at capping UBS’s fees. Plaintiff wanted to cap UBS’ fees at $2 million unless it was successful in obtaining more than 51% of Six Flags’ voting shares. It thought the agreement did that, but UBS successfully sued plaintiff for $10 million in fees. When that action reached the First Department, the court rejected the argument that the agreement capped the fee.
The agreement was drafted and executed in 2005. There were no consultations between the plaintiff and the defendant firm from then until 2007, when it became involved in the litigation between plaintiff and UBS. Defendant, although it did not represent plaintiff in the litigation with UBS, continued to render legal advice during the course of the litigation, conferring with plaintiff and its trial counsel and sharing documents. The court viewed this relationship as defendant’s attempt to correct its malpractice in drafting an ambiguous agreement by preventing UBS from demanding and receiving a fee in excess of $2 million. That being so, the continuous representation doctrine applied and tolled the limitations period.
The fact of the two-year gap in representation did not rule out a continuing representation, as there was no need for plaintiff to consult with defendant during that period, and the defendant firm did not notify the plaintiff that the representation had ended.