Tuesday, May 15, 2007

Malpractice Suit Proceeds Against Firms

Anthony Lin
New York Law Journal
May 14, 2007

A New York state judge has permitted a legal malpractice suit to proceed against plaintiffs lawyers who allegedly failed to seek a bankruptcy extension for their client, causing her medical malpractice case to be thrown out as untimely.

In denying a motion to dismiss the action against law firms Morelli Ratner and Schapiro & Reich, Manhattan Supreme Court Justice Emily Jane Goodman said a combination of equitable estoppel and the U.S. Bankruptcy Code's tolling of statutes of limitations might have saved the underlying lawsuit, even though the medical malpractice at issue took place over a decade ago.

Victoria Kremen underwent a double mastectomy in 1995 after receiving a cancer diagnosis from two doctors. But she claimed she found out on April 14, 1999, that the cancer had been misdiagnosed and that the surgery was unnecessary. In October 1999, she filed for personal bankruptcy.

A medical malpractice suit was not filed in the case until July 2001, a month after Kremen retained the law firm now known as Morelli Ratner. The suit was originally filed on behalf of Kremen and her bankruptcy trustee, but her lawyers took steps to have the trustee removed from the case.

The statute of limitations for medical malpractice cases in New York is 2 1/2 years following the malpractice. The trial court dismissed the suit as untimely and rejected the plaintiff's argument that the misdiagnosis had been fraudulently concealed from her. The Appellate Division, 1st Department, upheld the ruling in 2005, finding that Kremen's 25-month delay in bringing an action even after learning of the alleged malpractice in 1999 was "unreasonable as a matter of law."

But Justice Goodman, in Kremen v. Morelli & Associates, 101739/06, said the delay may not have been unreasonable in light of §108 (a) of the Bankruptcy Code, which grants debtors an additional two years to file claims that "applicable nonbankruptcy" laws would otherwise require them to file in the midst of bankruptcy.

The judge said New York's laws on the tolling of statute of limitations law constituted the type of non-bankruptcy law contemplated in the Bankruptcy Code.

She also cited prior decisions in which courts applied equitable estoppel to toll statutes for plaintiffs who only discovered alleged medical malpractice years after undergoing a treatment or procedure. In such cases, she noted, a delay of several months in filing a claim had been found reasonable. Thus, Kremen's claim could still have been viable when she filed for bankruptcy in October 1999, and then preserved by bankruptcy tolling until October 2001.

The case is against some well-known names in the legal community. Morelli Ratner is the firm headed by Benedict P. Morelli, the former president of the New York State Trial Lawyers Association. The now-defunct Schapiro & Reich was the firm of Perry S. Reich, a noted appellate lawyer who is serving a 27-month sentence for forging a federal magistrate judge's order.

Kremen is represented by Scott H. Seskin.

source : www.law.com

1 comment:

Scott J. Kreppein said...

Justice Goodman's decision tackled some complex questions, but there are a at least two reasons why this decision should be reversed.

First, the 108(a)(2) bankruptcy stay belongs to the debtor's trustree in bankruptcy, to exercise on behalf of the creditors. The idea that this provision is being used to allow a plaintiff to attempt a windfall is in complete contravention to the purpose of the toll; Ms. Kremen's bankruptcy trustree, on behalf of her creditors, would in theory have standing to make this argument, but Ms. Kremen does not.

Second, the bankruptcy toll does not revive a claim, it only extends one that is alive at the time bankruptcy is filed. In this case, the claim had unquestionably expired, and New York's equitable estoppel inquiry requires due diligence in bringing a claim once it could have been uncovered. Equitable estoppel and the bankruptcy toll cannot be stacked in the way Justice Goodman has allowed without fundamentally changing the estoppel inquiry.