On November 9, 2022, the Second Department issued a decision in Zi Kuo Zhang v. Lau, 2022 NY Slip Op. 06287, holding that a breach of fiduciary duty claim relating to an escrow account was not duplicative of a legal malpractice claim, explaining:
Here, in an affidavit properly submitted to amplify the allegations in the complaint, the plaintiff Jun Hong Zhang averred that Lau met with the individual plaintiffs to form WRE I and orally informed them that he was representing them, instructed them to wire funds to his escrow account, committed to certain conditions of disbursement of those funds, and advised that he would continue to represent them on matters related to the property to be acquired by WRE I. Contrary to the Lau defendants’ contention, assuming these allegations to be true and affording the plaintiffs the benefit of every possible favorable inference, they sufficiently alleged the existence of an attorney-client relationship.
Further, since legal malpractice actions are not subject to special pleading requirements, a legal malpractice plaintiff need not, in order to assert a viable cause of action, specifically plead that the alleged malpractice fell within the agreed scope of the defendant’s representation. Rather, a legal malpractice defendant seeking dismissal pursuant to CPLR 3211(a)(1) must tender documentary evidence conclusively establishing that the scope of its representation did not include matters relating to the alleged malpractice. Here, the Lau defendants failed to submit such documentary evidence.
Accordingly, the Supreme Court properly denied dismissal of the legal malpractice cause of action.
The Supreme Court also properly denied dismissal of the breach of fiduciary duty cause of action as duplicative of the legal malpractice cause of action. An attorney holding funds in escrow owes a fiduciary duty to anyone with a beneficial interest in the trust. An escrow agent has a duty not to deliver the escrow funds to anyone except upon strict compliance with the conditions imposed. Here, the complaint sufficiently pleaded the existence of an oral escrow agreement, invoking fiduciary duties even in the absence of an attorney-client relationship. Therefore, as the court correctly determined, the breach of fiduciary duty cause of action was properly pleaded in the alternative, in the event that it is ultimately determined that no attorney-client relationship existed or that the Lau defendants’ conduct related to the escrow funds was not within the scope of any such relationship.
(Internal quotations and citations omitted).