On November 17, 2021, Justice Schecter of the New York County Commercial Division issued a decision in Chef Chloe LLC v. Pryor Cashman LLP, 2021 NY Slip Op. 32353(U), rejecting a claim that counsel for an unsuccessful litigant should be held liable for advancing a losing legal argument, explaining:
There is no basis to hold defendant liable for its representation of its client notwithstanding its client having been found in the underlying arbitration to have unlawfully converted plaintiff’s membership interest in violation of the parties’ agreement. The action must be dismissed based on the settled rule that attorneys are immunized from liability under the shield afforded attorneys in advising their clients, even when such advice is erroneous, in the absence of fraud, collusion, malice or bad faith. The allegations in this case do not come close to approaching the circumstances under which law firms may be held liable for fraudulent conduct. As defendant correctly avers, the argument that its conduct was meant to give an air of legitimacy to an illegitimate transaction is untenable based on settled law and would have a catastrophic chilling effect on the legal profession. There was no fraud here, but rather a dispute over the meaning of the parties’ agreement. For good reason, the requisite level of culpability is much higher.
(Internal quotations and citations omitted) (emphasis added).