Executor’s Lawyer Drops the Ball and Pays Dearly

(Originally published on LinkedIn on August 31, 2023)

Plaintiffs in legal malpractice cases must typically be “in privity” with the defendant lawyer.  In practice, that means that non-clients may not sue lawyers for professional negligence.  The recent case of Betz v. Blatt, 211 A.D.3d 1004 (N.Y. App.Div. 2022) has clarified an exception to that restriction.

Carmelo Carbone died in 2004 with an estate of roughly $2 million, most of it in a parcel of real estate.  His brother Mike was named executor in the will, with Carmelo’s two daughters as primary beneficiaries.  Mike hired attorney Arnold Blatt to guide him through the administration process.  Blatt (later) admitted that he had neither the knowledge nor the experience to undertake that role.  He stood by as Mike engaged in various acts of self-dealing, which ultimately led to a loss to the estate of nearly $2 million.   Blatt admitted that he knew the executor’s conduct was “shocking” and that the estate accounting was “terrible.” Blatt told his client to clean up his act, but always knew that the warnings were pointless. Even worse, Blatt delivered to Mike the proceeds of the sale of the real estate.  The estate value plummeted from $2 million to just over $100,000.  Mike fled the jurisdiction.

At some point, one of Carmelo’s daughters (Betz) intervened, became the executor, and tried to right the sinking ship.  She sued the perpetrators of the administration debacle, including a malpractice claim against Attorney Blatt.  Over a period of years, Blatt attempted to extricate himself from the litigation, relying heavily on the “lack of privity” defense.  While acknowledging the privity rule, the court determined that where there are “special circumstances” such as “fraud, collusion and malicious acts,” the rule must give way to the goal of making injured parties whole.  The court entered a judgment against Mr. Blatt in the amount of $1.8 million. (It is important to note that there was no allegation that Mr. Blatt profited from Mike’s misconduct.)

Bequest managers should keep this case in mind for those infrequent situations where an executor vanishes with assets.  Typically, the lawyers involved are as shocked as the beneficiaries.  However, where the executor’s lawyer has ignored opportunities to mitigate losses, there might be a Blatt-type remedy available.  211 AD3d 1004 (NY App.2d Dept 2022).  It is also worth noting that the process of untangling the Carbone estate took nearly two decades.  We imagine that there will be a lengthy postscript as Betz seeks to collect on judgments.

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