## Facts

- VSI International, Inc., a Florida seller of reading glasses, and its CEO retained Darby & Darby, P.C., a New York patent-law firm, to defend two Florida actions alleging patent, trademark, and trade dress infringement related to “hanger tags.”
- Over roughly two years, VSI accrued substantial legal bills; nearly $200,000 remained unpaid after partial payments and repeated demands.
- Darby moved to withdraw for nonpayment and was relieved as counsel on October 21, 1993.
- VSI had a commercial general liability policy, but Darby did not advise that the insurer might have a defense or indemnity obligation under “advertising injury” or similar provisions.
- At the time of Darby’s representation, New York and Florida courts had not recognized such coverage for similar intellectual-property claims and had rejected it in comparable contexts.
- In 1994, successor counsel obtained insurance coverage for some litigation expenses, but the carrier refused to pay costs incurred during Darby’s tenure.
- In 1996, Darby sued in New York to recover $209,199.33 in unpaid fees plus interest and costs.
- VSI and its CEO counterclaimed for legal malpractice and breach of fiduciary duty based on the alleged failure to advise about insurance, and later sought to add a time-barred breach of contract counterclaim.

## Issues

1. Whether litigation counsel retained to defend intellectual-property suits had a duty to investigate and advise the client about potential insurance coverage for defense costs absent an engagement to provide insurance-coverage advice.
2. Whether the malpractice and breach-of-fiduciary-duty counterclaims stated a cause of action given the scope of representation and the state of insurance-coverage law during the representation.
3. Whether the firm was entitled to summary judgment on an account-stated claim for unpaid legal fees.

## Decision

- The Court of Appeals affirmed the Appellate Division and answered the certified question in the affirmative.
- The court held Darby owed no duty, on these facts, to investigate or advise VSI about possible insurance coverage for the Florida litigation.
- Because no actionable duty was pleaded, the malpractice counterclaim failed; the fiduciary-duty counterclaim was dismissed as duplicative and based on the same alleged omission and damages.
- The firm’s summary judgment on its account-stated claim for unpaid fees was left undisturbed.

## Legal Principles

- Legal malpractice requires showing the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by the profession, measured as of the time of the representation.
- The scope of an attorney’s duty is defined by the scope of the engagement; absent an express or implied undertaking to advise on insurance, counsel defending litigation has no automatic duty to investigate coverage.
- An attorney is not liable for failing to anticipate unsettled, debatable, minority, or later-developing legal theories.
- A breach-of-fiduciary-duty claim premised on the same facts and seeking the same relief as a malpractice claim is duplicative and does not state a separate cause of action.
- An account stated may be established by regular billing and the client’s retention of invoices and partial payments without timely, specific objection; malpractice allegations that fail as a matter of law do not defeat the account-stated claim.

## Conclusion

The court held that absent an engagement to provide insurance-coverage advice, counsel retained to defend intellectual-property litigation had no duty to investigate or advise about potential liability insurance coverage, and it dismissed duplicative malpractice and fiduciary-duty counterclaims while allowing recovery of unpaid fees on an account-stated theory.


Darby & Darby, P.C. v. VSI Int'l, Inc., 95 N.Y.2d 308 (N.Y. 2000)