Bilzin Sumberg Wins Dismissal of Legal Malpractice Suit by Russian Real Estate Investor

Posted on October 27, 2020
L-R William Petros and Peter Prieto Courtesy photos
L-R William Petros and Peter Prieto
By Lidia Dinkova | October 21, 2020 |

Miami-Dade Circuit Judge Michael Hanzman agreed with Bilzin Sumberg’s argument that the legal malpractice suit was filed beyond the statute of limitations expiration.

A Russian investor’s legal malpractice claim tied to an alleged $16 million Pembroke Park real estate fraud was dismissed against Bilzin Sumberg over its late timing.

Igor Mikhaylov, who retained the law firm in September 2015, sued in February for transactional malpractice and breach of fiduciary duty alleging negligent and incompetent representation in project agreements with Mikhaylov’s venture partner Anatoly Zinoviev.

The law firm unintentionally allowed for holes and shortcomings in documents that opened the door for Zinoviev and his then domestic partner Genna Demircan to divert Mikhaylov’s investment for personal use, the complaint claimed.

Zinoviev allegedly influenced the law firm in document drafting, leaving Mikhaylov in the dark about how much control Zinoviev held over the lending and borrower entities.

Miami-Dade Circuit Judge Michael Hanzman in an Oct. 7 final judgment agreed with Bilzin Sumberg that the claims were time barred.

At issue wasn’t the two-year statute of limitations — even Mikhaylov’s attorney agreed they sued more than two years after he retained Bilzin Sumberg — but on when the clock started ticking.
Mikhaylov argued under the finality-accrual rule that the clock didn’t start until his damages are final in a separate bankruptcy action.

Bilzin Sumberg countered that under the first-injury rule, the clock started when Mikhaylov first suffered from the alleged wrongdoing, regardless of his damages determined in bankruptcy.
“The court unhesitatingly concludes that plaintiff’s causes of action accrued when they first suffered injury caused by Bilzin’s alleged malpractice,” Hanzman wrote. “And the fact that plaintiffs may (or may not) recover from third parties some (or all) of the damages they have already suffered does not defer-delay accrual of their claims against Bilzin.”

The bankruptcy case could reduce or entirely eliminate Mikhaylov’s damages, Hanzman noted.
Mikhaylov’s attorney, William Petros Law founder and managing partner William Petros in Coral Gables, said he would appeal.

“The judge ruled that in this case of legal malpractice, that first-injury rule applied, and we believe the law is clear that in a transactional legal malpractice action, the statute of limitations do not begin to run until the client incurs damages at the conclusion of the related or underlying judicial proceeding,” Petros said. “That hasn’t occurred yet because the related underlying judicial proceeding is ongoing.”
The dismissal was good news for Bilzin and its attorney, Podhurst Orseck partner Peter Prieto in Miami.
“We are pleased that this unfounded suit was dismissed with prejudice,” he said in an emailed response. “The court’s well-reasoned order carefully and appropriately applied Florida law to support the dismissal.”

Underlying Case
Seneca Town Center was supposed to be a 98,992-square-foot retail development on 6.2 acres at 3195 W. Hallandale Beach Blvd. northeast of Hallandale Beach Boulevard and Southwest 32nd Avenue.
Mikhaylov said Zinoviev talked him into putting $16 million into the project, only to allegedly defraud Mikhaylov.

Mikhaylov is a serial entrepreneur who co-founded publicly traded payment services provider Qiwi in Russia and moved the headquarters to Cyprus.

Mikhaylov sued Zinoviev, Demircan and a slew of other people and companies in Miami-Dade Circuit Court in August 2018 and amended the complaint in April 2019. Zinoviev is accused of siphoning off some of Mikhaylov’s money through sham companies, fake invoices and doctored records.

Zinoviev’s attorney, Blaxberg, Grayson, Kukoff & Forteza partner Ian Kukoff, didn’t return a request for comment by deadline but denied the claims in a 2018 article.

“The allegations and claims asserted in the complaint are false and emphatically denied, and we intend to vigorously defend this action and to file counterclaims seeking damages against the plaintiffs for their misconduct,” he said.

Miami-Dade Circuit Judge Beatrice Butchko appointed forensic accountant Barry Mukamal of Kapila Mukamal in 2018 as project receiver to investigate the web of companies and their finances in the Mikhaylov-Zinoviev litigation, which is subject to a bankruptcy stay.

Mukamal filed for Chapter 11 bankruptcy protection last year on behalf of East Coast Invest. Mikhaylov is a creditor in the bankruptcy case.

The bankruptcy court in May sold the Pembroke Park site under a bidding process for more than $4 million to Hallandale Land Trust LLC, an affiliate of Swezy Realty Inc. led by Lewis Swezy in Miami Lakes.

Bilzin Case
Mikhaylov’s malpractice suit against Bilzin said he hired the firm to prepare documents that would protect his investment after Zinoviev hired the firm to advise on behalf of East Coast Invest on other project aspects.

Mikhaylov alleged Bilzin didn’t disclose a conflict of interest, saying Zinoviev engaged Bilzin a second time to represent Hallandale Beach day care Artec Academy and East Coast Invest, including the issuance of Artec preferred stock to East Coast.

Among the allegations is that Zinoviev persuaded Mikhaylov to assign his 1% general partnership interest in East Coast Invest LLLP, the sole member in developer East Coast Invest LLC, to Demircan. Zinoviev promised Mikhaylov an option to take back his 1% interest but secretly doctored Bilzin documents to erase Mikhaylov’s take-back option and give Zinoviev and Demircan full control of the partnership, the complaint said.

This and other alleged frauds would not have happened “without the negligent acts and omissions committed by Bilzin attorneys,” Petros wrote in the complaint.

He refuted the undisclosed conflict of interest claim by noting a retainer agreement explicitly said Bilzin simultaneously represented Mikhaylov and East Coast.

Mikhaylov tried to shift responsibility to Bilzin for a failed venture because he is unable to recover funds from Zinoviev, Prieto said in the motion to dismiss. He argued Mikhaylov is suing Bilzin for breach of duties that the firm wasn’t hired to do.

“Each of the alleged acts and omissions underlying plaintiffs’ claims are beyond the narrow scope of the attorney-client relationship that was formed with Bilzin,” Prieto wrote.

Hanzman didn’t address this argument but ruled strictly on the timeliness of the claim.
Mikhaylov’s “injuries have already occurred even if their damages may still be escalating,” the judge wrote.