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A Brookline real estate attorney is getting hit by a hailstorm of lawsuits stemming from the alleged pillaging of his law firm’s Interest on Lawyers’ Trust Account by hackers who made off with hundreds of thousands of dollars in home sales proceeds.
But the suit most likely keeping Dmitry Kirzner awake at night is the one filed by his firm’s professional liability insurer disclaiming coverage for any losses resulting from the sorry mess.
Kirzner’s legal troubles began on Oct. 12 when Carolyn Brayton Hart sued his firm, Kirzner, Fuchs & Hilland, and partner Ilya Fuchs in Norfolk Superior Court.
Fuchs represented the buyers in the July 2023 sale of Brayton Hart’s home in Cohasset. According to Brayton Hart’s complaint, the buyers’ counsel issued payments from the KFH account for the seller’s proceeds of sale and to pay off the mortgage on her home.
Brayton Hart claims that both a check for $513,036.45 and a scheduled wire transfer of $493,353.82 to pay off her mortgage were rejected due to insufficient funds in the law firm’s account.
“On information and belief, some party, or parties, gained control over the funds held by Defendant Buyers’ Counsel and converted the funds to such party’s or parties’ own use,” Brayton Hart’s complaint states.
The next shoe to drop came on Nov. 17 when Donna R. Haggett sued Kirzner and his firm in Plymouth Superior Court. Haggett’s complaint for negligence, breach of fiduciary duty and conversion alleges that Kirzner handled the August 2023 sale of Haggett’s condominium on Oceanside Drive in Hull.
After deducting his firm’s fee from the $850,000 purchase price paid by the sellers, Kirzner tendered Haggett a check for $690,015.68, representing her proceeds of sale from the transaction. The check was drawn on KFH’s IOLTA account into which Kirzner had deposited the buyers’ payment.
But when Haggett tried to cash the check, she alleges it was returned for insufficient funds.
“The Plaintiff seller and her agent made several requests and respectful demands as well as a formal written demand to be paid the $690,015.68, which was due her,” Haggett’s complaint states. “Kirzner and the Defendant Law Firm have refused to pay that amount (except for the amount of $109,319.18 recovered by their Bank) utilizing as an excuse that someone ‘hacked’ into their account and, without authority, had the money wired out of the account, leaving them with insufficient funds to pay the Plaintiff Seller.”
Haggett alleges that Kirzner represented both parties to the sale under a conflict of interest that benefitted the buyers, whom Kirzner allegedly represented in the past. Since the sale, however, Haggett alleges that Kirzner has steadfastly maintained that she was never his client.
Boston’s Neil Burns represents victims of legal malpractice against insurance companies. The Burns & Jain lawyer says that, in the absence of a knowing waiver, the alleged conflict of interest may be a “legitimate concern” under the Rules of Professional Conduct. On the other hand, he says such a conflict may not be determinative of Haggett obtaining relief in her civil case.
“A breach of the Rules of Professional Conduct is not negligence per se,” Burns says.
Haggett’s suit claims Kirzner “negligently or intentionally” left out a provision in the purchase agreement that would have ensured that title in her condominium would not have transferred to the buyers until she received the proceeds of sale.
Kirzner declined a request for an interview.
Haggett’s attorney, Allan H. Tufankjian of Tufankjian, McDonald, Doton & Sacchitella in Brockton, did not respond to a request for comment.
Kirzner was haled into court a third time on Jan. 30 when First American Title Insurance Co. sued his firm in Suffolk Superior Court. According to the complaint, First American suffered losses of $902,047.69 — the funds allegedly stolen from the Kirzner firm’s IOLTA account during the closing of the sale of Brayton Hart’s home in Cohasset.
The First American suit asserts claims for negligence, breach of contract, and breach of fiduciary duty relating to KFH’s performance of a limited agency agreement under which the law firm issued policies of title insurance on behalf of First American.
The insurer is named as a co-defendant in the Brayton Hart case and assigned the seller’s right to sue KFH for breach of fiduciary duty in paying Brayton Hart $902,047.69 to settle her claims against the title company.
First American alleges that it was informed by KFH that $1 million had been stolen from the firm’s IOLTA account on or about Aug. 21, 2023, a week before the closing on the sale of Brayton Hart’s home.
“There can be no dispute that had KFH had proper systems in place to verify wires, to monitor/reconcile its IOLTA account, and to prevent its IT system from being infiltrated as it should have, the entire loss would have been prevented,” First American’s complaint states.
Kirzner’s fortunes took yet another downward turn on March 15 when the firm’s professional liability insurer, Berkley Insurance Co., sued in U.S. District Court seeking a declaratory judgment that it had no duty to cover any potential liability in the Haggett or First American cases.
Specifically, the insurer contends that those claims fall within a “Funds Exclusion” in its policy, which states: “This Policy does not apply … to any Claim based on, arising out of, or in any way involving the actual or alleged conversion … [or] misappropriation . . . of client funds.”
Berkley also seeks a declaration that to the extent the allegations in the underlying lawsuits present potentially covered liabilities under the policy’s Social Engineering Endorsement, the insurer “owes no defense or indemnity obligations upon the exhaustion of that endorsement’s stated aggregate limit of $100,000, which limit includes, and is reduced by, defense costs payments.”
According to legal-mal lawyer Burns, certain allegations in Haggett’s complaint, such as those involving a conflict of interest, may be sufficient to trigger Berkley’s obligation to cover claims for professional negligence.
“However, I’m not sure if the damages flow from that breach, even if proved,” Burns says. “It seems too attenuated to [say] that had the firm not been involved in a conflict of interest the damages would not have happened.”
Goulston & Storrs lawyer Richard J. Rosensweig says the threat of cyber-hacking is “top of mind” for law firms, which continue to be targets for hackers.
“And some of these hackers may be state sponsored. It’s going to be hard for some law firm in Plymouth to match from a technology perspective some state-sponsored cyberhacker who could be operating in Russia or China,” he says.
One threat Rosensweig surmises may have been at play in the breach of the Kirzner firm’s IOLTA account involves bad actors hacking into a lawyer’s cellphone in an effort to initiate transfers of funds from their firm’s account.
IOLTA accounts are typically more secure than other types of accounts since the banks that offer them must meet the standards of the state’s IOLTA Committee, says Rosensweig, who defends lawyers and firms facing malpractice claims and disciplinary matters.
“The committee doesn’t let lawyers use any old bank for IOLTA purposes,” he notes.
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This article was originally published by a masslawyersweekly.com . Read the Original article here. .