In a legal malpractice case alleging $84 million in damages, a New York appeals panel pointed to remaining questions about a law firm's scope of representation, reversing a summary judgment win for the firm's ex-client.

In the malpractice case brought by venture capital funds against 18-attorney Gilbride, Tusa, Last & Spellane, the Appellate Division, First Department, also reversed the dismissal of the firm's counterclaims for unpaid attorneys fees, sending the case back to Manhattan Supreme Court.

The lawsuit dates back to 2014, when venture capital funds Genesis Merchant Partners LP and Genesis Merchant Partners II LP, created by hedge fund Sands Brothers Asset Management, sued Gilbride Tusa for legal malpractice.

The plaintiffs claim the law firm failed to perfect the funds' security interest in life insurance policies, leading to more than $84 million in damages. Gilbride had represented the funds in setting up loans to a company, nonparty Progressive Capital Solutions, buying life insurance policies.

The funds sued Gilbride Tusa, which has offices in New York and Connecticut, as well as Connecticut-based partners Jonathan Wells, Kenneth Gammill Jr. and Charles Tusa. They denied committing legal malpractice and counterclaimed for $112,000 in unpaid fees.

While Manhattan Supreme Court Justice Nancy Bannon in 2015 narrowed the complaint, last year she granted the funds' summary judgment against the law firm on the issue of liability for legal malpractice and dismissed the law firm's counterclaims, rejecting Gilbride's contention that perfecting the security interests was outside the scope of its representation.

But in a Jan. 11 ruling, a First Department panel, composed of Justices Rosalyn Richter, Barbara Kapnick, Troy Webber, Jeffrey Oing and Anil Singh, called that ruling an error.

The panel said “the crux of the factual dispute” is whether Gilbride had a duty to perfect Genesis' security interests in the collateral. Gilbride maintains that it was retained only to draft the loan documents and that this limited representation was at the express instruction of Genesis, according to the panel.

Noting there is no engagement letter defining the scope of representation, the panel said documents in the record “raise issues of fact” as to whether Gilbride's role was limited.

For instance, the panel said one document, a collateral assignment of contracts, suggests that Progressive and Genesis, not Gilbride, were tasked with the responsibility of taking the mechanical steps needed to perfect the security interest.

Emails in the record also raise questions, said the panel, noting both parties can point to emails that support their positions on scope of representation.

“There are issues of fact as to the scope of Gilbride's representation, and if limited, whether Gilbride ensured that Genesis understood that Gilbride was not responsible for perfecting the security interests in the life insurance policies,” the panel said.

Finally, Gilbride's billing for the filing of the UCC-1 financing statements isn't sufficient to support a conclusion that the law firm voluntarily assumed a duty to perfect the security interests, the panel said, adding that the billing entries note only that Gilbride reviewed the assignments and do not state that Gilbride was going to file the assignments or perfect the security interests.

Since it was reversing and denying summary judgment on liability for legal malpractice, the panel said, the law firm's counterclaims for quantum meruit and account stated “were improperly dismissed as well.”

The law firm's attorney, Judy Selmeci, of Wilson Elser Moskowitz Edelman & Dicker, declined to comment on the ruling, while the funds' attorney, solo practitioner Wallace Neel, did not immediately respond to a request for comment.