Unilateral Belief Is Insufficient to Establish an Attorney–Client Relationship; Breach-of-Contract Claims Fail Absent Provable Damages

1. Introduction

In Blank v Petrosyants (2026 NY Slip Op 05074 [2d Dept Aug. 26, 2026]), the Appellate Division, Second Department, addressed a recurring problem in closely held business disputes: when investors, founders, or shareholders later claim that company counsel also represented them personally, and when contract plaintiffs can show a technical breach but struggle to prove compensable loss.

The litigation arose from alleged investments beginning in late 2013 into a catering venture, Prime One Catering, Inc. The plaintiffs alleged their funds were diverted by the Petrosyants defendants (Zhan Petrosyants and Robert Petrosyants) to ventures in which the investors had no interest. The complaint asserted, among other claims, breach of contract, fraud, promissory estoppel, and legal malpractice against attorney Akiva Ofshtein.

Procedurally, this appeal followed extensive motion practice. The Second Department previously revived the legal-malpractice claim asserted by Vadim Shubaderov against Ofshtein (Blank v Petrosyants, 203 AD3d 685, 685). On renewed motion practice, the Supreme Court (Kings County) granted Ofshtein summary judgment dismissing malpractice as to Shubaderov, while denying summary judgment to the Petrosyants defendants on certain fraud, promissory estoppel, and contract claims. The plaintiffs appealed; the Petrosyants defendants cross-appealed.

2. Summary of the Opinion

  • Legal malpractice (Ofshtein vs. Shubaderov): Affirmed dismissal on summary judgment because Ofshtein established no attorney–client relationship existed; Shubaderov’s belief was unilateral, and the retainer showed Ofshtein represented the corporation, not Shubaderov personally.
  • Fraud (against Robert Petrosyants): Affirmed denial of summary judgment because the Petrosyants defendants failed to make a prima facie showing negating alleged misrepresentation (that Robert Petrosyants held himself out as an industry expert).
  • Promissory estoppel (Shubaderov): Affirmed denial of summary judgment because the Petrosyants defendants failed to show prima facie that the alleged promise (to build out the catering company with invested funds) was fulfilled.
  • Breach of contract (shareholder/escrow agreements):
    • Emilya Blank vs. Zhan Petrosyants: Reversed denial and granted summary judgment dismissing the claim because—even assuming breach—Emilya Blank failed to show damages resulting from the breach.
    • Shubaderov vs. Zhan Petrosyants: Affirmed denial of summary judgment because defendants failed to show prima facie that payments from escrow were for services in furtherance of “starting and developing” the catering business.

3. Analysis

A. Precedents Cited

1) Attorney–client relationship and legal-malpractice gatekeeping

  • Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD3d 790, 792: The court reiterated that a malpractice claim requires, as a threshold element, the existence of an attorney–client relationship. This frames malpractice as not merely deficient performance, but deficient performance owed to a client as a matter of professional duty.
  • Willoughby Rehabilitation & Health Care Ctr., LLC v Webster, 190 AD3d 887, 889: Cited for two linked propositions: (i) a relationship can exist without a formal retainer or fee, but (ii) unilateral belief is insufficient; there must be an “explicit undertaking to perform a specific task.” The Second Department used this to reject the notion that proximity to the lawyer or participation in the same business endeavor converts company counsel into personal counsel.
  • Wei Cheng Chang v Pi, 288 AD2d 378, 380: Supports the functional inquiry—courts look to the parties’ actions to determine whether a relationship was formed, rather than labels or assumptions.
  • Volpe v Canfield, 237 AD2d 282, 283: Reinforces the “explicit undertaking” requirement and the insufficiency of a party’s unilateral belief.
  • Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 562 and Mann v Sasson, 186 AD3d 823, 824: These authorities anchor the corporate-representation principle that a lawyer retained for an entity does not automatically represent individual investors, principals, or constituents. The Second Department relied on them to treat the retainer agreement naming Prime One Catering, Inc. as dispositive evidence against personal representation.

2) Fraud: elements, reliance, and summary-judgment burden

  • Ginsburg Dev. Cos., LLC v Carbone, 134 AD3d 890, 892: Supplies the standard elements of fraud and the articulation of reliance (inducement to act or refrain from acting to one’s detriment).
  • Nabatkhorian v Nabatkhorian, 127 AD3d 1043, 1044 and Sammy v Haupel, 170 AD3d 1224, 1226: Emphasize that reliance requires both belief in the truth of the representation and a change of position based on that belief.
  • Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 and Wells Fargo Bank, N.A. v Carrington, 221 AD3d 746, 749-750: Establish the procedural rule that if the movant fails to make a prima facie showing on summary judgment, the motion must be denied “regardless of the sufficiency of the opposition papers.” Here, that rule did the work: defendants’ inability to negate the alleged misrepresentation ended the inquiry.

3) Promissory estoppel: promise, reliance, injury—and non-fulfillment

  • 2261 Realty, LLC v Cai Ping Wang, 242 AD3d 682, 685 and Delmaestro v Marlin, 168 AD3d 813, 816: Provide the three-part test: (1) clear and unambiguous promise, (2) reasonable and foreseeable reliance, (3) injury.
  • 223 SAM, LLC v 223 15th St., LLC, 210 AD3d 733, 735: Cited with 2261 Realty to underscore that, on summary judgment, defendants must affirmatively establish the absence of an element (here, that the alleged promise was fulfilled, defeating breach/causation).

4) Breach of contract: damages as an essential element; evidentiary demands

  • 223 SAM, LLC v 223 15th St., LLC, 210 AD3d at 734-735 and Gawrych v Astoria Fed. Sav. & Loan, 148 AD3d 681, 683: Restate the four essentials of a breach-of-contract claim, including damages resulting from the breach. The Second Department used this structure to split outcomes between plaintiffs: one claim failed purely on damages.
  • Carroccio v Camia, 244 AD3d 1053: Supports dismissal where opposition fails to raise a triable issue on damages/causation once movant meets its burden.
  • Rahmonov v Purves Dev., LLC, 236 AD3d 941, 944 and Crutch v 421 Kent Dev., LLC, 192 AD3d 982, 984-985: Used to require evidence tethering disputed payments or conduct to the contractual purpose. Here, the defendants did not show that escrow-funded payments were for services furthering “starting and developing” the business.

B. Legal Reasoning

1) Malpractice turns first on privity-like proof of representation

The court treated the attorney–client relationship as a strict threshold. Even though an attorney–client relationship can exist without a formal retainer (Willoughby Rehabilitation & Health Care Ctr., LLC v Webster), it still requires an objective manifestation: an “explicit undertaking to perform a specific task.” The court found Ofshtein met his prima facie burden with two key proofs: (i) deposition testimony showing Shubaderov’s belief was unilateral, and (ii) a retainer agreement identifying the corporate client (Prime One Catering, Inc.), not Shubaderov.

The reasoning reflects a policy boundary: business participants frequently interact with corporate counsel and may assume alignment, but the law requires clear indicia of personal representation before imposing malpractice duties. The plaintiffs’ opposition failed because it did not supply evidence of an explicit undertaking directed to Shubaderov individually.

2) Fraud and promissory estoppel survived because defendants did not carry their prima facie burden

For fraud, defendants sought summary judgment but failed to establish, as a matter of law, that Robert Petrosyants did not misrepresent his expertise. Under Winegrad v New York Univ. Med. Ctr., that failure required denial without reaching whether plaintiffs’ evidence was strong. The court’s approach underscores that summary judgment is not a credibility contest; the movant must eliminate material factual disputes first.

For promissory estoppel, the court similarly focused on the movant’s burden: defendants did not show that the alleged promise—to build out a catering company using Shubaderov’s invested funds—was fulfilled. Without that prima facie showing, the claim remained triable.

3) Contract claims diverged on the element of damages and on proof of performance/purpose

The most concrete doctrinal move came in the contract analysis. Even assuming a breach of the shareholder agreement, the court dismissed Emilya Blank’s contract claim because she suffered no damages from the breach—an essential element under 223 SAM, LLC v 223 15th St., LLC and Gawrych v Astoria Fed. Sav. & Loan. This is a practical reminder that New York contract claims are compensatory; proof of breach alone is not enough.

By contrast, Shubaderov’s contract claim survived because defendants did not establish the legitimacy of escrow disbursements. The court demanded evidence that recipients of escrow funds rendered services advancing the contractual objective (“starting and developing” the catering business). Absent such proof, factual issues remained as to breach and contractual compliance.

C. Impact

  • Clearer boundary between corporate counsel and individual stakeholders: The decision strengthens the defensive use of retainers, engagement letters, and objective indicia of representation to defeat malpractice claims by non-clients in internal business disputes. It signals that courts will closely police attempts to convert dissatisfaction with a venture into professional-liability exposure for company counsel.
  • Summary judgment discipline in fraud/promissory estoppel cases: The court reaffirmed that defendants must affirmatively negate an element of the claim; mere argument that plaintiffs “cannot prove” fraud or non-performance will not suffice without evidentiary proof.
  • Damages as a decisive filter for contract claims: The dismissal of Emilya Blank’s claim highlights that contract plaintiffs must be prepared to quantify or concretely show loss caused by the alleged breach. This will matter in shareholder/escrow disputes where rights may be technical but economic harm is speculative or belongs to a different party/entity.
  • Escrow-use litigation and “business purpose” evidence: For claims involving escrow disbursements, the opinion underscores the importance of documentary substantiation (invoices, scopes of work, proof of benefit to the contracted venture) to establish that payments aligned with contract purpose.

4. Complex Concepts Simplified

Attorney–client relationship
A legal relationship that triggers a lawyer’s professional duties to a person or entity. It can exist without a fee or signed retainer, but it still requires objective evidence that the lawyer agreed to do legal work for that particular person—not merely that the person assumed the lawyer represented them.
Unilateral belief
A one-sided assumption (“I thought you were my lawyer”). New York law does not treat that assumption as enough; there must be an “explicit undertaking” by the lawyer.
Summary judgment / prima facie burden
A pretrial ruling that no trial is needed because there is no genuine factual dispute requiring a jury or judge to weigh evidence. The party moving for summary judgment must first make a prima facie showing that it is entitled to judgment as a matter of law. If it fails, the motion is denied even if the opponent’s papers are weak.
Fraud (civil)
Requires a false statement (or material omission), knowledge of falsity, intent to induce reliance, justifiable reliance, and injury. Reliance means the plaintiff changed position because they believed the false statement.
Promissory estoppel
A doctrine that can enforce a promise even without a traditional contract where there is a clear promise, reasonable reliance, and injury caused by that reliance.
Contract damages
Even if a contract was breached, the plaintiff must show the breach caused compensable loss. Without damages, a breach-of-contract claim fails.

5. Conclusion

Blank v Petrosyants delivers two practical lessons with doctrinal force: (1) legal-malpractice exposure depends on proof of an attorney–client relationship grounded in an explicit undertaking—particularly where corporate counsel is later accused by an individual stakeholder; and (2) breach-of-contract claims remain fundamentally compensatory, so a plaintiff who cannot show damages attributable to the breach may be dismissed on summary judgment even if breach is assumed. At the same time, the decision reinforces that fraud and promissory estoppel claims can survive where defendants fail to carry their prima facie summary-judgment burden, especially in investment-and-escrow disputes where proof of purpose, performance, and inducement is fact-intensive.