Attorneys should always strive for the zealous representation of their clients to ensure their clients are not only happy with the results of their legal representation, but to also ensure said clients are as protected as possible in the face of ever-more adversarial litigation. Protecting the client and their interests is generally the golden rule for attorneys. Unfortunately, we do not live in a perfect world where everyone follows the rules. Some people are all too happy to go out of their way to break the rules. In the case of Allan H. Applestein, et. al. v. Howard Kleinhendler, et. al.[i], a jury found the attorney, Mr. Kleinhendler, and by extension, his former law firm, Wachtel Missry LLP, broke the golden rule.
Specifically, the jury found Kleinhendler had engaged in not only legal malpractice in his prior dealings with his client, but also that Kleinhendler had also engaged in fraudulent inducement as well as exploitation of a vulnerable adult. As a result, the jury found Kleinhendler had to pay Applestein over $11 million in compensatory damages as well as $15 million in punitive damages for the aforementioned indiscretions. But how did we get here? To understand how the jury arrived at their decision, we must go back to 2013 to a plot of land located in Richmond, Virginia.
In 2014, Applestein ventured to either sell or develop a plot of land known as the Fones Cliffs Land in Richmond, Virginia. In seeking to sell or develop said property, Applestein sought the advice of Kleinhendler. However, Applestein’s health, including his mental capacity, began to deteriorate. Applestein’s attorneys argued that in the midst of this decline, Kleinhendler worked diligently to gain his trust for the ulterior motive of obtaining the Fones Cliffs Land for significantly less than the land’s actual value.
To that end, Kleinhendler made several visits to Applestein’s home office, often inquiring into the status of Applestein’s health. Ultimately, while several buyers were considered, Kleinhendler eventually pitched the possibility of Applestein selling the subject property to Kleinhendler himself. There was, however, a problem with that idea—one of many issues that would arise—there is no indication in the record that Kleinhendler ever advised Applestein of the inherent conflicts associated with his proposal to acquire Applestein’s land.
Failing to advise Applestein of the conflicts was just one issue with Kleinhendler’s proposal. Kleinhendler also organized a new entity through which he would secure the subject property. Kleinhendler founded Virginia True Corporation (“VRT”) and prepared and structured the acquisition agreement between Applestein and VRT while still representing Applestein throughout the course of said acquisition. Kleinhendler seemingly convinced Applestein to receive a $5 million cash payment at the time of closing, with a remaining $7 million, as part of the $12 million total deal, to be financed—even though said financed amount was not supported by any kind of collateral or security interest in the subject property.
When Applestein’s CPA asked why there was no security interest on the subject property to protect Applestein’s interests, Kleinhendler explained that having such a security interest would allegedly make the subject property undesirable to a developer—even though Kleinhendler himself organized VRT. Moreover, in an email exchange with Applestein’s representatives, Kleinhendler simply cited “tax reasons” for the lack of security interest in the property and further advised that Applestein was aware of the risks associated with the deal.
However, Applestein’s attorneys argued that Applestein, who was suffering from Alzheimer’s by this time, was in no position to understand any such risks associated with the agreement with VRT. Nevertheless, Kleinhendler was able to close the deal, and VRT secured the Fones Cliffs Land from Applestein on April 27, 2017.
Kleinhendler made a deal with Applestein via a “side letter” in which VRT promised they would not transfer any portion of the assets of VRT or encumber the subject land without the prior written consent of Applestein and his legal counsel.[ii] Despite this promise, Applestein’s attorneys argued that Kleinhendler drafted a side deal with two investors within VRT that very same day.
Domenick Cipollone and Anthony Cipollone, as part of a Stockholders’ Agreement entered into on April 27, 2017, would be allowed to convert their $5 million in equity in VRT into debt if they did not receive a return of their capital within 18 months after their investment. Such conversion would allow the Cipollones to impose a lien on the subject property, thus creating an encumbrance on the property without the prior written consent of Applestein and his legal counsel.
Come 2018, Applestein’s attorneys argued that VRT did not honor its buy-out agreement with the Cipollones. As such, Kleinhendler caused VRT to execute a deed of trust in favor of the Cipollones on December 12, 2018, in effect creating a mortgage on the subject land in favor of the Cipollones. Despite the “side letter” Kleinhendler executed promising not to encumber the subject land without Applestein and his legal counsel’s prior written approval, Kleinhendler’s creation of the deed of trust in favor of the Cipollones was very much an encumbrance that violated the terms of the aforementioned “side letter”.[iii]
Making matters even worse, VRT defaulted on the $7 million loan on the subject property and filed for bankruptcy. This left Applestein without any interest in the subject land and unable to recover the $7 million he had granted to VRT without any security interest. It was therefore abundantly clear at this point that Applestein’s interests were not protected.
With all of that said, a question remained as to whether Kleinhendler was in fact acting as Applestein’s attorney throughout the transfer of the subject property and subsequent events. However, testimony from Betz Guzman, Applestein’s personal manager, suggested that Kleinhendler was very much acting as Applestein’s legal counsel through the sale process, “side letter”, and in the subsequent default and bankruptcy of VRT.[iv] Guzman specifically testified that Kleinhendler explicitly held himself out to be Applestein’s attorney for and during the above events.
Applestein’s attorneys further argued that Applestein’s vulnerabilities were readily apparent to all those around him, including Kleinhendler. To that end, Applestein’s own daughter, Dr. Andrea Bivens, who sat in on the call between Kleinhendler and Applestein when Kleinhendler initially made his proposal to Applestein, explicitly advised Kleinhendler that Applestein was not able to partake in the proposal as her father was not even in the room during the majority of Kleinhendler’s presentation. Dr. Bivens was very clear that Applestein was not the same man he once was.
The jury heard all of the above and more—including an expert opinion from a doctor regarding Applestein’s clearly-impaired mental state as of April 2017. In sum, following a 10-day trial, the jury found Kleinhendler and his prior firm liable for legal malpractice in failing to disclose the inherent conflicts to Applestein, fraudulent inducement in engaging Applestein in the sale of the subject property even though there was clear evidence that Kleinhendler and VRT had no intention of abiding by the “side letter”, and exploitation of a vulnerable adult in light of Applestein’s abundantly clear decreased mental state at the time of the subject transaction.[v] Wachtel Missry was specifically found liable for Kleinhendler’s malpractice and will have to pay Applestein $112,768 in compensatory damages to that end.[vi]
The facts of this case are incredibly unfortunate. Applestein was a wealthy man with several representatives, including a personal manager. Despite this status, (arguably, these protections) Applestein was still swindled out millions of dollars by an unscrupulous attorney. In a case where the facts are stacked against the defense, it is critical to take steps to mitigate a Nuclear Verdict® before it occurs. In that vein, The Apex is a critical tool in the defense’s toolbox. In a case like this, there are plenty of upsetting facts that will enrage jurors. An angry jury is more likely to award a Nuclear Verdict®. The Apex is built to defuse juror anger and stop Nuclear Verdicts®.
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[i] Applestein v Kleinhendler, 20-CV-1454 (FB) (MMH), 2024 WL 3594710 [EDNY July 30, 2024] at *1.
[ii] Id.
[iii] Applestein v Kleinhendler, 20-CV-1454 (FB) (MMH), 2024 WL 3594710 [EDNY July 30, 2024] at *2.
[iv] Id.
[v] Applestein v Kleinhendler, 20-CV-1454 (FB) (MMH), 2024 WL 3594710 [EDNY July 30, 2024] at *3.
[vi] Applestein v. Kleinhendler, 2025 WL 990804, (EDNY Apr., 2, 2025) at *7.
