Claims Against Law Firm Dismissed
The dismissal of claims brought against a law firm was ordered by the New York Appellate Division for the First Judicial Department:
This case involves professional services surrounding the design andimplementation of a tax driven, sophisticated, individual privatepension plan costing millions of dollars. The parties had variousprofessionals in the form of accountants and lawyers representing them.Plaintiff describes himself, not as a member of the consuming public,but as a sophisticated entity, to wit: “a commodities trader on the NewYork Mercantile Exchange” who “operated [his] business as a soleproprietor.” Therefore, this transaction was “not the modest’ type oftransaction the statute was primarily intended to reach” (id.[internal citations omitted]). Plaintiff also recognizes that “thetarget market of the Pendulum Plan’ was for businesses, (such as mine)with a stable cash flow and minimal number of ancillary employees”rather than the consuming public in general.
Moreover, as plaintiff admits in his affidavit, it was not theform of the Pendulum Plan in general that ran afoul of IRS regulations,but rather the operation of plaintiff’s particular plan that used lifeinsurance as a tax shelter “in amounts that greatly exceeded both IRSimposed limits and the terms of the plan document prepared by BryanCave and approved by the IRS.” As it was the operation of plaintiff’sparticular plan that caused the problems with the IRS, this isessentially a private dispute among the parties relating to advice thatplaintiff received and his particular plan structure, rather thanconduct affecting the consuming public at large.
The court found that claims of unjust enrichment, legal malpractice and negligence were not established:
The allegations do not support the claims for unjust enrichmentagainst Bryan Cave and Smith and Hartstein. Whatever benefits they mayhave received were too attenuated from the conduct alleged and fromtheir relationships with plaintiff. The claim is also not viable as against Bankers, and Thornhill as Banker’s agent, because the express terms of plaintiff’s valid insurance contracts govern Bankers’ obligations to plaintiff.
The motion court should have dismissed the legal malpracticeclaims against Bryan Cave and Smith because no attorney-clientrelationship existed in 2002. The motion court was correct thatthe tax opinion letter was insufficient to support an attorney- clientrelationship, considering the letter stated it was for ECI solely andcontained disclaimers cautioning readers to procure tax advice tailoredto their specific plan. The motion court was also correct that thelimited power of attorney was insufficient to show an attorney-clientrelationship as that document could also have authorizednonattorneys to act on behalf of plaintiff. The limited power ofattorney only authorized Bryan Cave to represent “Robert A. Dennenberg,a Sole Proprietorship Defined Benefit Pension Plan” before the IRS andonly for “Form 5307,” which was the application submitted to the IRSfor it to determine whether to approve the Plan. Plaintiff does notcontend that Bryan Cave was negligent in submitting the Form 5307.
However, the motion court improperly relied on plaintiff’sentirely conclusory allegations that plaintiff retained the services ofBryan Cave in 2001 to support the legal malpractice claim. Plaintiffpoints to no communications with Bryan Cave for legal advice aboutimplementation of the Plan. Plaintiff offers no objective facts oractions to show the existence of an attorney-client relationship or theparties’ mutual agreement that Bryan Cave would perform ongoing legalservices for plaintiff.
In a last ditch attempt to hold Bryan Cave responsible,plaintiff claims Bryan Cave was negligent in defending him during his2004 audit before the IRS, until October 25, 2005 when plaintiffretained new counsel. However, plaintiff points to no damage relating to Bryan Cave’s alleged negligence during the audit period. Rather, according to plaintiff’s allegations, all ofplaintiff’s injury stems from the implementation of the Plan, not fromany actions the attorneys took during the audit period. Accordingly,the court should have dismissed the cause of action for legalmalpractice. (citations and headers omitted)