This legal malpractice case, which is based upon tax advice may eventually lead to the largest legal malpractice settlement of the year, and perhaps, of the decade.  Overseas Shipholding Group, Inc. v Proskauer Rose, LLP  2015 NY Slip Op 05772  Decided on July 2, 2015  Appellate Division, First Department deals with damages not in the millions, but in the hundreds of millions.  It involves questionable tax advice concerning $1 Billion dollars of earnings.  Whew!

The immediate lesson to be learned is whether continuous representation in the transactional arena can survive a period of time in which nothing actually happens.  This case holds that it can.

” The motion court correctly determined that the legal malpractice claim, based on allegedly deficient tax advice provided by defendants beginning in 2005 and continuing throughout the course of its ongoing representation of plaintiff, is not time-barred (see Shumsky v Eisenstein, 96 NY2d 164, 168 [2001]; Ackerman v Price Waterhouse, 252 AD2d 179, 205-206 [1st Dept 1998]; see also Zwecker v Kulberg, 209 AD2d 514, 515 [2d Dept 1994]). Further, plaintiff sufficiently pleaded that defendants’ advice was the proximate cause of its alleged damages.

Defendants argue that because the 2006 credit facility agreement was drafted by another law firm, it severed any causal chain between defendants’ work in 2005 and plaintiff’s increased tax liability. However, “[a]s a general rule, issues of proximate cause[, including superceding cause,] are for the trier of fact” (Hahn v Tops Mkts., LLC, 94 AD3d 1546, 1548 [4th Dept 2012] [alterations in original] [internal quotation marks omitted]) and defendants’ contention is unavailing at this procedural juncture (see Ableco Fin. LLC v Hilson, 81 AD3d 416, 417 [1st Dept 2011]). Plaintiff alleges, inter alia, that it continually relied on defendants’ advice for the purpose of shielding income from its off-shore subsidiary from federal income tax and that defendant improperly advised it to make the 2005 “check-the-box” election, which greatly enlarged the prospective pool of income on which plaintiff could be taxed. Plaintiff further alleges that the error in advising it to make the check-the-box election, which according to defendant could not be changed for the next five years, was compounded by the error of changing the language in the credit facility agreements from several liability to joint and several liability, effectively transferring the entire pool of off-shore subsidiaries’ income to plaintiff.”

For the extremely fact-intensive background, read the Richter, J. concurrance.