Really, the numbers boggle.  Clients collectively lost a $3 Million tax deduction when one of the trustees, without telling anyone else, waived the claim.  A professional malpractice claim followed in 1993 Trust of Joan Cohen v Baum    2017 NY Slip Op 30894(U)  May 2, 2017  Supreme Court, New York County  Docket Number: 150058/2015  Judge: Shirley Werner Kornreich .  Can the defendants seek to push liability onto attorneys?  Not in this case.

“On January 5, 2015, the plaintiffs in the main action, the 1993 Trust of Joan Cohen and the 1993 Trust of Ellen Hakim (collectively, the Trusts), filed a complaint against Baum and his employer, ABA, in which the principal allegation is that Baum, a former2 trustee of the Trusts who provided the Trusts with tax and accounting services, engaged in the ultra vires act of signing, on behalf of each of the Trusts, an IRS Form 870-PT (the Waivers) (Dkt. 63 & 64), which foreclosed the Trust’s ability to contest a particular tax matter with the IRS. To explain, the Trusts are members of Langham, a Delaware LLC that owns a building located at 135 Central Park West. As members of an LLC, the Trusts pay taxes on a pass-through basis. In October 2011, the IRS determined that a May 2005 charitable tax deduction taken by Langham’s members was improper. The deduction related to Langham’s non-cash $86 million charitable contribution of a conservation easement to the National Architectural Trust, which was based on the value of the building’s fa<;:ade being preserved. The Trusts’ respective pro rata deductions were $5,848,000. Langham’s members would go on to challenge the IRS’s position regarding the propriety of their charitable deduction, and in the end, settled for about half of the deduction, without the imposition o_f penalties or interest. In other words, if the Trusts participated in the settlement, they would have been able to maintain a deduction of $2,924,000. ”

“The Trusts, however, were not permitted to participate in the settlement because Baum waived their right to do so by signing the Waivers. The principle issue in the main action is whether Baum had the authority to do so. Baum was one of three trustees. Joan Cohen and Ellen Hakim were the other trustees. It is undisputed that under section 5 of the agreements governing Baum ‘s role as co-trustee, Trust Agreements dated as of February 4, ·1993, Baum lacked the unilateral authority to sign the Waivers; agreement by a majority of the trustees was required. See Dkt. 33 at 13 & Dkt. 34 at 13. It also is undisputed that he signed the Waivers without obtaining such majority consent. Baum, who always prepared and signed the tax returns, did not even notify the other trustees of the IRS’s deficiency notices or that he had received the Waivers, let alone that he intended to sign them.”

“On July 21, 2016, the Baum Parties filed the TPC, which contains two causes of action. See Dkt. 141. The first is a claim that Manocherian, the “Tax Matters Partners of Langham”, 3 breached sundry duties to the Trusts. For instance, Baum complains that Manocherian failed to disclose the IRS ‘s audit of Langham. As explained below, a detailed merits analysis of Manocherian’ s alleged wrongdoing is unwarranted because, even assuming the claims made against him are well pleaded, the Baum Parties lack standing to maintain such claims. Simply put, as a former trustee, Baum has no right to prosecute these derivative claims on behalf of the Trusts. ”

“The Baum Parties’ claims against Manocherian are derivative. They are all based on Manocherian’s duties to Langham as its “Tax Matters Partner”. While the precise meaning of “Tax Matters Partner” is somewhat unclear, there is no dispute (and the court assumes for the purpose of this motion) that Manocherian had contractual and fiduciary duties to Langham and the Trusts with respect to the tax matters he handled on their behalf. A successful claim for breach of such duties would result in recovery going to Langham or the Trusts. Baum, to be clear, was not a beneficiary, and thus a loss suffered by the Trusts is not a loss that affects Baum. Baum, personally, could not recover from Manocherian . “

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Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.