A claim against a finance adviser or investment adviser is permissible, but it is not professional negligence and there is no fiduciary duty running between the financial adviser and the plaintiff. As Judge Kornreich tells us in Gutterman v Stark 2017 NY Slip Op 32618(U) December 18, 2017 Supreme Court, New York County Docket Number: 655440/2016 not only is there no fiduciary duty, there are a large number of hurdles to get over before seeking a default.
“This case arises out of Gutterman’ s investment in an ambulatory care surgical facility which was to be built in West Palm Beach, Florida. Gutterman is an anesthesiologist residing in Brooklyn. Complaint ,-i 2. He conducts his medical practice through G~tterman Entity, a New York professional LLC. /d. ~ 3. Stark, a New York resident, is Managing Director of FinPrime, a Delaware financial management and investment firm located in New York and Florida. Id. ,-i,-i 4, 7. Defendant Ilya Kogan, a New York resident, while employed by JPMorgan Chase, allegedly worked part-time for FinPrime. /d. ,-i 6. As of March 2016, he worked fulltime at FinPrime as a Regional Director. Id. Defendant Nicholas Monroy (with Stark, Kogan, and FinPrime, the FinPrime Defendants) is a Florida resident and was a Regional Director at FinPrime until March 2016. Id.~ 5. Luis A. Vinas is a plastic surgeon residing in Florida and practicing through a Florida professional association, L.A. Vinas MD, PA (Vinas Entity). Id. ~~ 10-11. In early 2015, Kogan, while he worked at Chase rendering financial and investment advisory services, referred Gutterman to Stark at FinPrime. Complaint~~ 14-15. Kogan touted Stark as someone with expertise in surgery centers, the area in which Gutterman wished to invest. Id. Gutterman was not told of Kogan’ s affiliation with FinPrime. Id. ~ 17. Gutterman and Stark met at a Manhattan restaurant to discuss Gutterman’ s interest in investing in an ambulatory surgery center (ASC). Id. ~~ 15, 18. Unlike art Office Based Surgery Center (OBS), an ASC may be owned by individuals that ~o not perform surgery there and may charge potentially lucrative facility fees. Id. ~ 21. During their meeting, Stark allegedly falsely touted his experience and expertise in ASCs, which bear onerous regulatory requirements, and told Gutterman that he could “get it done” for him. Id. ~~ 16, 18, 24-27. ”
“As to Stark, the motion is denied as to the third cause of action for malpractice. The Complaint alleges that Stark “became the financial and investment advisor” for Gutterman, but failed to use “reasonable and proper skill in providing financial and investment advice” and to “properly manage [his] account.” Complaint~~ 52-58. Malpractice is professional misfeasance. Chase Scient(fic Research, Inc. v NIA Grp., Inc., 96 NY2d 20, 24 (2001). “[P]rofessional malpractice [requires] that a professional failed to perform services with due care and in accordance with the recognized and accepted practices of the profession .. . .”Fred Smith Plumbing & Heating Co. v Christensen, 233 AD2d 207, 208 (!st Dept 1996). Professionals, in the context of professional malpractice, refers to the learned professions such as. architects, engineers, lawyers, and accountants. See Chase Scientific, 96 NY2d at 29-30. Financial advisors are not professionals. See Starr v Fuoco Grp. LLP, 137 AD3d 634, 634 (1st Dept 2016), leave to appeal dismissed, 28 NY3d 1083 (2016). Plaintiffs’ fourth cause of action for negligence is also deficient. The Complaint summarily alleges that Stark failed in his duty to investigate the prospective investment, to ensure competent construction of the facility, and to manage the investment. Complaint iii-! 64- 65. “[T]o prevail on a negligence claim, ‘a plaintiff must demonstrate (I) a duty owed by the defendant to the plaintiff, (2) a breach thereof, and (3) injury proximately resulting therefrom.”‘ Pasternack v Lab. Corp. of Am. Holdings, 27 NY3d 817, 825 (2016), reargument denied, 28 NY3d 956 (2016), quoting Solomon v City of New York, 66 NY2d 1026, 1027 (1985). A duty to competently render investment advice must arise from a contract. See Starr, 13 7 AD3d at 634. As neither the complaint nor the briefing identify where Stark’s duty of care originates or how Stark’s breaches of his duty caused the claimed damages-particularly as to plaintiffs’ expenses8 -· plaintiffs’ motion is denied as to the fourth cause of action.9 Plaintiffs’ fifth cause of action for negligent misrepresentation also fails. Plaintiffs allege that, in or about April 2015, Stark misrepresented his and FinPrime’s experience and expertise in establishing ASCs. Complaint~~ 69-71. “[N]egligent misrepresentation requires … ( 1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance …. “JA. 0. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148 (2007). As Stark lacks professional status, some other identifiable source of a special duty of care is needed. Kimmell v Schaefer, 89 NY2d 257, 263 (1996). Moreover, a fiduciary relationship is required, see Sebastian Holdings, Inc. v Deutsche Bank AG, 78 AD3d 446, 447 (1st Dept 2000), and “the requisite relationship between the parties must [also] have existed before the transaction from which the alleged wrong emanated, and not as a result of it.” Gregor v Rossi, 120 AD3d 447, 448 (1st Dept 2014) (emphasis added). Plaintiffs allege no specific facts indicating a special relationship between Stark and Gutterman in April 2015-as far as the court can tell, the two simply met one time at a restaurant. While a fiduciary relationship arose later, the complaint identifies no misrepresentations occurring thereafter as the basis for this cause of action. Default judgment is therefore denied as to plaintiffs’ fifth cause of action.”