Boesky v Levine  2018 NY Slip Op 33017(U)  November 27, 2018  Supreme Court, New York County  Docket Number: 650756/2017  Judge: Eileen Bransten is a story containing the only certainties in life:  massive taxes and death, along with  a tricky tax scheme, bankruptcies, indictments, millions of dollars in losses and 15 years of litigation.  This case ends in dismissal, mostly for taking too long to sue.

“In this action, plaintiffs seek to recover damages for, among other things, defendants’
alleged fraud and negligence in connection with their tax-related advice, in the preparation of
plaintiffs’ ta”{ returns, and in their representation of plaintiffs in the litigation of a tax dispute.
Defendants Mazars USA LLP as successor in interest to Weiser LLP (Mazars USA), Herrick
Feinstein LLP (Herrick Feinstein), Moritt Hock & Hamroff LLP (Moritt Hock), and Harold
Levine, separately nove to dismiss the complaint insofar as asserted against them pursuant to
CPLR 3211 (a) (5) and (a) (7) (Motion Sequence Nos. 001- 004, respectively). 1 For the
following reasons, the motions are granted”

“Plaintiffs Boesky and Hirmes were senior executives of The Related Companies, Inc.
(Related), a global real estate development firm to which Katz provided tax advice and
accounting services. ld. at il~i 22-24. In or about 2002, Boesky approached Katz, who had
become a trusted advisor to plaintiffs, to inquire whether Katz knew of any legitimate real estate
deals that would reduce Boesky’s tax liability. Id. at ¶ 25. Katz informed Boesky that he knew
of a strategy to take advantage of a legal loophole in the tax law, whereby Boesky could invest in
a limited liability company (LLC) for the sole purpose of purchasing and then donating a remainder interest in certain real estate (or a remainder interest in the rights to an entity that
directly or indirectly holds the real estate). The amount of the charitable deduction claimed
would be higher than the amount Boesky paid to acquire the remainder interest, thereby creating
a tax deduction offsetting most of the income realized by Boesky for that tax year. Id. at ~26.
This strategy is referred to in the complaint as the “remainder interest tax strategy”. Id.
At the behest of Katz, plaintiffs retained Katz’s close friend Levine, to provide them Vvith
legal advice and services concerning the remainder interest tax strategy, including fonning the
LLCs required to execute the strategy. Id. at ~27. In 2002, Levine and Herrick Feinstein began
providing legal advice and services to plaintiffs pursuant to oral agreements. See Comp. at 4128.
At the time, plaintiffs did not have a written engagement letter with Levine or Herrick Feinstein.
Levine advised plaintiffs that the charitable deduction created by the remainder interest
tax strategy was legal and the “only legitimate way” to shelter income from taxation. Id. at ~~ 31-
32, Levine also told plaintiffs that a taxpayer utilizing the remainder interest tax strategy had
been audited by the Internal Revenue Service (IRS) and prevailed in the audit See id. at~- 34. In
addition, he told plaintiffs that the IRS had issued a letter ruling, or other position statement, that
the remainder interest tax strategy was a legitimate tax savings transaction. Id.”

“The first cause of action is for legal malpractice and is assessed against Levine, Herrick
Feinstein, and Moritt Hock. See Comp. iii! 172~185. Plaintiffs allege that these defendants
breached their duty to represent plaintiffs with such reasonable skill, care and diligence as
members of the legal profession commonly exercise in similar situations by: failing to implement
adequate controls to protect clients such as plaintiffs tram the intentional fraud and the negligent
misconduct of Levine; not doing anything to prevent Levine from marketing and promoting
unlawful tax shelters and in profiting from those acts; failing to apprise plaintiffs as additional
legal developments, rulings and decisions were issued by the IRS and the courts making it dear
the tax shelters they were prompting were not legitimate; and in continuing to provide flawed
and erroneous advice despite their continuing representation of plaintiffs through 2016. See id. at
¶s 74-18 l.

“Levine, Henick Feinstein, and Moritt Hock each contend that this cause of action is time~
barred. Plaintiffs have conceded that their malpractice claim insofar asserted  against Herrick
Feinstein is untimely. See Plaintiffs’ Memorandum of Law in Opposition to Defendant Herrick Feinstein’s Motion to Dismiss Complaint, at 8 n3. Therefore, the only remaining defendants
against whom this cause of action is asserted are Levine and Moritt Hock.”

“Here, the complaint does not allege that there was an “express, mutual agreement to advise” plaintiffs on the effect of the remainder interest tax strategy after Levine’s original advice. Apple Bank for Sav. v. PricewaterhouseCoopers LLP, 70 AD3d 438, 438 (1st Dept 2010); Johnson v. Proskauer Rose LLP, 129 A.D.3d 59, 68 (1st Dept 2015) (“while there was certainly the possibility that the need for future legal work would be required with respect to the tax strategy (promoted by the defendants), plaintiffs could not have ‘acutely’ anticipated the need for farther counsel from defendants that would trigger the continuous representation toil”). ”

“Here, the complaint alleges that plaintiffs received counsel from Levine between 2002 to
2004 regarding the tax strategy, However, it was not UIJ.til three years later, 1112007, that Levine
began to counsel them on the same subject matter — i.e., how to handle the IRS’s and NYSDTF’s
challenges to the strategy. This three-year gap between the provision of Levine’s services on this
matter is so great that the representation cannot be deemed continuous. See Landau v. Snow
Becker Krauss, P.C., 111 A.D.3d 795, 797 (2d Dept 2013) (stating “as evidenced by, inter aha,
the more than four-year period of time between the issuance of the opinion letter and the
plaintiffs alleged retention of the defendants in July 2007, during which no further legal
representation was undertaken with respect to the subject matter of the opinion letter, the parties
did not contemplate that any further representation was needed”). As such, any claims based
upon the advice rendered by Levine from 2002 through 2004 are untimely. ”