Gerzog v Goldfarb 2022 NY Slip Op 04120 [206 AD3d 554] June 28, 2022 Appellate Division, First Department discusses the fiduciary duties an accountant may have to its client.

“Plaintiff was an attorney at the law firm of nominal defendant Goldfarb & Gerzog. He claims that he and defendant Goldfarb were partners at the firm and that he was entitled to a one-third share of the firm’s profits. Defendant Migden was the firm’s accountant.

Issues of fact exist as to plaintiff’s partnership status and entitlement to a share of the firm’s profits (see generally M.I.F. Sec. Co. v Stamm & Co., 94 AD2d 211, 214 [1st Dept 1983], affd in part 60 NY2d 936 [1983]). Evidence in the record—including plaintiff’s testimony, the firm’s filing of partnership tax returns and K-1s, and its representations to others—supports plaintiff’s claim that the firm was a partnership and that he was entitled to a percentage of the firm profits (see Rosen v Efros, 258 AD2d 333, 333 [1st Dept 1999]; see also 26 CFR 301.7701-2 [a]; Peterson v Neville, 58 AD3d 489, 489 [1st Dept 2009]). Although the K-1s and representations are not dispositive, they are still relevant (see Rakosi v Sidney Rubell Co., LLC, 155 AD3d 564, 565 [1st Dept 2017]). The fact that the K-1s refer to plaintiff as a “limited partner” is not determinative of whether he had an equity stake, especially given that they also refer to Goldfarb as a limited partner.”

“As to Migden, plaintiff also raises an issue of fact as to the applicability of the exception to the general rule that accountants do not owe clients fiduciary duties. That exception applies “where the allegations include knowledge and concealment of illegal acts and diversions of funds and failure to withdraw in the face of a conflict of interest” (Nate B. & Frances Spingold Found. v Wallin, Simon, Black & Co., 184 AD2d 464, 465-466 [1st Dept 1992]). Plaintiff has submitted evidence from which the factfinder could conclude that Migden [*2]falsely classified Goldfarb’s personal expenses as case preparation expenses on income tax returns, with knowledge that deducting these expenses would reduce the profits available to be paid to plaintiff and that classifying them in this way would conceal the wrongdoing. The fact that plaintiff had access to his K-1s and the firm’s tax returns is immaterial because his claim is that the true nature of Goldfarb’s personal expenses was not obvious on the face of those documents. Plaintiff also submitted evidence indicating that Migden was responsible for categorizing expenses as deductions and did not simply rely on Goldfarb’s assessment. The parties also offered conflicting expert opinions regarding whether an accountant’s duties run to all partners or only to the partner in charge of tax matters. However, whether Migden owed a duty to plaintiff personally is irrelevant to the accounting malpractice claim, which was asserted derivatively on behalf of the firm.

Partial dismissal of the accounting malpractice claim on statute of limitations grounds (see CPLR 214 [6]) is precluded by issues of fact as to whether Migden is equitably estopped from asserting the defense because his alleged concealment of the misconduct induced plaintiff to refrain from filing a timely action (see Simcuski v Saeli, 44 NY2d 442, 448-449 [1978]; Langston v MFM Contr. Corp., 172 AD3d 583, 584 [1st Dept 2019]), whether the statute of limitations was tolled because Migden was in a fiduciary relationship with the firm (see Robinson v Day, 103 AD3d 584, 586 [1st Dept 2013]), and whether it was tolled under the continuous representation doctrine (see Booth v Kriegel, 36 AD3d 312, 314 [1st Dept 2006]). Although repetition of the same mistake on successive tax returns does not constitute continuous representation, the doctrine may apply where there is repeated intentional disregard of professional standards with respect to the same type of expense (see id. at 315; Ackerman v Price Waterhouse, 252 AD2d 179, 205 [1st Dept 1998]).”

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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.