In    PETER GIANOUKAS, DORIS GIANOUKAS and NICHOLAS TARSIA, Plaintiffs, – against – PETER CAMPITIELLO, ESQ., LEVY & BOONSHOFT P.C., DAVID M. LEVY, ESQ., STEPHEN BOONSHOFT, ESQ. and EAST WEST ACQUISITIONS, LLC, Defendants.;09 Civ. 1266 (PAC);UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 95354;October 13, 2009   we see the outer reaches of a breach of fiduciary duty and of legal malpractice in a well written and reasoned decision by Judge Paul Crotty of Southern District of New York. The facts and allegations are simple:

"The Amended Complaint alleges five separate fraudulent transactions: (1) Codine(x), (id. PP 41-68); (2) Pay Pad, (id. PP 69-87); (3) LIMPE, (id. PP 88-106); (4) Acellus, (id. PP 107-16); [*3] and (5) UTTI, (id. PP 117-34). Throughout the Amended Complaint, Campitiello is portrayed as the architect of the fraudulent transactions which bilked Plaintiffs out of in excess of $ 400,000. He did this as an employee of L&B, and used L&B’s escrow account to receive funds from the Plaintiffs and thereafter funds were disbursed from the account to consummate the fraud. The Amended Complaint does not allege that Levy and Boonshoft were involved in, or knew of, the fraud"

"According to the Amended Complaint, the L&B escrow account is an "interest on lawyer account," also known as an "IOLA" account. (Am. Compl. PP 10-11); see N.Y. JUD. LAW § 497. Plaintiffs contend that Levy and Boonshoft owed them a fiduciary duty as escrow agents and as "signatories on the defendant law firm IOLA account."  "Next, Plaintiffs claim that Levy and Boonshoft are liable for breach of fiduciary duty as "signatories" on the L&B IOLA account. An IOLA account "is a creation of New York State statute, and is defined as ‘an unsegregated interest-bearing deposit account … for the deposit by an attorney of qualified funds.’"

"Plaintiffs argue that lawyers "who accept funds from persons [*11] in escrow or make a decision to have funds in the firm IOLA accounts are fiduciaries to such persons with respect to those funds." (Pls.’ Opp’n at 10.) The Amended Complaint does not, however, allege that Levy and Boonshoft agreed to accept funds from the Plaintiffs or that they were involved in the decision to have the Plaintiffs transfer funds to the L&B IOLA account. Nor does the Amended Complaint allege that Levy and Boonshoft misappropriated or commingled Plaintiffs’ funds; it is Campitiello who allegedly misappropriated the Plaintiffs’ money."
 

"Most importantly, "[w]hatver may be the constraints imposed by the Code of Professional Responsibility with the associated sanctions of professional discipline . . . [New York] courts have not recognized any liability of the lawyer to third parties . . . [for violations of disciplinary [*12] rules] where the factual situations have not fallen within one of the acknowledged categories of tort or contract liability." Drago v. Buonagurio, 386 N.E.2d 821, 46 N.Y.2d 778, 779-80, 413 N.Y.S.2d 910 (N.Y. 1978). Plaintiffs do not contend that they had an attorney-client relationship with Levy or Boonshoft. (Pls.’s Opp’n at 3.) As shown above, Levy and Boonshoft were not the Plaintiffs’ escrow agents. Thus, to the extent Plaintiffs rely on DR 9-102 as the basis for their breach of fiduciary duty claim, the claim fails because "an alleged violation of a disciplinary rule ‘does not, without more, generate a cause of action.’