Hahn v Dewey & Leboeuf Liquidation Trust  2015 NY Slip Op 31481(U)  August 3, 2015  Supreme Court, New York County  Docket Number: 650817/2014  Judge: Eileen Bransten is an example of how high-flying plaintiffs can lose a legal malpractice case through the passage of time.  The statute of limitations in legal malpractice highly favors the attorney, and these two plaintiffs lost their case because they were late.

“In this action, plaintiffs assert legal malpractice, fraud, and negligent representation claims against their former legal counsel, defendants Dewey & LeBoeuf Liquidation Trust (“Liquidation Trust0 ), Sidley Austin LLP ( 11Sidley11 ), and Proskauer Rose LLP ( 11Proskauer”). All defendants now seek dismissal of plaintiffs’ Corrected Amended Complaint (“Complaint”) in its entirety, pursuant to CPLR 321 l(a)(S) and (a)(7). In addition, defendants Liquidation Trust and Sidley also contend that the fraud claim asserted against them fails under CPLR 3016(b ). Plaintiffs oppose and request leave to fi]e a second amended complaint, omitting the negligent representation claim and adding a Judiciary Law§ 487 attorney misconduct claim, based upon newly discovered evidence. For the reasons that follow, defendants’ motions are granted, plaintiffs’ cross-motion is denied, and plaintiffs’ action is dismissed.”

“In late 2000, plaintiffs Roy E. Hahn and Larry J. Austin, tax-advantaged investment strategists working in the United States and Asian financial markets, created and developed an investment strategy involving Asian distressed debt that became known as the “Non-Performing Loan Investment Program11 ( 11NPL Program”). The NPL Program involved the purchase of the distressed debt of fundamentally sound companies from the Federal Deposit Insurance Corporation and the Resolution Trust Corporation that could be used to offset tax liabilities. Hahn and Austin sold the debt to investors through plaintiff Chenery Associates, Incorporated (“Chenery”). Plaintiffs retained Graham R. Taylor, a LeBoeuf tax attorney, to render tax advice to them regarding the NPL Program. Taylor advised plaintiffs that he believed that plaintiffs’ investment strategy was legally viable and “worked” from a tax perspective. Plaintiffs engaged LeBoeuf as their legal advisor with regard to the NPL Program Plaintiffs also contacted Sidley, which was their then-general legal counsel. Sidley advised plaintiffs that it also believed the NPL Program would work and agreed to render United States federal income tax benefit opinions to plaintiffs’ investors, if the NPL Program were appropriately structured. ”

“Section 321 l(a)(S) of the CPLR permits dismissal of a claim that is barred by the applicable statute limitations. “On a motion to dismiss a cause of action pursuant to CPLR 321 l(a)(5) on the ground that it is barred by the statute of limitations, a defendant bears the initial burden of establishing, prima facie, that the time in which to sue has expired.” Benn v. Benn, 82 A.D.3d 548, 548 (1st Dep1 t 2011). Defendants have met that burden. The legaJ malpractice claims are untimely asserted. An action to recover for attorney malpractice is governed by a three-year statute of limitations. regardless of whether the underlying theory is based on contract or tort. McCoy v. Feinman, 99 N.Y.2d 295, 301 (2002); see CPLR 214(6). The three-year limitations period accrues when the malpractice is committed, not when the client discovers it, even if the plaintiff is unaware of any malpractice, damages, or injury. McCoy v. Feinman, 99 N.Y.2d at 300-301; Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 7-8 (2007). Contrary to plaintiffs’ suggestion, a legal malpractice claim does not accrue when the IRS assesses a deficiency. Instead, a tax-related legal malpractice claim accrues on the date that the defendants issued their tax opinion letter, even where the plaintiffs discover years later that their attorneys tax advice was incorrect. See Landow v. Snow Becker Krauss, P.C., 111A.DJd795, 795-796 (2d Dep1 t 2013) (citing Ackerman v. Price Waterhouse, 84 N.Y .2d 535, 541 (1994)). 11 [W]hat is important is when the malpractice was committed, not when the client discovered it.” Landow, 111 A.D.3d at 796; Arnold v. KPMG LLP, 334 Fed. App’x 349, 352 (2d Cir. 2009) (holding that, pursuant to New York law, plaintiffs’ legal malpractice claim was subject to three-year statute of limitations, and accrued when defendant law firm issued legal opinion letter at issue). As the Court of Appeals explained in Ackerman v Price Waterhouse: [w]e reject plaintiffs’ proposition on this appeal that a Statute of Limitations can only accrue in a malpractice action against an accountant when the IRS assesses a deficiency, a date that necessarily varies depending on the type of deficiency notice received by the taxpayer. The policies underlying a Statute of Limitations fairness to defendant and society’s interest in adjudication of viable claims not subject to the vagaries of time and memory – demand a precise accrual date that can be uniformly applied, not one subject to debate or negotiation … . Indeed, to base a limitations period on the potentiality of IRS action defies the essential premise of temporal finality embodied in Statutes of Limitations. Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541-542 (1994). “