The 183 day rule in NYS taxation bobs to the surface from time to time.  In this accounting malpractice case, where plaintiff resided makes a difference of about $1 million in tax.  Client relied upon the CPAs explanation of how the 183 day rule is applied, to his detriment.  Was that advice the [or a] proximate cause of this problem?

Hamadeh v Spaulding   2015 NY Slip Op 30027(U)   January 8, 2015   Supreme County, New York County  Docket Number: 114060/09   Judge: Marcy S. Friedman  applies the legal malpractice rule on proximate cause to accounting malpractice. 

"In arguing that plaintiffs cannot establish that they committed malpractice, both Spaulding and Citrin contend that plaintiffs must prove not only that plaintiffs could have avoided taxation as statutory residents if Spaulding had provided different advice about the number of days they could spend in New York, but also that they could have avoided taxation as non-domiciliaries. They further contend that plaintiffs cannot establish that they changed their domicile from New York to Pennsylvania, as evidenced by the finding in the Report of Audit to that effect, as well as by defendants’ analysis of plaintiffs’ failure to satisfy the elements necessary to establish a change of domicile. (See Spaulding Memo. In Opp. to Ps.’ Motion at 12-14; Citrin Memo. In Support of Citrin Motion at 13-17.) Put another way, defendants argue that because plaintiffs cannot show that they changed their domicile, they would have been subject to taxation as New York residents, regardless of whether the NYSDTF concluded that they were statutory residents. Spaulding concludes that plaintiffs cannot establish that his advice was the "proximate cause" of their increased tax liability. (Spaulding Memo. In Opp. to Ps.’ Motion at 14.) Citrin posits that plaintiffs’ failure to change their domicile from New York was an "independent cause" of their tax liability. (Citrin Memo. In Reply to Citrin Motion at 6.) Defendants both argue in effect that Spaulding’s incorrect advice on the statutory residency must  have been the sole proximate cause of the NYSDTF’s assessment of deficiency and interest charges upon plaintiffs. Defendants do not cite any case law in the accountant malpractice context which holds that the malpractice must have been the sole proximate cause of the plaintiffs injury. As discussed above, cases in the accountant malpractice area have used the term "a proximate cause" in articulating the standard that the plaintiff must prove. In the legal malpractice context, an often-cited formulation of the standard of proof requires that three elements be established: "(I) the negligence of the attorney; (2) that the negligence was the proximate cause of the loss sustained; and (3) proof of actual damages. It requires the plaintiff to establish that counsel failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that ‘but for’ the attorney’s negligence, the plaintiff would have prevailed in the matter or would have avoided damages." (Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, I 0 [I st Dept 2008] [internal quotation marks omitted, citing AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 (2007].) In other legal malpractice cases, however, the courts have held that the attorney’s malpractice must have been "a" proximate cause of the plaintiffs injury. (See 180 E. 88th St. Apt. Corp. v Law Off. of Robert Jay Gumenick, P.C., 2010 NY Slip Op 33848 [U], 2010 NY Misc Lexis 6878 [Sup Ct, NY County] [discussing varying formulations of attorney malpractice standard], affd 84 AD3d 582 (1st Dept 2011].) The Second Department has expressly held that these varying
formulations of the proximate cause standard ("a" as opposed to "the" proximate cause) have "no
substantive import," and that the "but for" standard for attorney malpractice cases does not require proof that the defendant attorney’s negligence was the "sole proximate cause" of the plaintiffs losses. (Barnett v Schwartz, 4 7 AD3d 197, 203-205 (2d Dept 20071.) Although the First Department has not expressly so held, it recently approvingly cited the Second  Department’s holding. (See Borges v Placeres, 2014 NY Slip Op 08910, 2014 NY App Div Lexis 8822 [Dec. 23, 2014] [citing Barnett in holding that the trial court’s jury charge appropriately provided that defendant attorney’s malpractice must be a "substantial factor in causing plaintiffs harm"].) 1 The court assumes that the "but for" standard from the legal malpractice context applies equally to accountant malpractice claims. For purposes of this motion, however, the court need not reconcile the differing interpretations of this standard because, even in its most rigorous application, the standard is clearly satisfied by the evidence in the record. "

Summonses and Complaints served at the very last minute are a study in tension and worry.  With good reason, practitioners should fear the NY rules on service of pleadings.  Has the process server found a person of discretion?  Is in hand service good enough for the case? Has the after-mailing been performed correctly?   Sometimes, it is not and dismissal looms.  We see such a situation in Qing Dong v Chen Mao Kao  2014 NY Slip Op 01735 [115 AD3d 839]  March 19, 2014
Appellate Division, Second Department  where both defendants could have obtained dismissal, but for waiting too long to move to dismiss.

"Contrary to the plaintiff’s contention, service of the summons and complaint upon Chen Mao Kao and Dickman was not made within 120 days of the commencement of the action as required by CPLR 306-b. Although the summons and complaint were delivered to persons of suitable age and discretion at the actual places of business of those defendants on November 4, 2011, one day before the expiration of the 120-day period, service was not completed within that time frame because the second act required by CPLR 308 (2), the mailing, was not performed within the 120-day period (see Furey v Milgrom, 44 AD2d 91, 92-93 [1974]; see also Siegel, NY Prac § 72 at 120 [5th ed 2011]). Also contrary to the plaintiff’s contention, considering all of the circumstances of this case, the Supreme Court providently exercised its discretion in denying her cross motion to extend the time to serve the summons and complaint upon Chen Mao Kao and Dickman, nunc pro tunc, in the interest of justice (see CPLR 306-b; Leader v Maroney, Ponzini & Spencer, 97 NY2d 95, 105-106 [2001]; Khodeeva v Chi Chung Yip, 84 AD3d 1030, 1030-1031 [2011]; Calloway v Wells, 79 AD3d 786, 786-787 [2010]). Accordingly, the Supreme Court properly granted Dickman’s motion, and properly denied the plaintiff’s cross motion.

The Supreme Court also properly denied that branch of Chen Mao Kao’s cross motion which was pursuant to CPLR 306-b to dismiss the complaint insofar as asserted against him. Chen Mao Kao waived his objection that he was not timely served with the summons and complaint by failing to move for judgment on that ground within 60 days after serving his answer (see CPLR 3211 [e]). Balkin, J.P., Chambers, Lott and Hinds-Radix, JJ., concur."

It seems that everyone was in on the Barnie Madoff delusion, including  Unions in Upstate New York.  How the IBEW got involved with Madoff is not stated.  However, they lost enough money to sue their CPAs.  In Board of Trustees of Ibew Local 43 v D’Arcangelo & Co., LLP
2015 NY Slip Op 00113  Decided on January 2, 2015  Appellate Division, Fourth Department the court discusses accounting negligence standards and continuous representation. 

""Accounting malpractice or professional negligence contemplates a failure to exercise due care and proof of a material deviation from the recognized and accepted professional standards for accountants and auditors, generally measured by [generally accepted accounting principles] and [generally accepted auditing standards (GAAS)] promulgated by the American Institute of Certified Public Accountants, which proximately causes damage to plaintiff" (Cumis Ins. Socy. v Tooke, 293 AD2d 794, 797-798; see Berg v Eisner LLP, 94 AD3d 496, 496). Here, plaintiff sufficiently alleged that defendant committed malpractice in not adhering to GAAS by, inter alia, failing to obtain a SAS 70 report, and that defendant’s negligence proximately caused plaintiff to sustain damages (see Sacher v Beacon Assoc. Mgt. Corp., 114 AD3d 655, 657). Although defendant contends that GAAS did not require it to obtain a SAS 70 report, it did not submit any evidence establishing that fact in support of its motion (see generally C.P. Ward, Inc. v Deloitte & Touche LLP, 74 AD3d 1828, 1829-1830; Cumis Ins. Socy., 293 AD2d at 798), and [*2]we disagree with the court that such a determination could be made as a matter of law in the absence of such evidence (see Berg, 94 AD3d at 496). With respect to proximate cause, "[a]s a general rule, issues of proximate cause[, including superceding cause,] are for the trier of fact" (Hahn v Tops Mkts., LLC, 94 AD3d 1546, 1548 [internal quotation marks omitted], citing Derdiarian v Felix Contr. Corp., 51 NY2d 308, 312, rearg denied 52 NY2d 784; see Bachmann, Schwartz & Abramson v Advance Intl., 251 AD2d 252, 253), and we see no basis to depart from that general rule in this case (see Sacher, 114 AD3d at 657). Plaintiff alleged that defendant should have obtained the SAS 70 report to confirm the existence and valuation of the funds’ investments. Plaintiff further alleged that, had defendant done so, it would have discovered that it could not confirm the existence of those securities, and plaintiff could have redeemed its investments.

As an alternative ground for affirmance (see generally Parochial Bus. Sys. v Board of Educ. of City of N.Y., 60 NY2d 539, 545-546; Hyatt v Young, 117 AD3d 1420, 1421; Summers v City of Rochester, 60 AD3d 1271, 1273), we agree with defendant that the third through sixth causes of action should be dismissed as duplicative of the professional malpractice cause of action, including the causes of action for fraud (see Long v Cellino & Barnes, P.C., 59 AD3d 1062, 1062), and breach of fiduciary duty (see Matter of HSBC Bank U.S.A. [Littleton], 70 AD3d 1324, 1325, lv denied 14 NY3d 710; Dischiavi v Calli [appeal No. 2], 68 AD3d 1691, 1693). Those causes of action make the same allegations of wrongdoing as the professional malpractice cause of action and do not seek any different damages. The second cause of action for breach of contract was already dismissed by a federal court as duplicative of the professional malpractice cause of action, and plaintiff does not dispute that collateral estoppel bars that cause of action. We reject defendant’s contention, however, that the professional malpractice cause of action, to the extent that it relies on the 2007 audit report, should be dismissed as time-barred. We conclude that plaintiff sufficiently pleaded that the continuous representation doctrine applies to toll the statute of limitations with respect to the 2007 audit report (see Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d 191, 195-196)."

A client is free to sue his professional, whether it be an attorney, an accountant or even a doctor.  But, if the client has "dirty hands" or has participated in some untoward act, he may be blocked from pursuing the case.  This is the principal of "in pari delicto."

In an accounting setting, Schwartz v Leaf, Salzman, Manganelli, Pfiel, & Tendler, LLP  2014 NY Slip Op 08823  Decided on December 17, 2014  Appellate Division, Second Department  is an example of the rule and an exception.  Where an agent engages in wrongdoing, that misconduct may be attributed to the principal.  Sometimes not. 

"The Supreme Court properly denied that branch of the defendants’ motion which was to dismiss the accounting malpractice cause of action pursuant to CPLR 3211(a)(1). The defendants contend that that cause of action is barred by the doctrine of in pari delicto, "which mandates that the courts will not intercede to resolve a dispute between two wrongdoers" (Kirschner v KPMG LLP, 15 NY3d 446, 464). However, the adverse interest exception to the doctrine of in pari delicto provides that "when an agent is engaged in a scheme to defraud his principal, either for his own benefit or that of a third person, the presumption that knowledge held by the agent was disclosed to the principal fails because he cannot be presumed to have disclosed that which would expose and defeat his fraudulent purpose" (Center v Hampton Affiliates, 66 NY2d 782, 784). Here, the documentary evidence submitted by the defendants did not conclusively foreclose the application of the adverse interest exception to the in pari delicto defense (see Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d at 196-199; compare Chaikovska v Ernst & Young, LLP, 78 AD3d 1661, 1662-1664)."

The legal principals are straightforward, and the prose is cool and scholarly, but the subtext to this legal malpractice case is heartbreaking.  Parent against child; economic interests tearing apart families. 

Take a look at Cusimano v Wilson, Elser, Moskowitz, Edelman & Dicker LLP   2014 NY Slip Op 04428 [118 AD3d 542]  June 17, 2014   Appellate Division, First Department

"Plaintiff failed to allege facts that would satisfy the proximate cause element, namely, that "but-for" defendants’ alleged inadequate and ineffective representation of her in the underlying arbitration, she would have succeeded in demonstrating that her parents lacked an ownership interest in a contested family asset (see Lieblich v Pruzan, 104 AD3d 462 [1st Dept 2013]). Plaintiff stated that if defendants had introduced her parents’ personal income tax returns in the underlying arbitration proceeding, the arbitration panel would have had no choice but to consider them, credit their contents, and hold that the information contained therein (i.e., that the parents allegedly made no claim of an ownership interest in the contested family asset) was binding against the parents in accordance with the tax estoppel doctrine. The contention that mere submission of the parents’ personal income tax filings in the arbitration proceeding would necessarily have altered the arbitration panel’s determination regarding the parents’ ownership interest in the subject asset is grounded in speculation, and thus, insufficient to sustain a claim for legal malpractice (see e.g. AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 435 [2007]; Pellegrino v File, 291 AD2d 60, 64 [1st Dept 2002])."

Plaintiff lacked two elements of a successful legal malpractice case.  The two missing elements were  the "but for" aspect which requires that "but for" the mistake of the attorney there would have been a better outcome for the estate.  The second missing element was ascertainable damages.  Here, the estate had to prove that there would have been identifiable damages in the future.

Estate of Feder v Winne, Banta, Hetherington, Basralian & Kahn, P.C.  2014 NY Slip Op 03593  117 AD3d 541] May 15, 2014 Appellate Division, First Department held that dismissal was warranted. 

"The motion court properly dismissed the legal malpractice claim. Plaintiff, the wife of decedent, failed to adequately allege that defendant acted negligently in advising her to pay the estate tax out of decedent’s estate, rather than making a qualified terminable interest property (QTIP) election (see Internal Revenue Code [26 USC] § 2056 [b] [7]). Such a QTIP election would have deferred payment of any estate taxes until plaintiff’s death, at which time they would be paid out of her estate. Defendant explained that while a QTIP election might have resulted in an immediate tax savings during plaintiff’s lifetime, it could have left significantly less to the residuary beneficiaries of decedent’s estate. Defendant’s legal obligation was to the estate, not to plaintiff. Thus, as the motion court concluded, defendant selected one among several reasonable courses of action (see Rosner v Paley, 65 NY2d 736, 738 [1985]; Rodriguez v Lipsig, Shapey, Manus & Moverman, P.C., 81 AD3d 551, 552 [1st Dept 2011]). Indeed, another firm with whom plaintiff consulted stated that defendant’s analysis was correct. To the extent plaintiff argues that defendant failed to consider other alternatives, such as gifts or other trusts, those options would have contradicted the decedent’s apparent testamentary intent to retain control and distribute the remainder of his assets to his children upon plaintiff’s death.

The court also correctly concluded that plaintiff failed to adequately allege that defendant’s conduct proximately caused any ascertainable damages. Plaintiff’s damages claim was based largely on speculation that the estate tax payment could have been avoided in the future, which, as plaintiff itself acknowledged in her motion papers, depended on too many [*2]uncertainties, including future tax laws, tax rates, and the future value of the trust property (see e.g. Brooks v Lewin, 21 AD3d 731, 734-735 [1st Dept 2005], lv denied 6 NY3d 713 [2006])."

Judiciary Law 487 is the ancient attorney deceit law.  It arose just years after the Magna Carta.  During the period between 1267 and today, attorneys have constantly been negotiating cases for their clients.  Here, in Wailes v Tel Networks USA, LLC  2014 NY Slip Op 02861 [116 AD3d 625]
April 24, 2014  Appellate Division, First Department  we see that there is absolute immunity for settlement negotiations, which can never be the basis of a JL 487 claim.

"The allegations of Snyder’s conduct in his representation of defendant Tel Networks USA, LLC during settlement discussions with plaintiff, which plaintiff characterizes as "overzealous and intimidating," do not state a cause of action under Judiciary Law § 487. The complaint alleges neither an intent to deceive nor "a chronic and extreme pattern of legal delinquency" that caused plaintiff a loss (Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 13 [1st Dept 2008] [internal quotation marks omitted], lv denied 12 NY3d 715 [2009] Nason v Fisher, 36 AD3d 486, 487 [1st Dept 2007]). Moreover, the only allegations of wrongdoing refer to a settlement discussion had after Tel Networks commenced a legal proceeding, and that communication is absolutely privileged (see Wiener v Weintraub, 22 NY2d 330 [1968] Mosesson v Jacob D. Fuchsberg Law Firm, 257 AD2d 381, 382 [1st Dept 1999], lv denied 93 NY2d 808 [1999]). Concur—Sweeny, J.P., Acosta, Saxe, Manzanet-Daniels and Clark, JJ."

There are a lot of law firms that take on medical malpractice cases.  In the past, medical malpractice litigation was more lucrative than it is today.  At one time, attorneys were permitted a 33.3% fee. Now, it is on a lower sliding scale.  At one time physicians were willing to testify at trial for a more reasonable fee.  Today, some expert fees are astronomical.  This has seemingly led to a situation in which med mal lawfirms take on cases, look at them for a while, do the discovery, and then when the case will not settle at the end of depositions, dump the case.  Often, they say that they were unable to "find" an expert.  Sometimes that means that they were unwilling to utilize an expert.

In Snyder v Brown Chiari, LLP  2014 NY Slip Op 02363 [116 AD3d 1116]  April 3, 2014  Appellate Division, Third Department the law firm tried to be relieved near the end of litigation, and failed.  They said that no expert could be found.  The doctors then successfully move to dismiss.  Was this legal malpractice?

"Plaintiff stated a cause of action for legal malpractice. Elements of such a cause of action include "establish[ing] both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action ‘but for’ the attorney’s negligence" (AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007] [citations omitted] accord Alaimo v McGeorge, 69 AD3d 1032, 1034 [2010]). In the procedural context of a motion to dismiss for failure to state a cause of action, "the court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]). "Whether the plaintiff will ultimately be successful in establishing those allegations is not part of the calculus" (Landon v Kroll Lab. Specialists, Inc., 22 NY3d 1, 6 [2013] [internal quotation marks and citations omitted]) and "a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint" (Leon v Martinez, 84 NY2d 83, 88 [1994]).

Here, plaintiff submitted, among other things, an affidavit and attached memorandum from a physician licensed in New York. This physician had been consulted by defendants in 2003, and he produced his memorandum from such time which set forth in ample detail for purposes of opposing a motion to dismiss that plaintiff’s surgeon deviated from appropriate care. His affidavit reaffirmed that he believed there was malpractice in the treatment of plaintiff by her surgeon and, further, stated that he had been available to testify at the scheduled 2007 trial, but was never contacted by defendants. Such proof, together with the detailed allegations in the complaint, state a cause of action.

Defendants urge as an alternative ground for affirmance the collateral estoppel argument that they unsuccessfully asserted before Supreme Court. They premise this argument upon the fact that Supreme Court permitted their lien on plaintiff’s file and the line of cases which hold that "where a client does not prevail in an action brought by counsel for the value of professional services, a subsequent action by the client for malpractice is barred by collateral estoppel" (Thruway Invs. v O’Connell & Aronowitz, 3 AD3d 674, 676 [2004] see e.g. Zito v Fischbein Badillo Wagner Harding, 80 AD3d 520, 521 [2011]). Here, at the appearance regarding the lien on the file, plaintiff was, as stated by Supreme Court in its decision, "expressly prevented by [Supreme] Court from asserting any claims relative to the actual services performed by [d]efendants, and strictly limited to a discussion of the accuracy of the amount of the disbursements made by [d]efendants on her behalf." We agree with Supreme Court’s characterization of the lien dispute and, under such circumstances, further agree with Supreme Court that plaintiff did not previously have a full and fair opportunity to litigate the issue of whether defendants were negligent so as to support invoking collateral estoppel (see generally Buechel v Bain, 97 NY2d 295, 303-304 [2001], cert denied 535 US 1096 [2002]). The remaining arguments, to the extent properly before us, are academic or without merit.

"