RRD Prevails in New York Appellate Division

February 9, 2018

RRD partner John F. Costa prevailed in New York’s Appellate Division, Second Department in a claim of legal malpractice against RRD’s client, a Connecticut attorney.

The claim arose out of two trusts created by the plaintiff’s grandfather for the plaintiff’s mother and aunt, the respective income beneficiaries of each trust, referred to as Trust A and Trust B. In the event of the death of the income beneficiary, the remaining principal was to be inherited by the income beneficiary’s children. In the event the income beneficiary died without children, the remaining income of that trust was to flow into the other trust. Plaintiff’s aunt had no children. Thus, upon her death, the remaining principal of that trust – Trust B – was to flow into Trust A, and the plaintiff and his siblings would be considered contingent beneficiaries of Trust B. Plaintiff’s aunt considered her life’s work to be her “child” and wanted the remaining principal under Trust B to be used to fund a “foundation” related to her work. Plaintiff’s aunt unsuccessfully sought the consent of plaintiff and his siblings to waive their contingent beneficiary interest in Trust B in order to fund her foundation. Plaintiff’s aunt then decided to adopt a colleague who shared her passion for her work as a way to achieve her goal of using Trust B to fund the foundation. The adult adoption was initially accomplished but was ultimately vacated in response to a legal challenge to it brought by plaintiff and his siblings. This returned the plaintiff’s interests and that of his siblings in the trusts to status quo.

Despite this, plaintiff brought a lawsuit against a number of individuals including his aunt, the would-be adopted adult, a financial consultant who managed the trusts, an accountant for the trusts, the attorney who represented the aunt in the adoption proceeding, RRD’s client – an attorney who provided legal services related to the trusts, and attorneys who provided legal services to the aunt regarding the trusts. Plaintiff claimed that the defendants employed a nefarious “team approach” in concocting the doomed adoption in order to defraud plaintiff of his contingent beneficiary interest in Trust B.

All defendants filed motions to dismiss in the Supreme Court which were granted.  The plaintiff appealed to the Appellate Division, Second Department.  Oral argument took place in December 2017 and in a decision dated February 7, 2018, a unanimous court denied plaintiff’s appeal. In doing so, the court found that the plaintiff failed to allege facts sufficient to establish that he justifiably relied to his detriment upon a misrepresentation by any of the professional defendants or that he sustained any recoverable pecuniary damages as a result of the professional defendants’ alleged fraudulent conduct.  The court also concluded that New York does not recognize civil conspiracy to commit a tort as an independent cause of action. Moreover, since the underlying tort of fraud was properly dismissed, the cause of action alleging civil conspiracy to commit fraud was also properly dismissed. Finally, the court held that the plaintiff failed to allege facts sufficient to establish that he sustained pecuniary damages as a result of the professional defendants’ alleged breaches of their fiduciary duties.