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May 13, 2024
First Department Revives Claims Against Accountants For Malpractice and Fraud Despite Evidence Showing They Disclosed The Purportedly Fraudulent Transactions In Company’s Financial Statements
On April 4, 2024, the Appellate Division, First Department, reversed a lower court decision to dismiss claims for malpractice and aiding and abetting fraud brought against an accounting firm despite evidence showing the accountants had disclosed the allegedly fraudulent transactions to the plaintiffs. In 1650 Broadway Associates, Inc., et al. v. Kenneth Strum, et al., Index No. 651690/2021, majority owners of the Manhattan 50s-themed Stardust Diner asserted claims against their former accountants after allegedly uncovering years of financial malfeasance by the diner’s minority owner and manager. The wrongdoing included taking unauthorized loans from the diner and forging one plaintiff’s signature on loan guarantees. The plaintiffs sued both the manager and the diner’s accounting firm, arguing the accountants knew of the fraudulent loans and breached their fiduciary duties by failing to alert them of the misconduct. Read More
December 8, 2023
Court Denies Motion To Dismiss Upon Reargument Finding Causation Was Alleged
In a Decision and Order, dated October 25, 2023, in Prospect Capital Corp. v. Morgan Lewis & Bockius LLP, Index No. 653941/2022, Justice Margaret A. Chan granted plaintiff’s motion for reargument and, upon reargument, denied defendant’s motion to dismiss. The case concerned plaintiff’s claim for legal malpractice in connection with services rendered by defendants while negotiating the terms of a subordinated debt agreement. The Court had previously granted defendants’ motion to dismiss due to failure to allege causation or damages. However, upon reargument, the Court explained: Read More
