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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 3, 2020

Court Enforces Disclaimer of Fiduciary Duty

On October 20, 2020, the First Department issued a decision in La Scoula D’Italia Guglielmo Marconi v. Gates Capital Corp., 2020 NY Slip Op. 05859, enforcing a disclaimer of fiduciary duty, explaining:

Here, the documents conclusively establish that defendants acted as placement agent to plaintiff and not, as plaintiff now contends, also as a financial advisor who owed plaintiff fiduciary duties.

Among other documents, the engagement letter states Gates’ role as Placement Agent will be to exert its best efforts to assist plaintiff in raising the funds, the Bond Placement Agreement (BPA) similarly defines Gates as placement agent, and the parties referred to Gates as placement agent in correspondence.

Paragraph 15 of the BPA expressly disclaims any fiduciary relationship between plaintiff and defendant Gates in connection with the offering of the Bonds or the process leading thereto, and plaintiff does not articulate any services performed by defendants that would fall outside of this category.

Plaintiff argues that the motion court failed to recognize that certain services in the engagement letter overlap with the Municipal Securities Rulemaking Board (MSRB) description of services that can be provided by a municipal advisor with fiduciary duties. This argument is unavailing as plaintiff fails to show such services, even if among those that can be performed by financial advisors, also fell outside of the process leading to the offering of the Bonds, as they would have to, in order to avoid the fiduciary duty disclaimer of the BPA. The examples of supposed advisory work that plaintiff gives, e.g., evaluating each bond structure, making recommendations for the financing team, creating a financing schedule, and exploring the bridge financing in advance of the tax exempt bond financing, even as plaintiff describes them, fall within the broad scope of the process leading to the bond offering. The same holds true for defendants’ use of the word advisor in the PowerPoint presentation made the day before the engagement letter was executed, as it was used to describe in what capacity plaintiff would supervise and oversee the entire financing process. That the BPA did not come about until eight months into the parties’ relationship is beside the point, since plaintiff articulates no services rendered during those eight months that would have fallen outside the scope of the fiduciary duty disclaimer.

(Internal quotations and citations omitted).

Fiduciaries have special duties and complex commercial litigation often involves allegations of a breach of those duties. We both bring and defend breach of fiduciary duty and professional malpractice claims and other claims relating to the duties of trustees and professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of such claims.

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