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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 7, 2018

Legal Malpractice Claim Properly Dismissed as Time-Barred

On October 30, 2018, the First Department issued a decision in Brean Murray, Carret & Co. v. Morrison & Foerster LLP, 2018 NY Slip Op. 07238, affirming the dismissal of a legal malpractice claim as time-barred, explaining:

The malpractice claim was properly dismissed as time-barred, and the doctrine of equitable estoppel will not toll a limitations statute where plaintiffs possessed timely knowledge sufficient to have placed them under a duty to make inquiry and ascertain all the relevant facts prior to the expiration of the applicable statute of limitations. Here, the alleged malpractice occurred in December 2010 when defendant issued its opinion letter that nothing has come to our attention that leads us to believe that the registration statement contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Thereafter, a public report which broke the news of Puda’s fraud on April 8, 2011 confirmed that the fraudulent transfers of ownership of Shanxi Coal were documented in government filings. There was nothing preventing plaintiff from accusing defendant of substandard care in April 2011, based on defendant’s opinion letter, when compared to statements made in the public report and the securities litigation that followed in April 2011.

Plaintiff’s contention that it relied on defendant because it was a large, international law firm with alleged expertise in China-based companies, and because it trusted that defendant would comply with professional standards and its fiduciary duty to advise plaintiff if its work product was deficient, is misplaced. Plaintiff maintains that defendant’s withdrawal as counsel did not exempt it from such standards, as the decision to terminate the relationship constituted an act of concealment that left plaintiff in the dark regarding the extent of defendant’s potential liability. Even if plaintiff’s allegations of concealment were true, plaintiff has failed to demonstrate its due diligence, for it was on inquiry notice by at least 2011 and failed to make a reasonable investigation.

(Internal citations and quotations omitted).

We both bring and defend professional malpractice claims and other claims relating to the duties of professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you have questions regarding such claims or appeals of such claims.

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