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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 28, 2020

Providing Legal Advice to Person Accused of Fraud Insufficient to Support Aiding and Abetting Claim

On April 23, 2020, Justice Cohen of the New York County Commercial Division issued a decision in Space Race, LLC v. Alabama Space Science Exhibit Commn., 2020 NY Slip Op. 31299(U), holding that providing legal advice to a person accused of fraud is an insufficient basis for a claim of aiding and abetting fraud, explaining:

Allegations that a law firm provided routine professional services to a primary fraudster is not sufficient to establish a claim for aiding and abetting. As noted above, the legal position asserted by counsel in opposing confirmation of the arbitration award – i.e., that the Barnhart decision warranted a renewed attempt to assert sovereign immunity – was by no means frivolous. Indeed, it likely would be counsel’s professional obligation as a zealous advocate to raise a potentially dispositive defense based on a change in the law, leaving for the court to decide if her or his client is entitled to the benefit of such a change.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. In New York, a defendant also can be held liable for aiding and abetting a fraud, which is what is at issue in this decision. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim.

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