A group of property owners has brought a legal malpractice suit against Herrick, Feinstein and two firm partners, claiming their advice on claiming deductions on a donation has led to an expensive dispute with the Internal Revenue Service. The plaintiffs, including IG Second Generation Partners, Normandy Management Co. and Mecox Partners, filed suit in Manhattan Supreme Court against the firm, Michael Kessel, a tax partner, and Dennis Russo, co-chair of Herrick’s real estate department. The plaintiffs are seeking more than $550,000 in damages for each cause of action, including legal malpractice and breach of fiduciary duty.
The property owners claim in BLDG Christopher v. Herrick Feinstein, 651-795/2012, that the firm and its lawyers told them their donations of easements to charitable organizations would be deductible for federal income tax purposes, but that the IRS said the deductions could be improper because, among other matters, the deeds prepared by the law firm appeared non-compliant.
The IRS found Mecox was not entitled to the easement deduction, according to the suit. Mecox is fighting that determination in the Southern District in Mecox Partners v. United States, 1:11-cv-08157-GBD. The plaintiffs in state court claim that the result of the Mecox litigation will determine the IRS’ claims against the other businesses. If the IRS prevails, they say, “plaintiffs would collectively face tax, penalties and interest totaling tens of millions of dollars.”
A Herrick spokeswoman, Shannon Lynch, declined to comment. Russo and Kessel did not return messages seeking comment. The businesses are represented by Pryor Cashman partner Todd Soloway and counsel Luisa Hagemeier. Soloway could not be reached and Hagemeier declined to comment.