Justice Shirley Werner Kornreich
Law firm Winston & Strawn (W&S) moved to dismiss the amended complaint by the Ross plaintiffs, the individual stockholders of Leggiadro Ltd., which alleged a claim for legal malpractice. Leggiadro’s new landlord sought to buy out their lease. Plaintiffs hired W&S specifically requesting it advise them of any tax liabilities arising from the buy-out. Plaintiffs claimed they incurred unexpected State and City tax liabilities from the differences in how the state, the city and the IRS treat S-corporations for tax purposes. They argued W&S failed to inform them of these tax issues. W&S moved for dismissal arguing no attorney-client relationship existed with the Rosses, and they failed to properly plead the alleged malpractice was the proximate cause of non-speculative damages. The Rosses argued that the special circumstances of the representation created a near-privity relationship. The court disagreed finding plaintiffs could not have reasonably relied on any representation or omission by W&S as to the existence of their individual pass-through tax liability as they knew such liability existed through their long history of paying these taxes as stockholders of an S-corporation. Hence, the Rosses’ claims were dismissed.
