Boesky v Levine

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Boesky v Levine 2018 NY Slip Op 33017(U) November 27, 2018 Supreme Court, New York County Docket Number: 650756/2017 Judge: Eileen Bransten Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*[FILED: 1] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 SUPREME COURT OF THE STATE OF NEW. YORK COUNTY OF NEW YORK - CIVIL TERM: PART 3 ------------------------------------------------------------------ :x: STUART J. BOESKY and ALAN P. Hlfuv1ES, Index No. 650756/2017 Mot. Seq, Nos, 001-004 Plaintiffs, - against HAROLD LEVINE, HERRICK FEINSTEIN LLP, MORITT HOCK & HAMROFF LLP, .RONALD KATZ and MAZARS USA. LLP, as successor in interest to WEISER LLP, Defendants, -------------------------------------------------------------------- ){ EILEEN BRA.NSTEN, .J. In this action, plaintiffs seek to recover damages for, among other things, defendants' aHeged fraud and negligence in connection with their tax-related advice, in the preparation of plaintiffs' ta"{ returns, and in their representation of plaintiffs in the litigation of a tax disput(~. Defendants Mazars USA LLP as successor in interest to \Veiser LLP (Mazars USA), Herrick Feinstein LLP (He1Tick Feinstein), Ivforitt Hock & Hamro±f LLP (Moritt Hock), and Harold Levine, separately rnove to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211 (a) (5) and (a) (7) (Motion Sequence Nos. 001- 004, respectively). 1 For the following reasons, the motions are grantedo 1 Defendant Ronald Katz had not yet appeared ]n this action and, indeed, was subsequently ordered to respond to the Complaint in Motion Sequence 005. See Decision and Order dated April 19, 20 J8. The Defendant argued in his motion papers that he was not required to file a response to the Complaint as he had initiated a Bankruptcy Proceeding in the Southern District of Florida, See id at Tr. 1JA-11:6 On July 27, 2017 the Bankruptcy vvas dismissed with prejudice but leave was granted fi.)r Defendant Katz to file another pefaion within 180 days. See l\lYi'lCEF . Doc. 94, It is unclear whether the Defendant ever filed a second bankruptcy petition within that 180-day period as nothing was subsequently filed \.Vith this court. Pursuant to a vvritten clarification to the Decision on Motion sequence 005, Defendant Katz was to file a 2 of 40 [*[FILED: 2] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 2 of38 The following facts are dra,,:vn from the complaint. Defendant Harold Levine, an attorney, was a partner in the tax department of defendant law finn Herrick Feinstein from 2002 tbrnugh Septemb(~r 2012, where he served as co-chair of the firm's Tax and Persona! Planning Department and headed the firm's Tax Group. Comp. ,-r 9, In September 2012, Levine left Herrick Feinstein and began practicing at defendant law finn Maritt Hock, where he served as a partner and chair of the Tax Group until he was indicted for tax fraud in October 2016. ld ~~4, 12. Defendant Ronald Katz, an accountant, was a partner at defendant tax advisory and accounting firm Mazars USA, vvhere he, among other things, oversaw the preparation of tax returns for certain entities and individuals. Id. at i-fl 8. Katz was also indicted for tax fraud in October 2016. See id. at ~13. Plaintiffs Boesky and Hirmes were senior executives of The Related Companies, Inc. (Related), a global real estate development firm to which Katz provided tax advice and accounting services. ld. at il~i 22-24. In or about 2002, Boesky approached Katz, who had become a trusted advisor to plaintiffs, to inquire whether Katz k11e'lv' of any legitimate real estate deals that would reduce Boesky's tax liability. Id. at ~f 25. Katz infonned Boesky that he knew of a strategy to take advantage of a legal loophole in the tax law, whereby Boesky could invest in a limited liability company (LLC) for the sole purpose of purchasing and then donating a motion to dismiss \Vithin 20 days of the April 19 Decision and Order, and the deadline to othervvise file an Answer only was extended to 10 days following the Decision on these instant 3 of 40 [*[FILED: 3] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 3 of38 remainder interest in ce1iain real estate (or a remainder interest in the rights to an entity that directly or indirectly holds the real estate). The amount of the charitable deduction ciaimed would be higher than the amount Boesky paid to acquire the remainder interest, thereby creating a tax deduction offaetting most of the income realized by Boesky for that tax year. Id. at ~26. This strategy is referred to in the complaint as the "remainder interest tax strategy". Id. At the behest of Katz, plaintiffs retained Katz's close friend Levine, to provide them Vvith legal advice and services concerning the remainder interest tax strategy, including fonning the LLCs required to execute the strategy. Id. at ~27. In 2002, Levine and Herrick Feinstein began providing legal advice and services to plaintiffs pursuant to oral agreements. See Cornp. at 4128. At the time, plaintiffs did not have a i,.vritten engagement letter with Levine or Herrick Feinstein. Id Levine advised plaintiffs that the charitable deduction created by the remainder interest tax strategy was !egal and the "only legitimate way" to shelter income from taxation. Id. at ~~ 31- 32, Levine also told plaintiffs that a taxpayer utilizing the remainder interest tax strategy had been audited by the Internal Revenue Service (IRS) and prevailed in the audit See id. at~- 34. In addition, he told plaintiffs that the IRS had issued a letter ruling, or other position statement, that the remainder interest tax strategy was a legitimate tax savings transaction. Id. In reliance on their relationship of trust and confidence with Katz, Levine's advice, and the reputation of Herrick Feinstein, plaintiffs decided to engage in the remainder interest tax strategy, the arrangement of which was primarily handled by Levine. Id,~ 36. From 2002 and motions. See NYSCEF Doc. 114. 4 of 40 [*[FILED: 4] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boe sky v. Levine et al. (650756/2017) Page 4 of38 2004, between them, plaintiffs invested in the following LLCs for the sole purpose of executing the strategy: PSRE Holdings LLC; RERI Holdings I LLC (RERI); BASH Real Estate LLC; RARE Investments IV LLC; and CMBH Real Estate Holdings, LLC (collectively the LLCs). Id. i37. Their investments in these LLCs totaled approximately $23 million, Id.~~ 39-41. Each of the LLCs executed a remainder interest tax strategy in order to create a large deduction for ta..x purposes that could be claimed by plaintiffs on their personal income tax returns. Id.~ 42. As a result, betvveen them, plaintiffs claimed more than $14 million in charitable deductions on their federal and state income tax returns from 2002 to 2005. Id. Katz and Mazars USA prepared plaintiffHirmes's personal income tax returns for the tax years 2002 through 2016, and plaintiff Boesky's personal incorne ta..~ returns for the tax years 2005 through 2007. See Comp, ~i 46-46, Katz and Mazars USA also prepared the income tax returns for the LLCs. See id at 1!47. In or about 2006, the IRS and the New York State Department ofTa..:"Xation and Finance (NYSDTF) began to audit each of the LLCs and the individual members engaged in the remainder interest tax strategy. Id. at i 62. On June 20, 2007, Levine sent Boesky a notice from the NYSDTF, dated June 13, 2007, which stated that the NYSDTF determined that the remainder interest tax strategy, was a "tax avoidance transaction" and that it intended to challenge any purported tax benefits from such a transaction on the grounds that the method of appraisal was inappropriate and resulted in an inflated fair market value for the donated property; the transaction was not done for a valid business purpose; and had no economic substance other than for obtaining tax benefits. Id. at~[ 63. The notice also stated that, pursuant to NYSDTF 5 of 40 [*[FILED: 5] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky Vo Levine et al. (650756/2017) Page 5 of38 regulations, any taxpayer participating in such a transaction was required to disclose his or her pruiicipatkm. ld at iJ4! 64-650 Defendants failed to file these disclosure statements. Instead of advising plaintiffs of the applicability and implications of the notice, defendants continued to tell plaintiffs that the transactions were legal. Id at 4f 70. Between 2006 and 2008, the IRS also sent plaintiffs notices of deficiency on the tax returns involving BASH Real Estate LLC, RA.RE Investments IV LLC, and CMHH Real Estate Holdings, LLC, demanding payment of several hundred thousand dollars in additional taxes and penalties. Id. at 4[4[ 127-1380 Additionally, in or about 2007, the IRS issued a notice designating transactions similar, or identical to, the remainder interest tax strategy as "transactions of interest". S'ee Comp. at ir~ 72-74. Under IRS regulations, if the IRS deelares a certain transaetion a "transaction of interest" after the filing of a tax return re.fleeting sueh transaction, the taxpayer must file a disclosure statement vvithin 90 days. See id at ~77. However, defendants failed to file the disclosure statement within 90 days. !d. at 4f 90 Instead of advising plaintiffs of th{.~ applicability or implications of the notice, defendants eontinued to tell them that the transactions -;,;vere legaL Id, at ~ 800 At some point, the IRS and the NYSDTF begru1 to focus specifically on auditing RERI because of the signifieant size of the deduction RERI claimed on its 2003 foderal income tax rettm1. Id. at~ 82. In or about 2008, the IRS denied approximately $30 million of RERI's $33 million charitable deduction, on the ground that RERI overstated the value of the eharitable contribution reported on its 2003 income tax return and assessed an accuracy-related penalty on any resulting underpayment of income tax. Id. 6 of 40 [*[FILED: 6] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 65075~/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 5 of38 participation. Id. at if~ 64-65. Defendants failed to file these disclosure statements. Instead of advising plaintiffs of the applicability and implications of the notice, defendants continued to tell plaintiffs that the transactions were legal. Id. at ii 70. Between 2006 and 2008, the IRS also sent plaintiffs notices of deficiency on the tax returns involving BASH Real Estate LLC, RARE Investments JV LLC, and CMBH Real Estate Holdings, LLC, demanding payment of several hundred thousand dollars in additional taxes and penalties. Id. at iii! 127-138. Additionally, in or about 2007, the IRS issued a nolice designating transactions similar, or identical to, the remainder interest tax strategy as "transactions of interest". See Comp. at~~ 72-74. Under IRS regulations, if the IRS declares a certain transaction a "transaction of interest" after the filing of a tax return reflecting such transaction, the taxpayer must file a disclosure statement within 90 days, See id. at i171. However, defendants failed to file the disclosure statement within 90 days, Id. at~ 9. Instead of advising plaintiffs of the applicability or implicatious of the notice, defendants continued to tell thern that the transactions were legaL Id. at ii 80. At some point, the IRS and the NYSDTF began to focus specifically on auditing RERI because of the significant size of the deduction RERI claimed on its 2003 federal income tax return. id. at~ 82. In or about 2008, the IRS denied approximately $30 million ofRERI's $33 million charitable dt~duction, on the ground that REIU overstated the value of the charitable contiibution reported on its 2003 income tax return and assessed an accuracy-related penalty on any resulting underpayment of income tax. Id, 7 of 40 [*[FILED: 7] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Bl)esky v. Levine et al. (650756/2017) Page 6 of38 Levine, in his capacity as the tax matters partner (TMP) for RERI, received a notice from the IRS and a tax deficiency notice from the NYSDTF. Id. at ~84. On March 4, 2008, he e~ mailed plaintiffs, advising them that "there are many issues with NY's notice including statute of limitations, penalties imposed, and the denial of the deduction". ld. Levine requested that plaintiffa send any notices they received, or may receive, from the IRS or the NYSDTF to Levine or to Kyle Wissd, a tax attorney employed by Mazars USA. Jd, Levine also advised plaintiff§ to participate in a "coordinated response" or "group protest" to the New York State notices and the IRS audits. Id. On or about April 21, 2008, Levine, 1n his capacity as the TMP for RERI, petitioned the United States Tax Court, challenging the IRS's determination regarding the charitable deduction reported on RERl's 2003 income tax return, ld, at il~! 85~86; RERf Holdings L LLC, Harold Levine, Tt;,x lvfaJters Partner v Commissioner, Docket No. 9323-08. The petition, filed by San Francisco-based aH.omey Randall G. Dick, asked the Tax Court to find that RERI's charitable contribution was properly computed and that any adjustments frmnd by the court would not be subject to penalties, Comp. at~[ 85. This proceeding is referred to in the complaint as the "RERI Tax Case!' Plaintiffs each provided Herrick Feinstein with approximately $50,000 as their share of the "litigation fund" for the RERr Tax Case. Id. at i198. A trial took place in the RERI Tax Case in Ilme 2015, Id. at 1119. However, at the time plaintiffa commenced the instant act1on on February 10, 2017, the United States Tax Comt had yet to decide the case. ld. On July 3, 2017, the Tax Court issued a decision disallowing RERI's claimed charitable contribution in full on the 8 of 40 [*[FILED: 8] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 .Boesky v, Levine et aL (650756/2017) Page 7 of38 ground that RERI failed to satisfy Income Tax Regulation Ll 70A-13 (c) (2), which required it to disclose its costs or other basis in the charitably contributed property, The Tax Court also upheld the IRS's imposition of a "gross valuatlon misstatement" penalty against RERL See RE'Rf Holdings l, LLC, JeflBlau, Tax A1atters Parmer v Commissioner, 149 T.C. No. 1 (United States Tax Court 2017) (Docket No, 9324~08). On Dect.~mber 18, 2017, RERI filed a notice of appeal from the Tax Court's decision. As of this writing, the appeal remains pending bt.~fore the DC Circuit Court of Appeals. In the meantime, on April 23, 2008, Levine e-mailed plaintiffs advising them that RARE Investments IV LLC had been selected by New York State as a test case with respect to challenging the charitable contribution deduction and stating: "[ w ]e believe NYS is incorrect for a number ofreasons and plan on chal1enging their assessrnent". Comp, at iJ 87, Levine also advised plaintiff-; to retain Ellis Reemer, an attorney at the law fim1 DLA Piper, to represent them in challenging the NYSDTF's audit Id. In or about May 2008, plaintiffs sent payment to Levine and Herrick Feinstein to prepare and file a response to the NYSDTF' s audit ld. ~88. On or about May 16, 2008, Boesky signed a power of attorney form permitting Levine and Reemer to represent Boesky before the NYSDTfi. On August 21, 2008, Boesky e-rnailed Katz and \Vissel seeking advice on how to respond to a deficiency notice he received from the IRS fix 2005. Id. at ~90. On or about February 20, 2009, Wissel \~Tote to Levine stating: "[a]s you are aware, New York State has categorized certain charitable contributions of remainder interests in real property as listed transactions and 9 of 40 [*[FILED: 9] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 • Boesky v. Levine et al. (650756/2017) Pave 8 of38 0 taken steps in some instances to assess tax based on a reduction of that deduction taken in prior years. As _pali of the ongoing effurt to resolve these matters, we have negotiated a settlem~nt offor with J\"'YS whereby the State has agreed to allm:v a charitable deduction equal to 2 112 times an investor's original cash investment, calculate the increase in tax on that adjustment, and then add to that amount an interest charge plus a penalty equal to smio of that calculated interest, an subject to adjustment once a final determination is made by the [IRS]". Comp. at ~[91. Levine forwarded this correspondence to Boesky, who responded by asking Levine what he should do. Id. On April 20, 2011, Levine e-mailed RERI's members, including plaintiffa, stating that some of them had received a letter from the IRS asking them to voluntarily cooperate with the investigation ofRERL Id. at~] 94. Levine advised in his e~mail: "You should NOT reply. You should ignore the letter and if they contact you tell them that you are represented by counsel. Also please let me know if the IRS contacts you in this matter. The partnership and therefore you are represented by RandaH Dick an attorney based in SF in this rnatter". Id, at ~94 On April 25, 2011, Randall Dick wrote a letter to the IRS which was copied to Levine and RERI's members. The letter stated: "Truce note that the following individuals are represented by me in connection with the IRS's determination that rnembers ofRERI ... will owe additional tax as a result of the denial ofRERI's charitable contribution set forth in the pleadings on file in RERI Holdings I, LLC, Harold Levine, Tax l\fatters Partner v Commissioner, Docket No. 9323-08: .. , Alan Hemws [sicJ [and] Stuart Boesky" Cornp. at~[ 95. 10 of 40 [*[FILED: 10] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 6 Boesky v. Levine et al. (650756/2017) Page 9of38 On or about July 10, 2012, Levine sent an e-mail to Boesky, stating that Levine, Dick, and Wissel "have been defending each entity/contributor since" since 2007 and opined that the IR.S's "main theory of the case was 'weak at best' and that '[t]here is plenty of case law that supports the notion that there does not need to be a business purpose fix a charitable contribution"'. Id. at ir 97. Levine further stated in his e-mail that he had "been trying to settle the cases without going to trial for the past 5 years" and "made some proposals . . . trying to avoid the cost oflitigation and have been consistently rebuffed". Id. Levine stated: "10 days ago, under the guise of budget cuts, [the IRS] finally made an offer to settle the cases. Their offer was to reduce the deductions by 60°/o of the claimed amounts. They of course would impose interest but offered to eliminate penalties". !do Levine stated that both he and Dick hdieved the offer to be deficient and requested that Boesky contribute approximately $50,000, as his "share of the litigation fond" to pay for the trial of the RERI Tax Case, and to rnake the check payable to "Henick, Feinstein LLP Attorney Trust Account". Id. On April 29, 2013, Katz sent an e~mail to the participants of the remainder interest tax strategy, including plaintiffs, providing them with an update on the RERI Tax Case. Id. at 4199. Katz stated: "as a legal matter, all of the participants in the remainder interest donation cases will be bound by the legal conclusions advanced in the case". See id. He fi.uther stated that the "'only proposal offered by the IRS was that if ALL of the entities agreed to concede 60% of the charitable deductions the IRS wou.ld alkn~l the investors to deduct 40~·{i of the original claimed deduction. Randal [Dick] countered (over 10 months ago) with our proposal that we would 11 of 4 O [*[FILED: 11] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. RECEIVED NYSCEF: 11/30/2018 Boesky v, Levine et al. (650756/2017) Page 10 of 38 concede 25% of the deduction in order to settle the cases, \Ve have, as of yet, not received a response from the IRS". See Comp. at if99. On November 6, 2013, Dick sent an e-rnail to the participants of the remainder interest tax strategy, including plaintiffs, regarding the RER! Tax Case, stating that 18 months prior, he requested from more than 100 investors that they send him their pro rat.a share to the "lltigation fund". Id. at 1'f100. Dick stated that over 50 individuals sent their pro rata share, but that plaintiffs and the other recipients ofthe e-mail had not Dick stated that if he did not receive paymf.mt promptly, he would be "resigning from your representation and will inform the [IRS] of this". Id. Dick also stated the following: '"You are hereby advised to hire indt'..j)endent counsel to advise you in all dealings with the [IRS] regarding remainder interests. In addition, you should be aware that due to the fact that the litigation fund, that has been collected to date, is almost exhausted my next act will be to attempt to settle (on whatever tem1s the IRS is \Villing to settle) the RERI litigation. This settlement, however disadvantageous to the taxpayer, will become the threshold for the [IRS] in all your cases. As you know we have an infom1al agreement with the IRS to try only the RERI case and have it control the other cases. Once I resign that agreement will no longer apply to you or your entities" See Comp. ~ 101. On November 7, 2013, 65075~/2017 Bo(~sky responded to Dick's e-mail stating: "From your e-mail it is not clear to me how much money is uncollected and if collected it is enough to positively influence the outcome of your representation and our case . . . . Has Harold [Levine] \Vashed his hands of this? He had been the one communicating and coord]nating with the group. Maybe the thing to do is set up an escrm".\1 arrangement and if enough is paid in to continue your 'vigorous' representation ofthe cases the l~scrow would be released" (id.). That same day, Dick responded to Boesky's e~mail as follows: "Harold [Levine] has in no way 'washed his hands' of this . . . . It would really be a waste to have to throw in the towel at this late date since I believe we have a good case. I also think the government is beginning to agree vdth me . . . . I am unwilling to accept 12 of 40 [*[FILED: 12] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 11 of38 the escrow concept There is already too much red tape involved in this representation and I believe having the funds deposited into my trust account is more than suffident 1f you need additional information please contact [Levine]". Id. at 41102. On June 4, 2014, the United States Attorney's Office for the Southern District of New York (US Attorney) filed a civil complaint against Levine in the Southern District ofNew York, alleging that he promoted, implemented, and/or participated in at least 90 unlawfi.11 tax strategies and acquin.~d more than $5 million in fees for his role in the unlawful transactions. See id. at 4!103. The US Attorney sought to enjoin Levine from promoting any tax plan, including tax shelter strategies. ld. The complaint also sought to require Levine to produce a list of names of individuals and entities that participated in any tax schem1.~ promoted by Levim~ from 2005 onward. Id. 1n addition, it listed a number of tax shelter strategies believed to be unlawful and the entities that were alleged to have participated in them. However, the remainder interest ta"X strategy and the LLCs in which plaintiffs invested were not listed. Id. at ~100, After the US Attorney filed the complaint against Levine, Levine dmvnplayed the risk of losing the RERI Tax Case and of its members, including plaintiffs, becoming liable to the IRS and the NYSDTF for significant tax assessments, penalties and interest. Id. at 4fl05. In Ja.me and September 2014, Levine fonilfarded to plaintiffs status repmts on the RERI Tax Case that were prepared by Dick Id. at ir~r 106-107. On September 6, 2014, Boesky e-mailed Levine with respect to the RERI Tax Case, stating: "Someone needs to calculate what this will cost us if we lose so we can start planning". Comp. at ~108. Levine responded: "You should speak to your accountant. He is the only one who will know that answer". Id. 13 of 4 O [*[FILED: 13] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine d al. (650756/2017) Page 12of38 On September 7, 2014, Boesky e-mailed Levine stating: ..Harold I think the group is owed more color and assessment of the status .... r get the feeling we are in a very bad situation with a low probability of succeeding in litigation with a party that is not inclined to settle, You owe me and the others [sic] defendants an assessment of the situation". id. at i!109. Levine replied that he would "ask ... Dick to respond". ld. In Septernber and October 2014, Levine sent Boesky several e-mails from his Moritt Hock account advising Boesky in regard to potential settlement deals with the IRS and New York Stak. Id" at 41110. The e-mails included a confidentiality notice stating that the infonnation contained in the e-mail and attachments wt~n.~ "legally privileged and confidential information". Id, On November 4, 2014, Levine advised Boesky in an e-mail that RARE Investments IV LLC \Vas subject to a written stipulation with the IRS that the assessment oftax deficiencies and penalties against it would be subject to the outcome of the RERI Tax Case. Further, the assessment of tax deficiencies and penalties against the other LLCs would also be subject to the outcorne of the RERI Tax Case. Id. at ~l 13, On April 7, 2015, Boesky e~mailed Levine stating: "I appreciate your efforts . Given the amount of liability I could bear and the lack of i11fom1ation I have about this matter, I hope you understand my concern". Comp. at 1114. Levine replied: "I have always been willing to help you (ifl can) and I know the exposure is big (we all have it to some degree)". Id. On or about April 27, 2015, Jeffery Blau, the CEO of Related and a member ofRERI, wrote to the other mernbers ofRERI informing them that Levine had resigned as RERI's TMP 14 of 40 [*[FILED: 14] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 13 of38 and that 'nick was no longer representing RERI due to serious health issues. ld. at in 1s. However, Levine continued to provide counsel to plaintiffs regarding the RER! Tax Case and the related audits through at least June of2016. Id. at ilf1116-118. When Levine and Katz were calfod to testify at the June 2015 trial of the RERI Tax Case, they both refused to testify based upon their Fifth Amendment privilege against self· incrimination. Id. at 11200 During the RER1 Tax Case, plaintiff<:: discovered that approximately two years after the LLCs made their donations of the remainder interests, Levine and Katz approached the charities that received the donations, and directly purchased, or entered into agreements to purchase, the previously donated rernainder interests from those charities. In most instances, Lt.~vine and Katz sold the remainder interests, or the rights to purchase the remainder interests back to the present interest holders at a profit, or, in the alternative, brokered the remainder interests to the present interest holder for a fee. Levine and Katz never disclosed such transactions to the individuals who invested in the remainder interest tax strategy. Id. at ~[121. On October 26, 2016, the US Attorney filed an eight-count indictment against Levine and Katz alleging that they engaged in a multi-year tax evasion scheme involving the diversion of mUlions of dollars of foes from a Manhattan law· fim1 and failed to report that fee income to the ms. See Comp. at 4!125. According to the press release issued by the US Attorney, Levine diverted from the law firm 1nore than $3 million in foe income from tax shelters and related transactions that Levine worked on \vhile serving as a partner of the fim1. Id. With respect to Katz, the press release stated that he received and failed to report more than $1.2 rnillion in fee income. id. The press release indicated that Levine was charged \vith obstructing the IRS, 15 of 40 [*[FILED: 15] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 · Boesky v. Levine et aL (650756i2017) Page 14 of38 conspiracy, tax evasion, wire fraud, and making false statements. Id. at4f126. Katz was charged with obstructing the IRS, conspiracy, and tax evasion. See id. at ~126. On February 10, 2017, plaintiffs commenced the instant action against Levine, Herrick Feinstein, Morrit Hock, Katz, and Mazars USA, alleging that none of the defendants infi:Jm1ed plaintitTs that the remainder interest tax strategy was likely to be challenged by the taxing authorities andior found to be unlawful, Id. at .,139. Instead, they continuously overstated the legitimacy of the strategy and understated its risks and the likelihood of an audit resulting in additional tax. assessments, interest, and penalties. id. at ~140. All of the defendants were illegally promoting an um·egistered tax shelter \·vhilc advising plaintiffs to the contrary. See id. at il144. In filing their tax returns, plaintiffs relied upon these misrepresentations. See id. at ~[148. Plaintiffa further allege in their complaint that defendants had a financial, business, and prop1ietary interest to induce plaintiffs, and others, to enter into thesl~ tax shelter transactions, and in doing so, assured them that the transactions would enable them to reduce their taxes. 5'ee Comp. at il~f 139-151. Defondants never disclosed to plaintiffs that their representation and advice would he materially limited and impaired by their own interests in the transactions they were promoting Id. Defendants never retracted their advice regarding the propriety of the strategy they promoted or advised them to amend their returns, even after the IRS issued a notice unmistakably refoning to the remainder interest tax strategy or after Levine and Katz were indicted, for among other lhings, the work they perfom1ed at Herrick Feinstein, Moritt Hock, and J\fazars USA, Id. at ~]168-170. 16 of 40 [*[FILED: 16] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 15of38 Had Levine and Moritt Hock provided plaintiffs with appropriate and accurate advice regarding the strength of the IRS's position in the RERI Tax Case, plaintiffs would have settled their respective liabilities with the IRS and the NYSDTF in an effort to avoid their exposure to incmring additional interest and penalties on all their tax liabilities stemming from the remainder interest tax strategy investments. See id. at ip22. In addition, they would not have contributed towards the legal costs incmrnd in prosecuting the RER1 Tax Case. See id. ~1123-122. The complaint fi.Jrther alleges, upon information and belier~ that "Dick, who was unilaterally chosen by Levine and Katz . . . to act as kad counsel in the RERI Tax Case, was not acting in the best interests of RERI's members in prosecuting and attempting to settle [the case], hut was mainly acting to benefit Levine and Katz in an effort to whitevvash their \Vrongdoing with respect to promoting unlawful tax shelters", See id. i!124. According to the c6mplaint, plaintiffs did not discover, and could not have discovered, defendants' "fraudulent misconduct" until after Levine and Katz's indictment in October 2016. See id. at ~1154. The complaint sets forth the follov.ring causes of action: legal malpractice; fraud; constructive fraud/negligent misrepresentation; conspiracy to commit fraud; the imposition of a constructive trust; forfeiture of foes and unjust enrichment; breach of fiduciary duty; failure to supervise; and a declaratory judgrnent. Defendants Mazars USA, Herrick Feinstein, Moritt Hock, and Levine separately move to dismiss the conrplaint insofar as assl~Iied against them pursuant to CPLR 3211 (a) (5) as barred by the statute oflimitations, and CPLR 3211 (a) (7) for failure to state a cause of action. Thl~ motions are decided as follows. 17 of 40 [*[FILED: 17] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 'Boesky v. Levine et aL (650756/2017) Page 16 of38 .A. 211.iJtion to Dismiss Standard "On a motion to dismiss a cause of action pursuant to CPLR 3211 (a) (5) on the §,'TOtmd that it is barred by the statute of limitations, a defendant bears the initial burden of establishing, prima facie, that the time in which to sue has expired. In considering the motion, a court must take the allegations in the complaint as true and resolve all inferences in favor of the plaintiff. Further, "plaintifi\ submissions in response to the motion must be given their most favorable intendment". See Norddeutsche Landesbank Girozentra!e v. Tilton, 149 A.D.3d 152, 158 (1st Dept 2017). Once the detendant meets the "burden of proving, prima fa.cie, that the time in which to sue has expired, the burden then shifts to the plaintiff to raise a qrn.~stion of fact as to \vhether the statute oflimitations is tolled or is otherwise inapplicable". See Stein Indus .. Inc. v. Certilman Balin Adler & Hyman, LLP, 149 A.D3d 788, 789 (2d Dept 2017)« CLP Leasing Co., LP v. Nessen, 12 AD.3d 226, 227 (1st Dept 2004). "On a CPLR 3211 (a) (7) motion to disrniss fr)r failure to state a cause of action, the complaint must be constrned in the light most favorable to the plaintiff and all factual allegations must be accepted as true. . . . Further, on such a motion, the complaint is to be construed liberally and aU reasonable inferences must be drawn in favor of the plaintiff". See Alden Global ·value Recovoy Master Fund, L.P v. KeyBankJV.A., 159 A.D.3d 618, 621-622 (1st Dept 2018). "However, factual allegations . . . that consist of bare legal conclusions, or that are inherently incredible . . , , are not entitled to such consideration" 1\Jamoon v. Dot Net Inc., 135 A.D3d 656, 658 (1st Dept 2016). 18 of 40 [*[FILED: 18] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v, L€vine et al. (650756/2017) Page 17 of38 B. First Cause ofActi<m: Legtll Aftllpractice The first cause of action is for legal malpractice and is asse1ied against Levine, Herrick Feinstein, and Ivforitt Hock. See Comp. iii! 172~185. Plaintiffs allege that these defendants breached their duty to represent plaintiffs with such reasonable skill, care and diligence as members of the legal profession commonly exercise in simil<1r situations by: failing to implement ad1.~quate controls to protect clients such as plaintiffs tram the intentional fraud and the negligent misconduct of Levine; not doing anythh1g to prevent Levine from marketing and promoting unla\vful tax shelters and in profiting from those acts; failing to apprise plaintiffs as additional legal developments, rulings and decisions were issued by the IRS and the courts making it dear the tax shelters they were prmnoting were not legitimate; and in continuing to provide fiawed and erroneous advice despite their continuing representation of plaintiffs through 2016. See id. at ~ill 74-18 l. In connection with the first cause of action, plaintiffs seek monetary damages, "including the payment to Levine, Herrick Feinstein, and Moritt Hock for tax and legal advice; the loss oflegitimate tax savings opportuniUes and tax deductions; having paid or incurring tax penalties and interest~ having to make tax payments they were promised they would not have to make and were advised not to make; and having paid and continuing to incur substantial additional costs to hire nevv tax and legal advisors to rectify the situation". Id. at 1185. Levine, Henick Feinstein, and Moritt Hock each contend that this cause of action is time~ haued. Plaintiffa have conceded that their malpractice claim insofar as asse1ied against Herrick Feinstein is untimely. See Plaintiffs' Memorandum ofLm.v in Opposition to Defendant Herrick 19 of 40 [*[FILED: 19] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 'Boesky v. Levine et aL (650756/2017) Pa£e ,,_, 18of38 Feinstein\; Motion to Dismiss Complaint, at 8 n3. Therefore, the only remaining defendants against \t,'hom this cause of action is asserted are Levine and Molitt Hock \Vi th respect to Levine, the complaint alleges that he initially promoted the rernainder interest tax strategy in 2002 and then proceeded to fom1 the LLCs needed to execute the strategies from 2002 to 2004. Between 2002 and 2004, plaintiffs invested various amounts in these entities and claimed charitable deductions based upon the strategy from 2002 to 2005. Pursuant to CPLR 214 (6), an action for nomnedical professional malpractice must be commenced within three years of the date of accrual. Claims for legal malpractice "accrue when the malpractice is committed, not when the client learns of it". See Palmeri v. Willkie Farr & Gallagher LLP, 156 A.D.3d 564, 567 (1st Dept 2017). Therefore, any daims sounding in profossional malpractice that are based upon Levine's advice to participate in the remainder interest tax strategy and the servi>.:es he provided in ordt.'f to implernent the strategies are untimely lmder the three~year statute oflimitations set forth in CPLR 214(6). Plaintiffs assert, however, that the complaint pleads allegations that Levine continued to represent them in connection \Vi th the remainder interest tax strategy until 2016 by advising them on how to proceed with the IRS 'sand the NYSDF's challenges to their use of the strategy. Therefore, plaintiffs contend, the continuous representation doctrine applies to toll the statute of limitations. "[P]ursuant to the doctrine of continuous representation, the time within which to sue on the claim is tolled until the attome:~/s continuing representation of the client with regard to the particular matter tenninates". See A qua-Trot Corp. v. rVi lentz, Goldman & S'pitzer, P.A., 144 20 of 40 [*[FILED: 20] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 .. !NDE:X NO . 6 5 o7 5 6 I 2 017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 19 of38 A.D.3d 956, 957 (2d Dept 2016); Rodeo Family Enters., JLC v. Afatte, 99 A.D.3d 781, 784 (2d Dept 2012); Sun Graphics Corp. v. Lei.J>, Davis & .t\4aher. LLP, 94 A.D.3d 669, 669 (1st Dept 2012). "The continuous representation doctrine tolls the running of the statute oflimitations on a cause of action against a professional defendant only so iong as the defendant continues to represent the plaintiff in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general profossional relationship". See Transport 11/orkers Union ofAm. Local JOO AF'L-CJO v. Schwartz, 32 A.D.3d 710, 713 (1st Dept 2006). For the doctline to apply, there must be "a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice clairn". lvfcCoy v. Feinman, 99 N.Y.2d 295, 306 (2002); see also Williarnson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 11 (2007) (explicit contemplation of farther representation regarding the matter at issue is required). Here, the complaint does not allege that there was an "express, mutual agreement to advise" plaintiffs on the effect of the remainder interest tax strategy after Levine's original advice. Apple Bank for Sav. v. Pricevt:aterhouseCoopers LLP, 70 AD3d 438, 438 (1st Dept 2010); Johnson v. Proskauer Rose LLP, 129 A.D.3d 59, 68 (1st Dept 2015) ("while there was certainly thepossibili~y that the need for future legal work would be required with respect to the tax strategy (promoted by the defondants), plaintiffs could not have 'acutely' anticipated the need for farther counsel from defendants that would tiigger the continuous representation toil"). Plaintiffs seernlngly rely on the princ1p1e that "[t]he 1aw recognizes that the supposed completion of the contemplated work does not preclude application of the continuous 21 of 40 [*[FILED: 21] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2-017 RECEIVED NYSCEF: 11/30/2018 ' Boesky v. Levine et aL (650756/2017) Page 20 of38 representation toll if inadequacies or other problems with the contemplated work timely manifest themselves after that date and the parties continue the profess1onal relationship to remedy those problems". See Regency Club at Wallki.ll. LLC v. Appel Design Group, P.A., 112 A.D.3d 603, 607 (2d Dept 2013); see also Stein Indus., hie. v. Certilman Balin Adler & Hyman, LLP, 149 A.D.3d at 789. "In this regard, a n1otion to dismiss pursuant to CPLR 32 l l (a) (5) will be denied unless the facts establish that a gap between the provision of professional services on the particular matter is so great that the representation cannot be deemed continuous as a matter of law". Regency Club at rVallkill. LLC v, Appel Design Group, PA., 112 A.D.3d at 607. Here, the complaint alleges that plaintiffs received counsel from Levine between 2002 to 2004 regarding the tax strategy, However, it was not UIJ.til three years later, 1112007, that Levine began to counsel them on the same subject matter -- i.e., how to handle the IRS's and NYSDTF's challenges to the strategy. This three-year gap between the provision of Levine's services on this matter is so great that the representation cannot be deerned continuous. See Landmv v. S1unv Becker Krauss, P.C., 111 A.D.3d 795, 797 (2d Dept 2013) (stating "as evidenced by, inter aha, the more than four-year period of time between the issuance of the opinion letter and the plaintiffs alleged retention of the defondants in July 2007, during which no further legal representation was undertaken with respect to the subject matter of the opinion letter, the parties did not contemplate that any further representation was needed"). As such, any claims based upon the advice rendered by Levine from 2002 through 2004 are untimely. As discussed above, in July 2017, the Tax Court disallowed RERI's claimed charitable contribution in foll on the ground that RERI failed to satisfy the substantiation requirernents of 22 of 40 [*[FILED: 22] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v< Levine et al. (650756/2017) Page 21 of38 Income Tax Regulation 1.170A-13(c)(2), which required it to disclose its costs or other basis in the. chari tab1y contributed property and al so upheld the IRS' s ilnposi ti on of a "gross valuation misstatement" penalty against RERI. 2 The deficient advice which led to the failure to satisfy the substantiation requirements and to properly value the donated property was received by plaintiffs 2 Income Tax Regulation 1. 170A-13(c) sets forth substantiation requirements that apply to certain charitable contributions of property \<Vorth more than $5,000. The failure to satisfy the substantiation requirements results 111 the denial of a deduction -fbr the contribution (see Income Tax Regulations§ 1.170A-13[c][l][I]). In order to satisfy thl~ requirements of sect.ion L170A13(c), the donor must obtain a qualified appraisal of the contributed property, attach a "folly compkted" appraisal summary to thl~ return on which the deduction is first claimed, and maintain records containing specified information (see Income Tax Regulations § 1. 170A13 [c][2][I]). The summary must include the adjusted cost or other basis of the donated property (see Income Tax Regulations§ Ll 70A-13[c][4][ii][E]). In the case ofRERI, the Tax Court found that since the appraisal sunnnary fonn it attached to its 2003 return showed no arnount in the space provided for the "Donor1s cost or other adjusted basis," RERI's appraisal summary did not satisfy the substantiation requirements. Since the omission prevented the appraisal summary from achieving its intended purpose, the court refused to excuse the failure on the grounds of "substantial compliance" and denied the deduction for the entire contribution (see RE'RJ Holdings I, LLC, J~(fBlau, Tax Afatters Partner v Commissioner, 149 T.C No. 1 at *9). The Tax Court noted that since RERI did not meet the substantiation requirements set forth in regulation 1. l 70A~ 13(c) , the value of the donated property was iITdevant to the issue of the deduction amount to \Vhich RERI was actually entitled for the contribution (see id at *13), The court nonetheless determined the value of thl~ donated property in order to decide whether to impose an accuracy-related "gross valuation misstatement" penalty against RERI pursuant to section 6662(h)(2) of the Internal Revenue Code. Under section 6662(h)(2), a property value claimed on a return results in a "gross valuation misstaternent" penalty if that value is 400% or more of the property1s correct value. The Tax Court detennined that the contribution made by RERI had an actual fair market value of $3,462,886 on the date it was made (see id. at *19). Since the $33,019,000 value that RERI had assigned to the contribution on its tax return \vas 953.5% of the contribution's actual fair market value, RERI's claimed deduction resulted in a "gross valuation misstatement," the penalty rate for which is 40% of the underpay111ent The court concluded that RERl did not make a "good-faith investigation" of the contribution's value as of the date of the contribution and therefore no RERI partner would be able to avoid the penalty on the basis of the "reasonable cause" exception provided in section 6664(c) (see id at *20-*22). 23 of 40 [*[FILED: 23] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO; 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 22of38 from 2002 to 2004. Therefore, a malpractice clahn based upon the damages caused by this advice is time-barred. The complaint alleges that plaintiffs received advice from Levine from 2007 forward regarding the taxing authorities' challenge to their use of the remainder interest tax shelter strategy. As just discussed, this advice does not wan-ant application of the continuous representation doctrine. Moreover, this advice, alone, cannot form the basis for a malpractice action. Plaintiffs are essentially contending that Levine overstated the strength of their case, and that but for Levine's deficient advice, they would have setHed 1,vith the taxing authorities rather than pursuing the RERI tax case, resulting in a more favorable outcome. Ho\vever, the impact of Levine's advice in this regard is predicated on speculation, Therefore, it cannot support a legal malpractice claim See Pellegrino v" File, 291AD.2d60, 63 (1st Dept 2002) ("speculative damages cannot be a basis for legal malpractice"); Diveck Law Firm v }Jann, 283 A.D.2d 292, 293 (1st Dept 2001) (legal malpractice action requires "specific factual allegations establishing that but for counsel's deficient reprnsentation, there would have been a more favorable outcome to the underlying matter"); Zarin v, Reid & Priest, 184 A.D2d 385, 387-388 (1st Dept 1992) ("damages claim(:d in a legal malpractice action nmst be 'actual and ascertainable' resulting from the proximate cause of the attorney's negligence"). As such, the first cause of action is dismissed insofar as asserted against Levine. Turning to Morrit Hock, there is no indication that Levine had any involvement or afiiliation 1,vith Moffit Hock prior to September 2012. By September 2012, the harm caused by Levine's advice to pursue the remainder interest tax strategy (i.e., plaintiffs' problems with state 24 of 40 [*[FILED: 24] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. t50756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v, Levine et aL (650756i2017) Page 23of38 and federal taxing authorities) was already done and the decision to pursue the RERI tax case in order to challenge the IRS's determination was already made, The post~September 2012 allegations involving Levine, standing alone, fail to satisfy the threshold standard necessary to maintain a legal malpractice action, which requires "specific factual allegations establishing that but for counsel's defident representation, there would have been a more favorable outcome to the underlying matter". Dweck Law Firm, LLP v. lvfann, 283 AD.2d at 293. According to the complaint, Levine's actions alter September 2012 consisted of fonvard1ng status reports prepared by Dick to the plaintiffs and keeping them app1ised of potential settlement deals. The complaint does not aHege that these paiiicular actions were deficient or caused them hann or that if Levine had not undertaken them, the outcome \vould have been different. Furthermore, for the reasons stated above, any damages caused by Levine's post~20()7 advice are speculative. As such, the first cause of action is also dismissed insofar as asserted against Mo.mt Hock. The first cause of action is dismissed in its entirety against Defondants Herrick Feinstein, Harold Levine, and M01Titt Hock. C Second Cause ofAdion: Fraud The second cause of action is for fraud. Comp. i;~ 186-199. Plaintiffa ailege that all of the defendants knowingly made affirmative misrepresentations and omissions with the intent that plaintiffs would rely upon them in deciding to retain defendants, in entering into the tax shelter transactions, and in paying defondants' fees. But for the intt.~ntional misrepresentations and material omissions described in the complaint, plaintiffs \vould have availed themselves of 25 of 40 [*[FILED: 25] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2n17 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 24 of38 legitimate tax savings opportunities and would have promptly amended their returns. Plaintiffs did not know, and could not have known, that defendants' fraud occurred because of the continued concealment of the circumstances surrounding Levine's and Katz's actions to defraud not only the IRS and the NYSDF, but their clients as well, which were unknown to plaintiffs until Levien and Katz \Vere indicted in October 2016. See Comp. atf195" \Vith respect to damages, the second cause of action alleges that in reasonable reliance on defendants' false representations and misleading omissions, plaintiffs paid defendants and have incurred, or will incur, penalties, interest, and additional taxes and other expenses. id. ifl 97. As a result of the fraud, plaintiff<> also failed to avail themselves oflegitimate tax savings available to them. Additionally, to correct the consequences of the fraud, plaintiffs incurred, and will continue to incur, substantial additional costs to hfre new tax and legal advisors to rectify the situation. Id. at 41197, Plaintiff<> farther asseii that they are entitled to punitive damages in order to punish defendants and deter similar misconduct in the future, Id. at ~199. The crux of defendants' are,'Ument in seeking to dismiss this cause of action is that while it is denominated a cause of action fix fraud, it is, in essence, a tirne-ban-ed professional malpractice claim and should therefore be dismissed. "\\'11ere . . , a fraud claim is asseiied in cmmection with charges of professional malpractice, it is sustainable only to the extent that it is premised upon one or more affirmative, intentional misrepresentations -- that is, something more egregious than mere concealr:nent or failure to disclose [one\] own malpractice~~ which have caused additional damages, separate and distinct from those generated by the alleged malpractice". See White ofLake George v. Bell, 251 A.Dold 777, 778 (3d Dept 1998); see also 26 of 40 [*[FILED: 26] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO; 650756/2n17 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 25 of38 fVeiss v. lvft.i11fredi, 83 N.Y.2d 974, 977 (1994) ("attorney1s failure to disclose malpractice does not give rise to a fraud claim separate from the custmnary malpractice action"); Girl v. Cohen, 55 A.D.3d 478, 478-479 (1st Dept 2008) (fraud claim deerned duplicative oflegal malpractice claim \Vhere it "was not based on an allegation of independent, intentionally tortious conduct and failed to allege separate and distinct damages"). \\'here the "plaintiffs have not shown that their reliance upon the[] alleged misrepresentations subjected them to any damages beyond those resulting frmn the purported malpractice alone, their fraud claim is not maintainable." White of Lake George v. Bell, 251 A.D.2d at 778; c;f Johnson v. Proskauer Rose LLP, 129 A.D3d at 69 "damages plaintiffs seek for the fraud and malpractice causes of action do not completely overlap with each other"; complaint "seeks for rnore money in damages under the fraud cause of action than under the malpractice cau;:;(~ of action"). "The key to detem1ining whether a claim is duplicative of one for malpractice is discerning the esst:nce of each clairn". Johnson v. Proskauer Rose LLP, 129 A.D.3d at 68. Indeed, "[t]he test of a cause of action, for Statute of Limitations purposes, is its gravamen not the form in which it is pleaded". Wilson v. Bristol-lvfyen; Co., 61 AD.2d 965, 965 (1st Dept 1978). Here, plaintiffs' fraud claim is not based simply upon eITors of professional judgment or the failure to disclose one's own malpractice. Rather, plaintifls are asserting that defendants intentionally and knmvingiy promoted a tax shelter strategy they knew to be unlawfhl, or at best risky, in an effort to profit from it and did so wilhout disclosing that they had a direct financial interest in promoting the strategy. They are also asserting that defendants continued to reassure them about the legitimacy of the strategy and the viability of their position in order to keep 27 of 40 [*[FILED: 27] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2n17 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 26 of.38 collecting fees fix their servkes and to cover up Levine's and Katz's involvement in promoting and profiting from illegal tax shelters. Although the comp1a1nt does not allege separate and distinct damages from the malpractice claim, the essence ofthe fraud and malpractice claims are sufficiently distinct See Johnson v. Proskauer Rose LLP, 129 A.D.3d at 70 ("Proskauerts narrow fixus on what each claim seeks in damages ignores its own statement as to \vhat the focus should be in detennining whether claims are duplkabve; that is, the essence of the claims. Here, the essences ofthe fraud and malpractice claims are sufficiently distinct from one another that the court properly did not invoke the duplicative claims doctrine"). Nevertheless, the fraud cause of action 1s time-barred. "An action based upon fraud must be commenced within the greater of six years from the date the cause of action accrued or two years from the time plaintiff discovered or, with reasonable diligence, could have discovered the fraud". Gutkin v. Siegal, 85 AD3d 687, 687 (1st Dept 2011); see CPLR 213 [8], "[W]here the circumstances are such as to suggest to a person of ordinary intdligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry vvhen it would have developed the truth, and shuts his eyes to the facts vvhich call for investigation, knowledge of the fraud will be imputed to him". Gutkin v Siegal, 85 i\.D3d at 688; see CSAlvf Capital, Inc. v. Lauder, 67 A.D.3d 149, 156 (1st Dept 2009). Here, plaintiffs' :fraud claims accrued in 2002, when they entered into the first allegedly fraudulent transaction promoted and fucilitated by Levine and Katz. See Kanterakis v. Kanterakis, 125 A.D.3d 814, 816 (2d Dept 2015). Plaintitfo did not commence this action until 2017 -- 15 years later. Plaintiffo also did not initiate this action within two years of when they 28 of 40 [*[FILED: 28] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et at (650756/2017) Page 27 of38 could, with reasonable diligence, have discovered the facts constituting the alleged fraud, Plaintiff-; allege that it was not until the 2016 indictment that plaintiffs discovered Levine and Katz inflated the legitimacy of the remainder interest tax strategy, that they had a conflict of interest in promoting it, or that they had a conflict of interest in cmmseling them to pursue the RERI Tax Case as opposed to st~ttling the matter. However, the 2016 indictment was unrelated to the remainder interest tax strategy. More impo1iantly, plaintiffs should have been aware of the circu:rnstances sooner, In 2006, the TRS and NYSDTF began to audit the entities and individual members engaged in the renrninder interest tax strategy. ln 2007, plaintiffs wt~re in receipt of a notice from the NYSDTF stating that it had determined transactions identical to, or similar to, the remainder interest tax strategy were "avoidance transactions"" Comp. 1! 63. That same year, the TRS deemed such transactions to be "transactions of interest". See id at i-fi! 72, 75. Therefore, by 2007 at the latest, plaintiffs should have been aware that, contrary to the advice given by Levine and Katz, the remainder interest tax strategy was problematic. See TMG-11 v. Price Waterhouse & Co., 175 A.D .2d 21 , 22-23 (1st Dept 1991) (knowledge that IRS is questioning legitimacy of transaction creates duty of inquiry for related fraud claim), Further, by February 2013, it should have been apparent to plaintiffs that Levine and Katz were benefitting from the transactions at issue by re-purchasing the remainder interests because on February 15, 2013 and May 22, 2014, filings in the RERI tax case revealed they were doing so, See Zaiger Affirm, Ex, 10 at *3; Ex. 12 mf 18-21. Additionally, in June 2014, the civil case filed by the US Attorney put plaintiff-; on notice that Levine promoted, implernented and/or 29 of 40 [*[FILED: 29] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2rr17 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) participah.~d Page 28 of38 in at least 90 unlawful tax schemes and that he acquired more than $5 million in foes for his role in the unlawful transactions. The same lawsuit identified Katz as an individual who received rnillions of dollars from the transactions. 5'ee Zaiger Affirrn, Ex. 13 at~~ 1~ 11, 103104. Therefore, even assuming defendants concealed Levine's and Katz's self-interest, the twoyear discovery period would have begun in 2014 and expired in 2016. Plaintifts did not commence this action until 2017. Accordingly, even if the cause of action for fraud is adequately pleaded, and even if it is not duplicative of the malpractice claim, it is nonetheless untimely, and it is therefore dismissed insofar as asserted against Defendants Mazarn USA LLP, Herrick Feinstein LLP, and Moritt Hock & HamroffLLP, and Harold Levine. lJ. Third Omse ofAction: Constructive Fraudl1Vegligent 1itlisrepresentation The third cause of action is for constructive fraud/negligent misrepresentation. See Comp. at ~'Vo 200-208). Plaintiffs allege in this regard that defendants mad1.~ numerous false affirmative representations and concealed and/or failed to disclose material facts to plaintiffs as to the legitimacy ofthe remainder interest tax strat1.~gy. See id. at,~ 202-203. They did so in order to induce plaintiffs to: (1) retain defondants; (2) enter into the tax shelter transactions; and (3) pay defondants' foes. See id. at, 204. The complail1t alleges that but for the "negligent or innocent misrepresentations and material omissions" made by defondants, plaintiff<> woukl have availed themselves of legitimate tax savings opportunities and deductions, would never have claimed the tax shelter losses on their state and federal tax returns, and would have promptly amended their returns. See id. at ii 205. It further alleges that defendants failed to colTect their past tax advice 30 of 40 [*[FILED: 30] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 29 of38 and continued to provide flmved and erroneous ad vice "despite their continued representation of Plaintiffs through 2016n. See id. at ~206. Plaintiffs did not know, and could not have known, that this constructive fraud occurred "because of the negligent misrepresentation and omissions of Defendants . . . as well as the continued concealment of the circumstances surrounding Levine's and Katz's actions to defraud not only the IRS and [the N'{SDTF], but their clients as well, which were unknown to Plaintiffs until Levine and Katz were indicted in October 2016". See id. at ii207. "A cause of action predicated upon the ground of constructive fraud must be commenced within six years from the date of the commission of the fraud (CPLR 213(1))". See Quadrozzi Concrete Corp. v, 1'.Jastroianni, 56 A.D.2d 353, 355-356 (2d Dept 1977)0 The tvvo-year discovery rule does not apply. See Schoen v. Martin, 187 A.D.2d 253, 254 ( l st Dept 1992)0 A cause of action for negligent. rnisrepresentation is also subject to a six-year statute of limitations and "accrnes on the date of the alleged rnisrepresentation which is relied upon by the plaintiff". Fandy Cmp. v. Lung-Fong Chen, 262 A.D.2d 352, 353 (2d Dept 1999); see also CPLR 213 [l]. This action was commenced more than six years after plaintiffs were allegedly induced by misrepresentations to participate in the remainder interest tax strategy and more than six years after they were allegedly induced hy misrepresentations to challenge the taxing authorities' detennination by pursuing the RERI Tax Case. Therefore, the third cause of act.ion flJr constructive fraud/neg11gent misrepresentation is also dismissed as time-barred insofar as asserted against Defondants Mazars USA LLP, Herrick Feinstein LLP, and Morirt Hock & Hamroff LLP, and Harold Levine, 31 of 40 [*[FILED: 31] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 30 of38 E. Fourth Cause o.fAction: Conspiracy to Commit Fraud The fourth cause of action is for conspiracy to commit fraud. See Comp. at 1il 200-215. Plaintifls allege in this regard that defendants engaged in a civil conspiracy to cornmit the wrongful acts alleged in the first three causes of actjon. See id. at ir211, Since "the State of New York does not recognize an independent cause of action in tort for conspiracy", See Salerno v. Pandick. Inc., 144 A.D.2d 307, 308 (1st Dept 1988), citing Alexander & Alexander ofN 1'. v, Fritzen, 68 N.Y2d 968, 969 (1986), this cause of action is dismissed insofar as asserted against Defendants Mazars USA LLP, Hen:ick Feinstein LLP, and Moritt Hock & HarnroffLLP, and Harold Levine. 32 of 40 [*[FILED: 32] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO; 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 31of38 rise to a duty of restitution . . . and not from th(~ time \Vhen the facts constituting the fraud ,.vere discovered". lvlatter ofSalww, 219 A.D.2d 479, 482 (1st Dept 1995); see also Knobel v. Shaw, 90 A.D.3d 493, 496 (1st Dept 2011). Here, the wrongful acts alleged to have given rise to the duty of restitution occurred more than six years prior to the commencement of this action. This cause of action is therefore dismissed against De fondants Mazars USA LLP, Herrick Feinstein LLP, and Moritt Hock & HamroffLLP, and Harold Levine. G. Sixth Cause o.fActitm: Vnjust Enrichment and Recision The sixth cause of action is for unjust enrichment. It seeks disgorgement of improperly obtained foes received by Herrick Feinstein, Moritt Hock, and Mazars USA based upon allegations that the services provided by thern had no value and the foes charged by them were invalid and unreasonable. See Comp. at ,4'[ 220-222; 226-227; 231-232. The sixth cause of action further alleges that plaintiffs were induced to pay foes to these defendants as a result of their misrepresentations, omissions, and continued concealment of the circumstances surrounding Levine's and Katz's actions to defraud not onlv the IRS and the NYSDTF,. but their 1:.:lients as ~ well, which were unknown to plaintifl-s until Levine and Katz were indicted in October 20160 See id. at !Ji! 223; 228; 234, Plaintiffs allege t11at defi.mdants were unjustly emiched by tlmir receipt of the foes paid by plaintiffs in that they benefitted, at plaintiffs' expense, by collecting fees that were excessive, unreasonable, unethical and improper. Equity and good conscience demand the return of those fees. Accordingly, plaintiffs assert, they are entitled to rescind the agreements to 33 of 40 [*[FILED: 33] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) . . Page 32 of38 pay these defendants and are entitled to restitution or recoupment of that amount from defi.~ndants, who must disgorge those fees to plaintiffs. See id. at 1[~· 224-225; 229-230; 234-235. The statute oflimitations fix unjust enrichment is six years and "accrues upon 'the occurrence ofthe alleged ;,vrongfol act giving rise to restitution"' See Sivain v Brown, 135 AD.3d 629, 632 (lst Dept 2016); Gerschel v Christensen, 143 A.D.3d 555, 556 (1st Dept 2016); CPLR 213 [1]. Here, the wrongful acts alleged to have given rise to the duty of restitution occurred more than six years prior to the commencement of this action and therefore, the claim fix unjust enrichment is time-barred. A.s to rescission claims, "[ w ]here, as here, 'rescission is sought on the ground of actual fraud, the Statute of Limitations is six years from the commission of the fraud or two years from vvhen the plaintiff discovered or should have discovered the fraud, whichever is later'". Percoco v Lesnak, 24 A.D,Jd 427, 427 (2d Dept 2005), quoting fh~/jinan v Cannone. 206 A,D2d 740, 740-741 (2d Dept 1994). As discussed above, plaintiffa failed commence this action within the limitations period for fraud. Therefore, this cause of action is also dismissed insofar as asserted against Defendants Mazars USA LLP, Herrick Feinstein LLP, and J\foritt Hock & Hamroff LLP, and Harold Levine. li. Seventh Cause ofAction: Breach of Fidudtiry Duty The seventh cause of action is for breach of fiduciary duty. See Comp. at ~rir 236-251 . This cause of action alleges that defondants, through their representation of plaintiffs, had a fiduciary duty not to make negligent misrepresentations or conceal material facts, and owed 34 of 40 [*[FI 34]LED : NEW YORK COUNTY CLERK 11/30/2018 10 : 41 AM] NYSCEF DOC. NO. 116 '' INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 33 of38 plaintiffs a duty to represent them with the uhnost degree ofloyalty and with such reasonable skill, care and diligence as members of the legal and accounting profession commonly possess and exercise in similar situations. See id. at ~ii 236-245. Defendants breached their duties to plaintiffs by failing to infom1 them that the remainder interest tax strategy was highly risky and likely to be challenged by taxing authorities. Further, as additional legal developments, rulings and decisions were issued by the IRS, the NYSDTF, and the courts, making it dear that the remainder interest tax strategy was problematic, defa'lldants failed to timely apprise plaintiffs of those developments, to correct their misrepresentations and improper advise, to advise plaintiffs to amend and correct their tax returns, or take steps to ensure that the accountants and/or attorneys who knew or learned of these developments did so. See id. at 1[,. 242; 249. Defendants had a continuing duty to correct their past financial and tax advice provided between 2002 and 2016 but failed to do so. See id. at ifilf 243; 250. "Where an allegation of fraud is essential to a breach of fiduciary duty clairn, the statute oflimitations is six years, and [t}he discovery accrual rn1e .. , applies". Gersche! v. Christensen, 143 A.D.3d at 557), As discussed above, plaintiffs' claims are untimely under the six~year statute of limitations for fraud. Therefore, this cause of action is also dismfased insofar as asserted against Defendants Mazars USA LLP, Herrick Feinstein LLP, and Moritt Hock & Har.nroff LLP, and Harold Levine. 35 of 40 [*[FILED: 35] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 34 of38 L Eighth Cause o.fAction: Failure to Supervise The eighth cause of action is for failure to supervise and is asserted only against Herrick Feinstein, Mmitt Hock, and Mazars USA See Comp. at if~ 252-256. The complaint alleges that these defondants "failed to adopt or implement adequate controls to protect their clients from wrongdoing and negligence by their own and their co-conspirator's personnel, in marketiug and promoting various tax shelter, including the Remainder Interest Tax Strategy, in inducing clients to enter into costly and risky transactions, and in issuing improper, incompetent, and baseless advice or in assuring that contrary views Vi/lthin the fim1 were discussed with clients" 1d. at ~255. "The statute of limitations applicable to causes of action alleging negligent hiring and negligent supervision is three years" Calamari v. Panos, 131 A.D.3d 1088, 1090 (2d D{.~pt 2015); see also Green v. Emmanuel A.frican lvf..E. Church, 278 A.D.2d 132, 132 (1st Dept 2000); Jarvis v. Nation of.Islam, 251 AD.2d 116, 117 (1st Dept 1998); CPLR 214 (5). The claim accrnes "on the date of the last alleged underlying act". See Pichardo v. New York City Dept. ofEduc., 99 A.D.3d 606, 607 (1st Dept 2012). Here, an of the underlying acts alleged in this cause of action occurred before 2014. Therefore, this cause of action is tirne-bam.~d and is dismissed against Defendants Herrick Feinstein, Morr:itt Hock and Hamroff, and l\tlazars LLPo 36 of 40 [*[FILED: 36] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et al. (650756/2017) Page 35 of38 J, Ninth Ctmse of Action: Breach of Fiduciary Duty against Levine in his Captlcity as Ti11.P3 forRERl-.: The ninth cause of action is for breach of fiduciary duty and is asserted only against Levine in his capacity as RERI's TMP. See Comp. at,~ 257-262. In this regard, plaintiff-; allege that Levine served as the TMP for RERI from 2003 until 2015 and was responsible for representing RERI before the IRS and the NYSDTF, preparing and filing RERI's tax returns, providing tax information to RERI's partners, and managing the audit processes and investigations. Id. at 55, i!258. Accordingly, Levine had a fiduciary duty to the partners of RE1U, including plaintiffs, In violation of that duty, Levine intentionally or recklessly made numerous misrepresentations and concealed or failed to disclose material facts by representing that the remainder interest tax strategy was legal and that attorneys at Renick Feinstein and Maritt Hock had independently and objectively reviewed the strategy and concluded that it was lawful. See ido at 1!~] 141, 250. The ninth cause of action further aHeges that due to his role as plaintiffs' attorney, "Levine had an incentive to breach his fiduciary duty to Plaintiffs in his capacity as RERI's [TMP] as a result of his material interest in generating foes from solic1ting Plaintiffs as clients, inducing them to invest in RERI, fonning RERI, organizing and implementing the Remainder Interest Tax Strategy through RERI, and entering into subsequent undisclosed transactions involving the purchase and sale of the remainder interest This conflict of interest caused 3 Comp. TMP refers to Levine's titk as the "Tax Matters Partner". See supra Part I; see also ~4f83-84. 37 of 40 [*[FILED: 37] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page .36 of 38 Levine, in his capacity as RERI's [TMPJ, to become incapable of rendering independent judgment to avoid violating hh;; fiduciary duty to Plaintiffs", See id. at i!261. As discussed above, "[w]here an allegation of fraud is essential to a breach of fiduciary duty claim, the statute oflimitations is six years, and [t]he discovery accrnal rule. , . applies", See Gerschel v Christensen, 143 A.D.3d at 557. Although Levine acted as RERI's TMP until 2015, the wrongful acts alleged to have been committed by him (Le., his self-rnotivated advice to enter into the tax shelter transact.tons and to pursue to the RERI Tax Case) occurred more than six years piior to the commencement of this action. Further, for the reasons discussed above, his alleged conflict of interest could have been discovered by piaintlffs more than two years prior to the commencement of this action. As such, this claim is also time-barred and is dismissed. K. Tenth Cause of Action: Declaratory Judgment The tenth cause of action seeks a declaratory judgment See Comp. at 4!~[263-268. P1aintifrs allege that the IRS and the NYSDTF have audited their tax returns and interest andlor penalties may be assessed against them by these entities, See id. at '1266. Plaintiffs assert that defendants are legally responsible for such interest, penalties, and/or professional fees that may be incurred by plaintiffs on account of defendants' professional malpractice, fraud, constructive fraud/negligent misrepresentation, breach of fiduciary duty and civil conspiracy. See id, at if267, Accordingly, plaintiffs seek a judgment declaring that defendants are liable to them "for such damages as have not yet been paid and will be incurred in the future". See id. at ~268. 4 RERI refers to RERI Holdings I LLC. See supra Part I; see also Comp. ~37 38 of 40 [*[FILED: 38] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 .. · Boesky v, Levine et al. (650756/2017) Page 37 of38 Plaintiffs concede in their opposition papers that thf..~ viability of their declaratory judgment claim depends upon the viability of their other claims. Therefore, this cause of action is also dismissed insofar as asserted against Defendants Mazars USA LLP, Herrick Feinstein LLP, and Moritt Hock & Harnmff LLP, and Harold Levine .. L. Equitable Estoppel Lastly, it is noted that to the extent plaintiffs may be urn:forstood as arguing that defendants are equitably estopped from asserting the statute oflimitations as a defense, the argument lacks merit Equitable estoppel may bar a defendant's reliance on the statute of limitations as a defonse "where plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a fonely action". Simcuski v. Saeli, 44 N.Y.2d 442, 448-449 (1978). However, it does not apply "where the misrepresentation or act of concealment underlying the estoppd claim is the same act forming the basis of thf..~ underlying substantive cause of action". See Transport Workers ·union ofAm. Local 100AFL-Cl0 v. Schwartz, 32 A.D.3d. 710, 714 (1st Dept 2006). Since that is the case here, equitable estoppel is inapplicable. HI. Conclusion and Order ........................................................................................................................................,,.,,. 1n accordance with the foregoing, it is hereby ORDERED that defendant Mazars USA LLP as successor in interest to \Veiser LLP's motion to dismiss the complaint insofar as asserted against it is granted, the complaint is 39 of 40 [*[FILED: 39] NEW YORK COUNTY CLERK 11/30/2018 10:41 AM] NYSCEF DOC. NO. 116 INDEX NO. 650756/2017 RECEIVED NYSCEF: 11/30/2018 Boesky v. Levine et aL (650756/2017) Page 38of38 disn1issed insofi.1r as asserted against it, and the Clerk is directed to enter judgment accordingly (Mot Seq. 001 ); and it is fariher ORDERED that defendant Herrick Feinstein LLP's rnotion to disrniss the complaint insofar as asserted against it is granted, the complaint is dismissed insofar as asserted against it, and the Clerk is directed to enter judgment accordingly (Mot Seq. 002); and it is further ORDERED that defendant Maritt Hock & Hamroff, LLP's motion to dismiss the complaint insofar as asserted against it is granted, the complaint is dismissed insofar as asserted against it, and the Clerk is directed to enter judgment accordingly {MoL Seq. 003); and it is further ORDERED that defendant Harold Levine's motion lo dismiss the complaint insofar as asserted against him is granted, the complaint is dismissed insofar as asserted against him, and the Clerk is directed to enter judgment accordingly (Ivfot Seq, 004); further ORDERED that the action is severed and continued against the remaining defendant Ronald Katz for the reasons stated in footnote 1; and it is further ORDERED Defendant Katz shall have 10 days to file an i\. nswer, for the reasons stated in footnote 1. This constitutes the decision and order of the Court Dated:1:lo~\..i~L1-, LO\ 'f ENTER: ) ,r; ~lu-~~~\·:~°" ~ \"_:_""'' 40 of 40

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