Furman Kornfeld & Brennan LLP successfully defended an appeal by a conglomeration of individual regional carpenter unions affiliated with employee benefit funds throughout the State of New York, who claimed that their attorneys’ negligent representation caused them to suffer substantial losses as a result of the Ponzi scheme orchestrated by Bernard L. Madoff and Bernard Madoff Investment Securities.

In John DeLollis, et al. v. Robert M. Archer, et al., 2015 NY Slip Op 04084, ___ A.D.3d ___ (2d Dept. 2015), Plaintiffs, the trustees of several local and regional benefit funds (the “Funds”) affiliated with carpenters’ unions throughout the State of New York, brought suit against FKB’s client (the “Law Firm”), alleging that the Law Firm was responsible for monetary losses the unions sustained in connection with a 2008 merger of two pension funds and a $6.4 million investment in a Bernard Madoff feeder fund. The Law Firm served as General Counsel to the Funds. Plaintiffs alleged that the Law Firm failed to advise them of their fiduciary obligations under ERISA (the Employee Retirement Income Security Act) for both transactions, thereby causing them to sustain substantial losses.

Before the lower court (Suffolk County Supreme Court), FKB successfully obtained dismissal of the action against the Law Firm, pursuant to CPLR 3211 (a)(1) & (a)(7), prior to discovery. FKB prevailed by arguing that the Law Firm’s conduct was not the “but for” cause of the losses sustained by the Funds. Rather, the Funds employed a team of investment professionals to oversee the Fund’s investments, and it was beyond the scope of the Law Firm’s engagement to provide investment advice. Further, FKB argued that documentation proved that the Law Firm acted appropriately at all times. Following the decision by the lower court, Plaintiff pursued an appeal to the Appellate Division, Second Department.

On appeal, FKB argued that the Law Firm, as Fund Counsel, provided compliance advice, and was never responsible for investment decisions with regard to the unions’ assets. Therefore, FKB argued, Plaintiffs’ Complaint failed as Plaintiffs could not establish the Law Firm’s conduct was the “but for” proximate cause of its losses. On May 13, 2015, the Appellate Division, Second Department unanimously affirmed the dismissal of the Complaint, and awarded costs.

Should you have any questions concerning this decision, or the defense of legal malpractice claims in general, please contact A. Michael Furman or Andrew S. Kowlowitz.