FKB’S A. MICHAEL FURMAN AND SPENCER A. RICHARDS SUCCESSFULLY OBTAIN DISMISSAL OF A RACKETEERING INFLUENCED AND CORRUPT ORGANIZATIONS ACT (“RICO”) ACTION ARISING OUT OF A CONTENTIOUS DIVORCE PROCEEDING IN NEW YORK COUNTY SUPREME COURT

10/9/2019

The plaintiff alleged that FKB’s client, who provides complex tax and estate advice to high-net-worth individuals, violated the Federal RICO Act by assisting the plaintiff’s wife to strategically cut the plaintiff out of any share of the wife’s family business or proceeds arising from the sale of the wife’s family business. The plaintiff further alleged that FKB’s client’s tax and estate advice to the plaintiff’s wife gave rise to aiding and abetting a breach of a fiduciary duty, aiding and abetting fraud, civil conspiracy, and fraudulent conveyance claims because the plaintiff’s wife used FKB’s client’s advice to secrete and hide the plaintiff’s marital assets from the plaintiff. To support all of the allegations, Plaintiff claimed that his wife, FKB’s client, and various accountants and other lawyers conspired to transfer the assets from the sale of the wife’s lucrative family business to various trusts, LLCs, and other corporate entities in an attempt to dilute the wife’s potential interest in her family’s business. The plaintiff claimed that the transfers reduced the plaintiff’s potential equitable distribution in the divorce proceeding by providing his spouse with asset protection.

FKB moved pre-answer to dismiss the plaintiff’s complaint arguing in sum that FKB’s client’s tax and estate advice was lawful and that the advice to the plaintiff’s wife did not result in any asset protection. Specifically, FKB argued that FKB’s client’s conduct did not violate the RICO Act because FKB’s client did not engage in any racketeering activity and because plaintiff’s potential matrimonial interest in his wife’s family business is too speculative to support a RICO claim. As to the aiding a breach of fiduciary duty, fraud, and civil conspiracy, FKB argued that FKB’s client did not make or assist the plaintiff’s wife in making any misrepresentation to the plaintiff, which proximately caused the plaintiff’s damages in a reduction of the plaintiff’s share in marital assets. As to the fraudulent conveyance claims, FKB argued that FKB’s client was not a transferor or transeferee of the plaintiff’s alleged marital assets.

On October 4, 2019, the Hon. Michael L. Katz, J.S.C., who is also the judge presiding over the plaintiff’s divorce action in New York County Supreme Court, dismissed the plaintiff’s complaint in its entirety with prejudice. The Court agreed with FKB’s argument that the plaintiff’s “mere expectation that he might be awarded some share in his wife’s property is too speculative to support a RICO claim.” The Court additionally agreed with FKB’s argument that FKB’s client’s tax and estate advice “does not rise to the level of alleged wrongdoing required to state a valid RICO claim.” The Court further granted dismissal of the aiding and abetting a breach of fiduciary duty, aiding and abetting fraud, and civil conspiracy claims against FKB’s client because the plaintiff did not justifiably rely on any statements from FKB’s client. Finally, the Court agreed with FKB’s argument that the plaintiff’s fraudulent conveyance claim should be dismissed because FKB’s client was not a transferee of the assets nor a beneficiary of the alleged conveyance. 

If you have any questions about this decision, or the defense of attorneys in general, please contact A. Michael Furman or Spencer A. Richards.

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