Coe v. Proskauer Rose LLP.

• Decision Date: 24 June 2021
• Docket Number: A21A0142
• Citation: 860 S.E.2d 630,360 Ga.App. 68
• Court: Georgia Court of Appeals
• Parties: COE et al. v. PROSKAUER ROSE LLP.

360 Ga.App. 68

860 S.E.2d 630

COE et al.

v.PROSKAUER ROSE LLP.

A21A0142

Court of Appeals of Georgia.

June 24, 2021

Harry W. MacDougald, Atlanta, Jeven Robinson Sloan, W. Ralph Canada Jr., John W. McKenzie III, David R. Deary, for Appellant.

Anthony Wyatt Morris, Atlanta, Shari Lynn Klevens, Mark G. Trigg, David M. Lederkramer, for Appellee.

Reese, Judge.

Douglas ("Doug") Coe, Jacqueline Coe, and GFLIRB, LLC (collectively, the "Appellants") filed a renewal action against Proskauer Rose, LLP, ("Proskauer") related to a legal opinion letter provided to the Appellants. Proskauer subsequently filed a motion to dismiss, which the trial court converted to a motion for summary judgment, providing the parties 30 days to present any evidence pertinent to the motion. Following a hearing, the trial court ruled in favor of Proskauer, and the Appellants appealed the court's order. For the reasons set forth infra, we affirm.

Viewed in the light most favorable to the nonmoving party,¹ the record shows the following. In 2001, the Appellants were involved in the sale of a company in which they owned substantial stock. BDO Seidman, LLP, ("BDO") who had served as Doug Coe's accountants since 1985, approached him regarding a strategy ("distressed debt strategy") they claimed would allow him to avoid capital gains taxes. According to BDO, the distressed debt strategy would involve investments in distressed debt with Gramercy, an investment advisor company, and would be supported by a legal opinion letter from an independent law firm. BDO and Gramercy told Doug Coe that Proskauer could issue the legal opinion letter and would provide legal support in the face of an audit or dispute with the Internal Revenue Service ("IRS"). Following these conversations with BDO and Gramercy, the Appellants agreed to proceed with the distressed debt strategy for their 2001 tax year.

The Appellants alleged that prior to approaching them, Proskauer served as BDO's legal counsel, that BDO and Proskauer had agreed that BDO could market the distressed debt strategy to its clients, and that Proskauer would provide supporting opinion letters endorsing the strategy. The Appellants also alleged that Proskauer, BDO, and Gramercy had a fee-sharing arrangement in place related to the distressed debt strategy. The Appellants claimed they were never informed that Proskauer advised BDO and Gramercy on the distressed debt strategy, or that the parties had a fee sharing arrangement in place, although Proskauer did inform them that it represented BDO and Gramercy "in connection with various matters[.]"

Proskauer provided the Appellants a legal opinion letter on April 15, 2002. The letter stated that, inter alia, the distressed debt strategy should not be subject to penalties under the Internal Revenue Code, and that "[t]here is a greater than fifty percent ... likelihood that the tax treatment of the Transactions would be upheld if challenged by the [IRS]." However, the Appellants claimed that Proskauer failed to disclose to them that the firm had informed BDO around the same time it issued the Appellants’ opinion letter that the chance of an audit for anyone following the distressed debt strategy was almost 100 percent.

On January 11, 2005, the IRS initiated an audit of the Appellants’ 2001 tax return. The Appellants retained alternative counsel during the audit, and entered into a settlement agreement with the IRS in January 2012. Between February and early July 2009, four former BDO partners pled guilty to federal charges related to their involvement with tax shelters, and on June 13, 2012, BDO entered into a deferred prosecution agreement with the United States Department of Justice due to its involvement with these tax shelters.

The Appellants filed suit against Proskauer in December 2015. The parties agreed to dismiss the case without prejudice, and the Appellants refiled on August 16, 2017.

Proskauer filed a motion to dismiss, which the trial court converted into a motion for summary judgment. The court invited the parties to submit evidence in support of their motions. Following a hearing, the trial court granted summary judgment in favor of Proskauer. The Appellants now appeal.²

"[A] de novo standard of review applies to an appeal from a grant or denial of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant."³ Additionally, "[w]e review a trial court's decision on a motion to strike for abuse of discretion."⁴ Further,

[t]he grant or denial of a motion for protective order generally lies within the sound discretion of the trial court. We therefore will not reverse absent an abuse of that discretion. The trial court is in the best position to make determinations on these issues, and we will not overrule its judgment if there is any reasonable evidence to support it.⁵

With these guiding principles in mind, we now turn to the Appellants’ claims of error.

1. The Appellants argue that the trial court erred by granting Proskauer's motion for summary judgment based on the applicable statute of limitation.

The statute of limitation for attorney malpractice, fraud, and negligent misrepresentation is four years.⁶ The statute of limitation for breach of fiduciary duty is either four or six years depending on whether the damages claimed are to personalty or pursuant to a written contract.⁷

It has long been recognized and is well established that a statute of limitation begins to run on the date a cause of action on a claim accrues. In other words, the period within which a suit may be brought is measured from the date upon which the plaintiff could have successfully maintained the action.⁸

Additionally, "[i]t is well-settled in this state that in a malpractice action for damages against an attorney, the statute of limitation runs from the date of the breach of the duty and not from the time when the extent of the resulting injury is ascertained nor from the date of the client's discovery of the error."⁹

Here, the Appellants did not file suit until December 31, 2015. Under Georgia law, a cause of action accrues on the date when the plaintiff could maintain the action.¹⁰ As Proskauer issued the legal opinion letter in 2002, which the Appellants alleged was not tailored to their situation and was knowingly unreliable, the Appellants would have been able to maintain a cause of action at this point as it constituted the date of the alleged breach and malpractice.¹¹ Therefore, December 2015 fell well outside the limitation period for any claims that began to accrue in 2002.

However, the Appellants argue, relying on Mauldin v. Weinstock ,¹² that Georgia law provides special treatment for malpractice claims that involve pending proceedings. Although this Court in Mauldin did note that "where ... the viable underling action remains pending[ ]" the plaintiff cannot prove an injury,¹³ this case is distinguishable from the present matter. In Mauldin , the plaintiff sued his attorney for malpractice after the plaintiff's former employer deemed untimely an appeal letter disputing the plaintiff's termination.¹⁴ The administrative board, designated to hear employment disputes, adjourned without addressing the timeliness issue regarding the appeal, and the plaintiff did not allow his attorney to bring suit to challenge the issue.¹⁵ This Court in Mauldin determined that "[the plaintiff's] conduct in effect prevented [the attorney] from judicially establishing that he had not filed an untimely administrative appeal."¹⁶ Although Mauldin referenced the "pending" proceeding of the administrative board, the main issue centered more on the plaintiff's waiver of his right to sue as he did not allow his attorney to challenge the timeliness issue.¹⁷ Here, in contrast, the IRS audit was not permanently "pended," and judicial examination of the central issue has not been precluded. In fact, the IRS audit concluded, and the Appellants have filed suit regarding Proskauer's alleged malpractice. Therefore, we conclude that Mauldin does not provide grounds for postponing the accrual of the Appellants’ underlying legal malpractice claim.¹⁸

2. The Appellants also argue that the trial court erred in finding that their causes of action were not tolled. Specifically, they contend that in cases involving a breach of the fiduciary duty of disclosure, their claims were tolled until the audit was complete because Proskauer, as their fiduciary, remained silent during the Appellants’ audit.

"Once the movant has presented evidence that the claim is time-barred, the burden of persuasion then shifts to the nonmovant to present some evidence showing that an issue exists that the statute has not run but has been tolled."¹⁹ To establish fraudulent concealment sufficient to toll the statute of limitations, "a plaintiff must prove that: (1) the defendant committed actual fraud involving moral turpitude, (2) the fraud concealed the cause of action from the plaintiff, and (3) the plaintiff exercised reasonable diligence to discover his cause of action despite his failure to do so within the applicable statute of limitation."²⁰ However, "[w]hen a fiduciary relationship has been established, it is not necessary for a plaintiff to show some affirmative act involving moral turpitude, i.e., that some trick or artifice[ ] was employed to prevent inquiry or elude investigation, or to mislead and hinder the party who has the cause of action from obtaining information."²¹

Here, the Appellants claim that because they shared a fiduciary relationship with Proskauer, they were not required to show that Proskauer committed an act of moral turpitude, and the statute of limitation tolled because Proskauer remained silent during the IRS audit. However, even assuming arguendo that the Appellants shared a fiduciary relationship that persisted beyond Proskauer's issuance of the opinion letter, there was sufficient evidence that the Appellants,...