The Accountant/Attorney Liability Reporter: October 2006

Inside this Issue

Engagement Letter and Good Record Keeping Lead to Accountant Defense Verdict

In June of this year, Donovan Hatem LLP successfully defended an accountant in a four-day jury trial. The plaintiff was an attorney who claimed that the accountant committed malpractice in the preparation of his 1992 tax returns. The plaintiff claimed the accountant should have performed a cash reconciliation of his books and Form 1099s received when the attorney received settlements. The plaintiff asserted that the failure to perform this work created red flags that caused the Internal Revenue Service to audit the plaintiff’s 1992 tax returns. Eventually, the plaintiff was assessed an additional tax liability of approximately $7,500, based on underreported income. The plaintiff sought recovery of substantial attorney’s and accountant’s fees incurred in connection with the audit, as well as emotional distress damages stemming from the IRS audit.

Closing Attorney Not Liable to Seller as Escrow Agent in Absence of Contract With Seller of Property

By Doulgas M. Marrano, Esq.

A Massachusetts Superior Court Judge recently awarded summary judgment to a defendant law firm (the “Firm”), which conducted the closing on a sale of commercial property between business entities. Despite allegations that the Firm received sales proceeds and did not distribute them as agreed, the court awarded summary judgment on several breach of contract and consumer protection act theories because no contract existed between the Firm and the seller imposing duties that the attorney act as an escrow agent.

Massachusetts Probate and Family Court Addresses Lawyer’s Simultaneous Representation of Family Members

A recent decision of the Probate and Family Court reinforces the fundamental principles set forth in the Massachusetts Professional Rules of Conduct that an attorney may simultaneously represent clients related to one another so long as their interests are not directly adverse to each other. In this matter, the plaintiff filed a complaint against an attorney alleging breach of fiduciary duty as a result of the attorney’s preparation of two wills for the plaintiff’s Aunts disinheriting the plaintiff while at the same time providing legal assistance to the plaintiff on other matters. The plaintiff alleged that this was a breach of fiduciary duty because his attorney represented his Aunts in preparing a document that was adverse to him. The Probate and Family Court granted summary judgment for the attorney finding no violation of any Professional Rules of Conduct. Donovan Hatem LLP represented the attorney in this matter.

Domestic Asset Protection Trusts (DAPT)

A Domestic Asset Protection Trust or DAPT, is an irrevocable trust established in one of the nine states (Alaska, Colorado, Delaware, Missouri, Nevada, Oklahoma, Rhode Island, South Dakota, and Utah) whose laws allow a person (a “Donor”) to transfer assets to a trust for his or her own benefit and prevent the Donor’s creditors from reaching those assets.

To access full articles, please contact marketing.