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Outside Financial Advisors not Considered Professionals

Businesses using outside financial advisors may be surprised to learn that according to courts in New York City, those financial advisors are not considered professionals.  In a recent appellate case, Starr v. Fuoco Group LLP, 2016 N.Y. Slip Op. 02143 (1st Dept. 2016) the Court ruled that so-called “financial advisors” were not professionals.  Therefore, unlike an accountant, attorney, engineer, or doctor, financial advisors cannot be held liable in tort for failing to exercise reasonable care.  The Court found that any duty to render financial advisory services competently must arise out of the contract itself.  Some of these contracts, but not all, may be boiler plate, but both financial advisors and potential clients would be well advised to obtain competent legal counsel before entering into such an agreement.  Proper execution can prevent substantial litigation expenses.

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Importance of Due Diligence in Divorce

In a recent appellate case Castellotti v. Free, 2016 NY Slip Op 01625 (Mar. 8, 2016) the Appellate court recently reversed the dismissal of a plaintiff’s unjust enrichment and promissory estoppel claims against his sister.  The plaintiff, Peter Castellotti, brought suit against his sister, defendant Lisa Free, claiming breach of contract, breach of fiduciary duty (duty of loyalty), unjust enrichment, and promissory estoppels (you’re prohibited from claiming there was no agreement).  Peter and Lisa’s mother was a wealthy business owner.  Shortly before her death, the mother removed Peter from her will, leaving Lisa as the sole beneficiary.  The mother did this because Peter was going through a nasty divorce with his then-wife Rea Castellotti, and the mother did not want Rea benefiting  in any way, directly or indirectly, from her estate.  At or around the same time, Peter and Lisa entered into a verbal agreement whereby Peter agreed to pay all of the estate taxes on the mother’s estate on condition that Lisa transfer 50% of all the assets from the mother’s estate to Peter once his divorce with Rea was finalized.  The mother passed away in June 2004.  Peter and Rea finalized their divorce in 2008 without Rea knowing of Peter’s rights to a multi-million dollar inheritance based on his verbal side-deal with Lisa.

After Peter’s divorce was finalized, he sought to collect his half of his mother’s estate from his sister who said there was no deal.   Peter sued.  In reversing the lower court’s dismissal of the unjust enrichment and promissory estoppels claims, the Court specifically mentioned the divorce proceeding and stated “we do not condone parties in matrimonial actions being less than candid with their spouses about their assets.  Peter’s alleged fraudulent behavior, however, should be explored in the matrimonial action, but should not preclude him from moving forward with at least some of his claims here.”  The Court further advised that Rea’s remedy, if any, was to move to vacate the divorce judgment, based upon Peter willfully concealing his alleged oral agreement with Lisa.

The bottom line here is that this entire costly nightmare could have been avoided by retention of both competent matrimonial and trust & estate counsel.

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