The Accountant/Attorney Liability Reporter: July/August 2005

Inside this Issue

The Bankruptcy Court Denies Counsel’s Motion to Withdraw Despite Clear Failure to Pay

In a Chapter 7 bankruptcy proceeding, a U.S. Bankruptcy Judge denied a motion by defendant’s counsel to withdraw, ruling that a lawyer who represents the debtor in a bankruptcy proceeding cannot rely on a clause in the retainer agreement allowing the lawyer to withdraw in the event of non-payment. In re Cuddy, No. 04-12166-WCH (Bankr.D.Mass. March 24, 2005).

Executrix Held Personally Liable for Legal Services Rendered to Probate Estate

In a breach of contract action brought by Attorney Diana Butt Campbell (“Attorney”) against an executrix, Nancy C. Toner (“Executrix”), The Massachusetts Appellate Division for the Northern District confirmed that an executrix is personally responsible for the payment of legal fees incurred in probating an estate, unless the parties agree otherwise. Diana Butt Campbell v. Nancy C. Toner, 2004 Mass.App.Div. 7.

The Federal District Court Denies Summary Judgment on Partnership by Estoppel

In Katherine Andrews v. Barry D. Elwell, Paul W. Pappas, John F. Carlson, and Neil Colicchio, C.A. No. 03-10825-REK, the United States District Court for the District of Massachusetts addressed the issue of partnership by estoppel, as applied to lawyers practicing together, who shared letterhead and used their names together to describe their offices.

The United States Court of Appeals for the First Circuit Holds Chapter 11 Counsel Liable for Malpractice

In a legal malpractice claim brought by the bankruptcy trustee, (“Trustee”) against Chapter 11 counsel (the “Defendants”), the US Court of Appeals for the First Circuit addressed the elements of a legal malpractice claim as it applies to Chapter 11 proceedings. Significantly, it considered (1) the existence of an attorney-client relationship, which imposed a duty of care, skill and knowledge in providing legal services to a client; (2) breach of duty; and (3) the connection of a legally recognized causation between the breach and the resulting harm to the client.

CPA Not Liable for Failing to Consider Applicability of §280H

A recent unpublished decision of the Massachusetts Appeals Court held that a defendant tax preparer was not negligent when the plaintiff failed to show that the defendant submitted an incorrect tax form and even if he did, the alleged negligence was not actionable because the plaintiff not was harmed by the defendant’s omission. In Barry R. Miller v. Roger Volk, the Appeals Court reversed a trial court’s finding of negligence because the plaintiff did not prove that the defendant’s failure to explore the applicability of 26 U.S.C. §280H (1994) (“§280H”) caused the plaintiff’s increased tax liability. Further, the plaintiffs’ own action of withdrawing money from his business caused the resulting tax liability and no proof was submitted to the trial court that the interest charged by the Internal Revenue Service (“IRS”) exceeded the value of the plaintiff’s use of the funds.

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