Professional Negligence Law Reporter

Lisi v. Lowenstein Sandler LLP, 2019 WL 1064023 (N.Y. App. Div. Mar. 7, 2019).

A New York appellate court held that a law firm was not liable to a client for its alleged failure to advise him that exercising his stock options would result in gains subject to ordinary income taxation. Here, a client sued a law firm, alleging liability for the failure to advise him that income gained from the exercise of his stock options would be taxed as ordinary income. The plaintiff asserted that had the defendant advised him appropriately, he would have sold his shares or eliminated market risk by taking other steps, including shorting his stock options. The trial court dismissed the plaintiff’s complaint.

Affirming, the appellate court found that the plaintiff could not have shorted his stock before exercising his stock options, on which he purportedly intended to speculate as evidenced by his failure to sell them immediately, despite the stock market’s volatility. Citing case law, the court also concluded that the plaintiff’s claim that he would have ended his stock speculation had the defendant provided appropriate advice relies on a grossly speculative chain of future events subject to the stock market’s fluctuations and the changing sale price of the plaintiff’s vested stock. Consequently, the defendant was not liable for legal negligence.