The following papers and the attachments and exhibits thereto have been read on this motion:

Notice of Motion1

Memorandum of Law in Support2

Affidavit in Opposition3

Memorandum of Law in Opposition4 [*2]

Reply Affirmation5

In an action to recover damages for legal malpractice, the Defendants move for an order pursuant to CPLR 3211(a)(1) and (a)(7) dismissing the complaint.

For the reasons that follow, the motion is denied.

The Defendants, attorneys who practice in the field of trusts and estates, have represented the Plaintiff for more than 10 years in connection with estate planning. In 2010, the Defendants implemented a new estate plan in order to remove from the Plaintiff's future estate his fine art collection (Ex. "A" to Motion at ¶¶ 9, 12, 14). The plan, as espoused in Defendants' letter dated September 17, 2010, was set forth as follows:

First, we will create a new Family Limited Partnership. We will use whatever name David [Lerner] chooses, but keep in mind, as I said at the time of the meeting, this is not a name that will appear anywhere other then on the income tax filings. The partnership will consist of a General Partner Corporation which we will form that will have 100% control over all partnership affairs in terms of business decisions, but will only own a 1% equity position in the partnership in terms of the assets the partnership possess. The Limited Partner will have no control whatsoever, but have a 99% equity interest.

As I said, we will create a General Partner Corporation which will be "S" Corporation controlling the affairs of the partnership. Once formed and perfected under New York State Law, David will then transfer those works of art that are currently in his name or in Lois's name to the partnership. Because the original owner of the Corporation will be David and David and/or Lois will be the initial Limited Partners, this first transfer of title will not require any tax filing, nor is it a taxable event. The change in ownership will be reflected in the paper trail at the very least with the insurance carrier that David uses to insure his valuable collection. We will require a fair market value appraisal on each and every piece of artwork placed into the partnership.

* * *

We will then sell the Limited Partnership Interest to David's already existing and already funded Intentionally Defective Grantor Trust. The sale price will have no down payment and will be evidenced by a Promissory Note requiring interest only to be paid . . . . Because this Note essentially represents an asset freeze as far as the value of the Paintings are concerned in David's Estate (at the discounted value) there is really no incentive for this Note to ever be repaid, but that is always an option.

* * * [*3]

The General Partner Corporation, which will have a name that you will come up with, will be in the art leasing business. As I had pointed out to you, there are enumerable companies listed on the internet that are in the business of leasing fine art both for private homes and to corporations, more specifically, Fortune 500 or Fortune 1,000 corporations. Pricing is obviously something you can spend some time on or perhaps David's granddaughter Sara who has an internship at Sotheby's. David would create with this corporation a first class color brochure of the artwork that is available, and will use his best efforts to market the artwork for lease two entities other than David Lerner Associates. The intention, however, is that some of the pieces will be leased to David Lerner Associates to be hung on the walls of one or more of his offices for the public to view and his employees to view.

Clearly, the Master Lease Agreement, which can be drawn by your in-house attorney, will require that the lessee provide adequate insurance coverage for the artwork hanging on the wall as well as the cost of transportation in addition to the basic leasing payments themselves.

This again creates a paper trial [sic] of the artwork hanging on the wall of the lessee as opposed to David's living room.

Although, some of the leasing programs online talked about a "Lease to Purchase Program" that is not our intention here, but in fact our intention here is a pure leasing business arrangement (Ex. "B" to Motion) (emphasis added).

In 2011, in accordance with this plan, the Defendants organized, on behalf of the Plaintiff, Majajo LP, a limited family partnership. The limited partnership was organized with Sasoha, Inc. to serve as Majajo LP's general partner, and David Lerner IDGT ("Lerner Trust") to serve as the limited partner, of the Majajo LP. Sasoha, an S corporation, was formed for the purposes of engaging in the business of leasing the Plaintiff's art collection.

According to the complaint, the Defendants were negligent in structuring this enterprise with a corporation rather than an LLC as the general partner, because an LLC would qualify as a "disregarded entity" under the tax code while a corporation is a "pass through" entity and not a "disregarded entity". Because the corporation was the general partner, the lease payments made by the Plaintiff triggered a $721,000 tax liability that would have been avoided had the Defendants formed an LLC to be the general partner of the Majajo LP.^[FN1]

On July 2, 2013, the Plaintiff commenced the instant legal malpractice action against the Defendants alleging, inter alia, the following: Defendants were specifically engaged by the Plaintiff to implement the Majajo plan, which had been recommended and devised by the [*4]Defendants; by structuring the Majajo LP with a corporation as its general partner, instead of making the general partner a "disregarded entity" (such as an LLC), the Defendants breached their duty of care owing to the Plaintiff; as a result of their breach, Plaintiff was damaged by reason of having to pay $721,110 in income tax and, additional expenses incurred in rectifying the error made by the Defendants; and that, but for the Defendants' negligence, the Plaintiff would not have incurred any such tax liability or expense (Ex. "A" to Motion at ¶¶ 31-36).

The Defendants served the instant motion to dismiss, pursuant to CPLR 3211(a)(1) and (a)(7), on the grounds that Majajo LP leased all of the art collection back to the Plaintiff, personally, that Plaintiff made rental payment to the Majajo LP, and that this leasing arrangement was a "fundamental departure from the estate plan recommended by [the Defendants]" (Affirmation in Support at ¶ 6). In this regard, Defendants note that the Plaintiff attempts to "divert attention from his failure to relinquish personal control of the art collection, which created a sham transaction, by alleging that the only reason he was forced to pay such income tax was because the general partner of the family limited partnership was structured as a corporation, instead of as a limited liability corporation" (Affirmation in Support at ¶ 7). According to the Defendants, however, whether the general partner was a corporation or an LLC "would have had no effect if Plaintiff had followed the advice of the [Defendants] and leased the art work to third-parties" and it was for this reason, as espoused in Defendants' June 27, 2013 letter, that Plaintiff was "deemed to have received taxable income". That is, by keeping the art collection in his personal residence, Plaintiff destroyed any legitimate business purpose of the Majajo LP thereby creating a sham transaction (Affirmation in Support at ¶ 11).^[FN2] [*5]

Under these circumstances, Defendants argue that, based upon the documentary evidence (two letters from the Defendants dated September 17, 2010 and June 27, 2012), they did not breach any duty to the Plaintiff and, moreover, Plaintiff has not pleaded a cause of action for legal malpractice inasmuch as the taxable income was attributed to Plaintiff because of Plaintiff's failure to follow the Defendants' advice (Affirmation in Support at ¶¶ 11-12). In support of their motion to dismiss, the Defendants submitted the verified complaint, affirmation of legal counsel along with the two letters by Defendants' firm.

In opposition to the Defendants' motion, the Plaintiffs submit the affidavit of Eric Kramer, an attorney who concentrates in estate tax planning. In his affidavit, Kramer states that the Defendants' use of an S corporation to serve as the general partner of the Majajo LP "contravened accepted practice by trusts and estates professionals" and that "by using a corporation instead of an LLC as the general partner of Majajo, the defendants failed to ensure that Majajo would be a disregarded entity' for income tax purposes, and thus exposed [Plaintiff] to income tax liability on rent he himself paid" (Kramer Affidavit in Opposition at ¶¶ 24, 29).

The Defendants' motion for an order dismissing the complaint pursuant to CPLR 3211(a)(1) and (a)(7) is denied. [*6]

When considering a pre-answer motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction and the plaintiff's allegations are accepted as true and accorded the benefit of every possible favorable inference (Leon v Martinez, 84 NY2d 83, 87 [1994]; Reiver v Burkhart Wexler & Hirschberg, LLP, 73 AD3d 1149 [2d Dept 2010]).

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only if the documentary evidence submitted by the defendant utterly refutes the factual allegations of the complaint and conclusively establishes a defense to the claims as a matter of law (Goshen v Mutual Life Insurance Co. of New York, 98 NY2d 314 [2002]; First Keystone Consultants, Inc. v DDR Construction Services, 74 AD3d 1135 [2d Dept 2010]). Contrary to the Defendants' submissions, letters are not considered "documentary evidence" within the meaning of CPLR 3211(a)(1) (see Granada Condominium III Ass'n v Palomino, 78 AD3d 996 [2d Dept 2010]; Suchmacher v Manana Grocery, 73 AD3d 1017 [2d Dept 2010]; Fontanetta v John Doe 1, 73 AD3d 78, 85—87 [2d Dept 2010]) and, thus, that branch of the Defendants' motion seeking dismissal of the complaint pursuant to CPLR 3211(a)(1), premised upon two letters drafted by the Defendants and annexed as exhibits "B" and "C" to Defendants' motion, is denied.

With respect to the branch of Defendants' motion seeking dismissal pursuant to CPLR 3211(a)(7), the standard is whether the pleading states a cause of action, not whether the proponent of the pleading has a cause of action (Sokol v Leader, 74 AD3d 1180 [2d Dept 2010]). To successfully plead a cause of action for legal malpractice, a plaintiff must allege that his attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that this failure proximately caused the plaintiff to sustain actual and ascertainable damages (Siracusa v Sager, 105 AD3d 937 [2d Dept 2013]; Keness v Feldman, Kramer & Monaco, P.C., 105 AD3d 812 [2d Dept 2013]). In considering the instant motion, accepting the facts alleged in the complaint as true, and according the Plaintiff the benefit of every possible favorable inference, the court concludes that the facts state a claim for legal malpractice (Sokol v Leader, 74 AD3d at 1181, supra). Whether the Plaintiff will ultimately establish his claim is not relevant at this juncture.

Based on the foregoing, it is hereby

Ordered that the Defendants' motion to dismiss the complaint is denied; and it is further

Ordered that the Defendants are directed to serve an answer to the complaint within 20 days of the date hereof.

This constitutes the decision and order of the court.

Dated: December 4, 2013

_____________________________ [*7]

Hon. Vito M. DeStefano, J.S.C.