Summary: Overseas Shipholding Group Inc. claims that their financial difficulties are due to bad information that the law firm gave the company about taxes.
Proskauer Rose’s request to have a malpractice suit against them dismisses was turned down. The oil tanker company, Overseas Shipholding Group Inc., has sued the law firm for tax advice that cost the company millions of dollars.
A panel of the Appellate Division, First Department, unanimously agreed with Manhattan Supreme Court Justice Jeffrey Oing. He ruled that the malpractice suit should continue forward despite statute of limitations issues. The oil shipping company’s complaint against Proskauer Rose dates back to 2000 when the firm first drafted and negotiated a credit agreement. The statute of limitations for legal malpractice claims is three years from the date it was committed.
The language in previous agreements enforced joint and several liability on OSG’s overseas secondary, OIN, for all of OSG’s accountabilities. This language was crucial for OIN to guarantee OSG’s borrowings under Section 956 of the IRS code. OSG entered into more agreements in 2003 and 2006 but did not use Proskauer at those times. Instead, OSG used the joint and several agreements as templates. OSG did keep Proskauer partner Alan Parnes as their principal tax adviser.
OSG hired the law firm in 2011 to do another credit facility when Parnes discovered that some of the language used in the latest agreements could be potential tax problems. Proskauer gave OSG advice in a memo that the language did not matter and OIN was not required to repay OSG’s borrowings. OSG took the advice as informed and correct and drew down the leftover $343 million from their 2006 credit facility in 2012.
The IRS filed a claim against this for $463 million in income tax shortage, forcing OSG to file for Chapter 11 bankruptcy protection. OSG claims that Proskauer provided negligent Section 956 information. The argument is now over what date should be used for the tax advice. Proskauer claims that since they were not always under contract with OSG as their legal representation, that everything before 2011 is not useable. OSG claims that the advice from 2011 relates to the previous work that the law firm did for the company so it is useable.
Source: http://www.newyorklawjournal.com/home/id=1202731421961
Photo: proskauer.com