NEW YORK, May 22 (Reuters) - For the second time in six
months, a state appeals court has rejected a lawsuit against a
law firm in connection with a $400 million fraud scheme by
convicted lawyer Marc Dreier.
Ruskin Moscou Faltischek was hired to give an independent
opinion on whether documents setting up a $50 million loan from
Fortress Investment Group to Dreier's client, real estate
investor Sheldon Solow, were properly drawn up.
The law firm gave several opinions confirming that the
documents were valid and binding. However, after Dreier was
charged with fraud Fortress discovered that the signatures on
the papers -- including one that was purportedly Solow's -- were
Fortress sued Ruskin in 2010, claiming it would not have
agreed to the deal without the firm's legal guidance. It also
argued the firm was derelict by communicating solely with Dreier
rather than checking with Solow Realty, which turned out to have
no knowledge of the deal.
State Supreme Court Justice Charles Ramos denied Ruskin's
motion to dismiss the complaint last year. But the Appellate
Division, First Department, reversed that ruling on Tuesday,
relying on a decision it made in November regarding a virtually
identical lawsuit that Fortress filed against the law firm
In that case Fortress sued Dechert for essentially the same
actions, after the law firm told Fortress that documents for a
$50 million loan to Solow Realty were properly executed. In
fact, the documents were also part of Dreier's fraud.
The First Department ruled at the time that Dechert was not
responsible for ascertaining whether the signatures were real,
since Dreier was working as Solow's attorney. That decision also
reversed an earlier ruling from Ramos, who had denied Dechert's
motion to dismiss the case.
"As Dreier was Solow Realty's attorney and the guarantor of
the loan, defendant had no reason to suspect that Solow Realty
was not in fact a party to the loan transaction or that Dreier
forged the signatures of its principal and CEO," the five-judge
panel wrote in the November ruling.
In Tuesday's single-paragraph decision, the court simply
said that the case was similar to the earlier lawsuit and that
the law had not changed in the interim.
"Everything that Ruskin did was 100 percent by the book and
consistent with accepted practice," said Lawrence Steckman, who
represented Ruskin. "The fact that Mister Dreier was able to
deceive an entire industry is not a reason to hold a law firm as
a guarantor for a real estate loan."
In a statement, Cindy Kelly, a lawyer for Fortress, said
Fortress had not yet decided whether to appeal the ruling.
"If it stands, the Appellate Division's ruling would permit
law firms to provide legal opinions without so much as knowing
who they represent and would put parties at their peril in
relying on legal opinions in corporate transactions," she said.
Dreier, who once ran a 250-member law firm bearing his name,
pleaded guilty in May 2009 to securities fraud, money laundering
and other charges and was sentenced to 20 years in prison.
The case is Fortress Credit Corp. v. Ruskin Moscou
Faltischek, Appellate Division, First Department, No. 7725.
For Fortress: Cindy Kelly of Kasowitz, Benson, Torres &
For Ruskin: Lawrence Steckman of Lester Schwab Katz & Dwyer
(Reporting by Joseph Ax)
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