Florham Park associate Jack N. Frost, Jr. was quoted in a New York Law Journal article titled, “Non-Client Can Pursue Action Against Law Firm, Panel Rules.”
In a recent ruling, a Manhattan appeals panel revived a negligent misrepresentation claim against a lawyer who had made written assurances to a non-client hedge fund investor. Plaintiff Alvin Chanin filed suit after losing the entirety of his investment in a hedge fund that was shut down after its fund manager allegedly siphoned off fund money to support the manager’s failing electrical contracting business. Chanin had been contacted by the SEC as part of its audit of the fund, at which time he turned to the fund’s outside counsel for reassurances regarding the fund’s stability. The case centered on whether or not the correspondence would construe any kind of privity-like relationship supporting a negligent representation claim.
Jack, who briefed and argued the case on behalf of Alvin Chanin, said, “Law firms have been held liable for opinion letters issued to non-clients in the context of large corporate transactions.” He continued, “Here, the law firm gave the representation to a customer of its client, and that was enough to establish privity.”