NY Court: Financial Advisors Aren't Professionals
While financial advisors might take offense at being told by New York's courts that they aren't "professionals," they shouldn't. It means they face far less liability to being sued if/when things go wrong.
And this point was brought home rather clearly by the hot-off-the-presses, March 24, 2016 decision in Starr v. Fuoco Group, LLP decision from New York's Appellate Division, First Department.
In this case, the plaintiff claimed that the defendant, who was their financial advisor, was liable to them for the damages they sustained as a result of the defendant's negligence and gross negligence in their performance of the agreement between them. The New York County trial court dismissed those claims right out of the gate, before any depositions or discovery was had in the case.
Why the Plaintiff's Claims That the Defendants Should be Liable for Their Grossly Negligent Performance of the Contract Failed
In affirming the trial court's dismissal of those claims, the appellate court distinguished between "professionals," who under certain circumstances, can be held liable in negligence (regardless of what it says in a contract), and non-professionals, who cannot be held negligent for improperly discharging their responsibilities under a contract, stating:
While "[p]rofessionals ... may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties" (see Sommer v Federal Signal Corp., 79 NY2d 540, 551 ), a financial advisor such as Eureka is not a "professional" (see Leather v United States Trust Co. of N.Y., 279 AD2d 311, 311-312 [1st Dept 2001]).
Thus, any duty owed by the Eureka defendants to render financial advisory services to plaintiff in a competent manner must arise out of a contract. Indeed, the complaint alleges that plaintiff "retained" the Eureka defendants and that Eureka "agreed to act as [his] financial advisor" (emphasis added). However, "claims based on negligent or grossly negligent performance of a contract are not cognizable" (Kordower-Zetlin v Home Depot U.S.A., Inc., 134 AD3d 556, 557 [1st Dept 2015] [internal quotation marks omitted]).
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