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Divorce Litigant’s Claims Against Court-Appointed Expert Dismissed

The case is DePalma v. Maya Murphy, 16 cv 8933, from the Southern District of New York.  The relevant opinion is dated December 1, 2017.

The plaintiff, Carol DePalma, sued her former divorce attorney and the court-appointed financial expert. This post will deal with the claims against the financial expert. During the divorce the parties chose and the court appointed an accounting firm, KLG, LLC. KLG was to render an opinion as to the value of Husband’s interest in Shred-It, a company in the shredding business. KLG issued two reports and the parties ultimately settled the divorce case.

Carol then sued KLG for negligence, for its purported failure to value the interest in Shred-It after it merged with another company.  The court dismissed the negligence claim against KLG and explained that the opinion of KLG did not proximately cause any injury to Carol. The explanation:

DePalma’s argument that KLG was negligent in not updating its reports after the merger is not persuasive. KLG informed the parties that May 29, 2013 would be the date for all valuations, “unless directed by the Court or pursuant to a stipulation in writing from both parties’ attorneys.” (Retainer Agreement at 1.) No one objected, and KLG never received an instruction to change the date. (Aff. ¶ 14.) Indeed, if KLG had changed the valuation date or updated its reports sua sponte, it would have violated the terms of the Retainer Agreement.

DePalma’s retort that she never signed the Retainer Agreement is without merit. “[A]n unsigned contract may be enforceable, provided there is objective evidence establishing that the parties intended to be bound.” Flores v. Lower E. Side Serv. Ctr., Inc., 828 N.E.2d 593, 597 (N.Y. 2005). Counsel for both parties were well aware of KLG’s engagement and its terms, and operated under them for over a year.

DePalma also asserts errors in the specific valuation methods and procedures used. But in a professional negligence claim, like any negligence claim, “a plaintiff must demonstrate . . . a causal connection between its losses and the defendant’s actions.” MF Global Holdings Ltd. v. PricewaterhouseCoopers LLP, 199 F. Supp. 3d 818, 830 (S.D.N.Y. 2016) (internal citation omitted). The requirement is one of proximate causation, meaning “the cause that directly produces an event and without which the event would not have occurred.” Ritchie Capital Mgmt. LLC v. Gen. Elec. Capital Corp., 121 F. Supp. 3d 321, 338 (S.D.N.Y. 2015) (internal citation omitted).

Here, KLG was only an intermediate player in the parties’ ultimate decision to settle. Murphy and DePalma were free to choose what weight to give to KLG’s conclusions, and could have decided to conduct additional discovery or hire their own expert to do another analysis. (See Order Appointing Appraiser at 4) (“This Order is without prejudice to either party’s right to retain their own appraiser/expert to value the assets and/or income at issue in this matter.”)

Because DePalma cannot establish that her settlement amount was proximately caused by any of KLG’s alleged errors, her negligence claim is dismissed.

Edward X. Clinton, Jr.