News & Events

Simpson Thacher has achieved a significant victory before the New York Court of Appeals on behalf of Davis Polk & Wardwell. In 1992 Ambase Corp. retained Davis Polk to represent it in a tax case brought by the Internal Revenue service. After Davis Polk won the case for its client, Ambase balked at paying the "success fee" required under the retainer agreement it had signed with the firm.

Despite the victory achieved on its behalf, AmBase filed a legal malpractice claim seeking return of previously-paid legal fees. The company alleged that Davis Polk waited too long to inform it that it likely would not have no liability for the taxes sought by the IRS. Thus, according to AmBase, for years it was forced to carry an unnecessarily large loss reserve to its financial detriment.

Simpson Thacher gained dismissal of the Complaint and obtained affirmance of that dismissal by the Appellate Division, First Department. AmBase appealed to the New York Court of Appeals.

On April 26 the Court of Appeals unanimously held that AmBase's contention that it suffered from the lack of earlier notice that it likely would have no tax liability "purely speculative" and insufficient to support a claim for legal malpractice. The Court also rejected an argument by AmBase that it was denied due process under the federal and state constitutions when the trial court ordered it to pay the "success fee" without a separate proceeding for recovery of a money judgment.

Litigation partner Roy L. Reardon represented Davis Polk in the matter.

To read the New York Court of Appeals opinion in the matter, click here.