Facts

Plaintiff Gerard A. McHale Jr., P.A., Trustee of the 1031 Debtors Liquidation Trust, was the successor in interest to 1031 Advance, Inc., which filed for bankruptcy in New York in May 2007. Plaintiff claimed that prior to its bankruptcy in 2006, 1031 Advance hired Silicon Valley Law Group (SVLG) to advise it in selling the company, a qualified intermediary in the 1031 exchange business.

Plaintiff filed a suit alleging that SVLG was negligent in advising 1031 Advance in the sale of the company to 1031 Tax Group Inc. owned by Edward Okun, by not conducting proper due diligence.

After the sale was consummated, Edward Okun looted the proceeds that had previously been held by 1031 Advance Inc. Okun is now serving a 100-year jail sentence.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that it relied on defendant's expertise with 1031 exchange transactions and mergers and acquisition in hiring defendant to represent it in the sale of the company. Plaintiff also contended that defendant was negligent in advising against a sale to Southwest Exchange. Plaintiff then contended that defendant was negligent in the sale of the company to Edward Okun and the 1031 Tax Group with the knowledge of Okun's misconduct.

Plaintiff further contended that defendant did not conduct proper due diligence concerning suspicious facts disclosed to it about Okun's past borrowing, and future intent to borrow, 1031 exchange funds, and negligent in advising 1031 Advance concerning these red flags.

Plaintiff alleged that defendant missed red flags regarding Okun and the Tax Group and failed to give adequate notice to plaintiff. Plaintiff further alleged that if SVLG had done proper due diligence and given proper advice 1031 Advance would not have been sold to Okun's company and Okun would not have been able to steal $34.9 million in exchange funds from 1031 Advance to keep his Ponzi scheme going.

Damages

Plaintiff sought $34.9 million plus $1 million for forensic accounting costs.

Result

The jury unanimously found in favor of the Silicon Valley Law Group and specifically found that it had not committed negligence.