11-2514-cv
Solin v. Domino



                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                       SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

      At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 25th day of October, two thousand twelve.

PRESENT: REENA RAGGI,
                 PETER W. HALL,
                 DEBRA ANN LIVINGSTON,
                         Circuit Judges.
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DANIEL R. SOLIN, Individually and as Trustee of the
Daniel R. Solin Trust,
                           Plaintiff-Appellant,

                  v.                                                     No. 11-2514-cv

ANTHONY J. DOMINO, JR., THE GUARDIAN
INSURANCE & ANNUITY COMPANY,
INCORPORATED,
                         Defendants-Appellees,
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APPEARING FOR APPELLANT:                                  LAWRENCE KELLOGG, Levine Kellogg
                                                          Lehman Schneider & Grossman LLP,
                                                          Miami, Florida.

APPEARING FOR APPELLEES:                                 KEVIN J. WINDELS, D’Amato & Lynch
                                                         LLP, New York, New York, for
                                                         Defendant-Appellee Anthony J. Domino.
                                                   ROBERT D. MEADE, Bleakley Platt &
                                                   Schmidt, LLP, White Plains, New York,
                                                   for Defendant-Appellee The Guardian
                                                   Insurance & Annuity Company,
                                                   Incorporated.


       Appeal from a judgment of the United States District Court for the Southern District

of New York (Kevin Thomas Duffy, Judge).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment entered on May 27, 2011, is AFFIRMED.

       Plaintiff Daniel R. Solin appeals from the dismissal of his New York state law claim

for professional malpractice and negligent misrepresentation against investment advisor and

insurance agent Anthony J. Domino Jr., for mistakenly advising Solin as to the tax

consequences of surrendering an annuity. He further appeals from an award of summary

judgment in favor of Guardian Insurance and Annuity Company, Inc. (“Guardian”), on his

three equitable claims for rescission and reformation, based on alleged negligent

misrepresentation, unilateral mistake, and mutual mistake.       We assume the parties’

familiarity with the facts and record of prior proceedings, which we reference only as

necessary to explain our decision to affirm.

1.     Dismissal of Claims Against Domino

       We review a judgment of dismissal de novo, Simmons v. Roundup Funding, LLC, 622

F.3d 93, 95 (2d Cir. 2010), accepting all factual allegations in the complaint as true and

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drawing all reasonable inferences in favor of the plaintiff, to determine whether the pleadings

state a plausible claim for relief, see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Chase Grp.

Alliance LLC v. City of N.Y. Dep’t of Fin., 620 F.3d 146, 150 (2d Cir. 2010).

       a.      Malpractice Claim

       An action for professional malpractice requires proof of damages actually and

proximately caused by the malpractice. Kaminsky v. Herrick, Feinstein LLP, 59 A.D.3d 1,

9, 870 N.Y.S.2d 1, 5–6 (1st Dep’t 2008). Here, Solin’s claim for malpractice damages fails

because it falls within New York’s proscription on the recovery of tax liability. See Gertler

v. Sol Masch & Co., 40 A.D.3d 282, 283, 835 N.Y.S.2d 178, 179 (1st Dep’t 2007) (“[T]axes

. . . are not recoverable under New York law.”). Indeed, New York applies this rule even

when the tax liability is allegedly attributable to the defendant’s mistaken advice. See

Fownes Bros. & Co. v. JPMorgan Chase & Co., 92 A.D.3d 582, 583, 939 N.Y.S.2d 367, 367

(1st Dep’t 2012) (holding, where plaintiff’s transfer between employee benefit plans

generated tax liability, that “fact that plaintiffs may have performed the transfer pursuant to

advice from defendants does not convert plaintiffs’ tax liability into consequential

damages”); see also Gaslow v. KPMG LLP, 19 A.D.3d 264, 265, 797 N.Y.S.2d 472, 473 (1st

Dep’t 2005) (“Plaintiff’s tax liability naturally flows not from defendants’ alleged fraud or

other tortious acts, but rather from the fact that he . . . creat[ed] a taxable event.”).

       Solin’s complained-of damages amount to the difference between the taxes he paid

upon surrender of the annuity and the lower taxes that he expected to pay as a result of

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Domino’s advice or, alternatively, to the difference between the taxes he paid and what his

future taxes would have been. Even if this calculation were not speculative, as the district

court found, such damages would fall squarely within New York’s rule against the recovery

of taxes owed.1 Solin therefore fails to state a claim for malpractice.

       b.     Negligent Misrepresentation

       The same conclusion applies to Solin’s claim of negligent misrepresentation, which

arose from the same facts and alleged the same tax-based damages as his malpractice claim.

See Symbol Tech., Inc. v. Deloitte & Touche, LLP, 69 A.D.3d 191, 199, 888 N.Y.S.2d 538,

544 (2d Dep’t 2009) (affirming dismissal of negligent misrepresentation claim as duplicative

of accounting malpractice claim); Gertler v. Sol Masch & Co., 40 A.D.3d at 283, 835

N.Y.S.2d at 179. Alternatively, dismissal is warranted because a plaintiff claiming negligent

misrepresentation may seek only “out-of-pocket” damages, amounting to “the actual

pecuniary loss sustained as a direct result of the wrong,” rather than the “profits which would

have been realized in the absence” of the misrepresentation. Lama Holding Co. v. Smith

Barney Inc., 88 N.Y.2d 413, 421–22, 646 N.Y.S.2d 76, 80 (1996). The tax deferral benefit



       1
        In his brief before this Court and during oral argument, Solin framed his damages as
a loss of “tax deferral benefits.” He asserts that such damages could be calculated using a
web-based calculator that Guardian markets to its customers. We need not address this
possibility because Solin never advanced this damages theory against Domino in the district
court, and so forfeited the argument. Or, put differently, Solin’s complaint, which sought
“[r]ecovery of the tax payment,” Joint Appendix at 64, failed to allege a claim for legally
recoverable damages.

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of the forgone annuity represents not a direct out-of-pocket loss, but the anticipated profits

of an alternative course of action that Solin contends was foreclosed by Domino’s inaccurate

advice. Thus, no recovery may be had.

2.     Summary Judgment in Favor of Guardian

       After dismissal of his damages-based claims against Domino, Solin abandoned his

damages claims against Guardian and filed a Second Amended Complaint that sought

equitable   relief,   specifically,   rescission   and   reformation   based   on   negligent

misrepresentation, unilateral mistake, and mutual mistake.

       On de novo review of the district court’s grant of summary judgment for Guardian,

we draw all permissible factual inferences and resolve all factual ambiguities in Solin’s

favor. See Burg v. Gosselin, 591 F.3d 95, 97 (2d Cir. 2010). We conclude that summary

judgment was correctly granted to Guardian.

              a.      Rescission

       Rescission operates “to declare [a] contract void from its inception and to put or

restore the parties to status quo.” County of Orange v. Grier, 30 A.D.3d 556, 557, 817

N.Y.S.2d 146, 146 (2d Dep’t 2006) (internal quotation marks omitted). What Solin seeks

to “rescind” here is “the surrender of the Annuity agreement,” Second Am. Compl. at 8. The

surrender of the agreement was—as the phrase implies—an operation performed upon the

annuity contract pursuant to terms contained therein. It was not itself a contract, and thus,

it cannot be rescinded. In surrendering his annuity, Solin did submit a document entitled

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“Request for Total Withdrawal.” That document, however, bears no hallmarks of a contract

distinct from the annuity agreement to which it pertains. For example, it nowhere indicates

that Solin gave any consideration to Guardian to induce its surrender of his annuity. Nor did

a representative of Guardian sign the surrender document. Indeed, it appears that upon

receipt of Solin’s request, Guardian was contractually bound—by the annuity agreement—to

surrender the annuity to Solin. Thus, Solin does not state a claim for rescission of a contract.

His relief for any mistakes or misrepresentations informing his decision to submit a

withdrawal request must be found in an action for damages, or not at all.

       b.     Reformation

       The same conclusion obtains with respect to Solin’s claim for reformation based on

negligent misrepresentation. Insofar as he seeks reformation based on unilateral or mutual

mistake, the record fails to support either theory. Both doctrines of mistake are premised on

the same factual scenario: two parties to a preexisting oral agreement sign a writing that is

meant to express that agreement but does not. Where neither party is aware of the writing’s

inadequacy, there is mutual mistake; where one party recognizes the inadequacy but misleads

the other, there is unilateral mistake. See Greater N.Y. Mut. Ins. Co. v. U.S. Underwriters

Ins. Co., 36 A.D.3d 441, 443, 827 N.Y.S.2d 147, 149 (1st Dep’t 2007).

       Here, Solin and Guardian never had an oral agreement at all, or even a sequence of

two written agreements. Instead, they had a single written agreement, the annuity contract,

which itself permitted Solin to withdraw without the parties’ having to reach any further

                                               6
agreement. Under these circumstances, Solin has no claim for reformation of the annuity

contract based on mutual or unilateral misunderstanding of the tax consequences of his

decision to exercise his right of withdrawal. Moreover, Solin offered no evidence that he

entered his annuity agreement on the basis of a mistake about a fact then underlying the

agreement—as would be required to obtain reformation. See Asset Mgmt. & Capital Co. v.

Nugent, 85 A.D.3d 947, 948, 925 N.Y.S.2d 653, 654 (2d Dep’t 2011). The mistake, if there

was one, arose during the pendency of the contract, and not before; it did not induce Solin’s

formation of the contract, but only his decision to surrender it.

       Since neither rescission nor reformation was appropriate in Solin’s case, summary

judgment was properly granted in Guardian’s favor.

3.     Conclusion

       We have considered Solin’s remaining arguments on appeal and conclude that they

are without merit. Accordingly, the judgment of the district court is AFFIRMED.

                                    FOR THE COURT:
                                    CATHERINE O’HAGAN WOLFE, Clerk of Court




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