Judge won’t toss OSG suit


A New York judge has declined to dismiss Overseas Shipholding Group (OSG)’s malpractice lawsuit against law firm Proskauer Rose, new legal documents show.

State Supreme Court Justice Jeffrey Oing denied a request by the New York firm to throw out OSG’s claim that lawyers breached their duty of care to the shipowner, according to a court transcript that was recently made public.

As TradeWinds has reported, the New York tanker owner has asserted damages of $450m on allegations that bad tax advice from Proskauer left it with a large debt to the US government before its descent into bankruptcy.

Oing ruled that the first of the company’s two malpractice claims was legally sufficient to move forward.

“We were happy with it. We thought the judge got it right,” said John Brown, OSG’s lawyer at Texas firm Mullin Hoard Brown.

‘False’ memo

The Davis, Polk & Wardwell lawyers representing Proskauer had argued that OSG’s lawsuit should be thrown out because the company knew that a 2011 memo by the law firm was false. The memo concerned tax liability language in OSG’s credit agreements that came to expose the tanker owner’s international operations to US tax liability.

Proskauer argued that its memo was based on information from OSG, which the firm claims didn’t turn over key documents that would have shown that the tanker owner knew that OSG International intended to guarantee debts of its US-flag arm.

OSG’s lawyers had fired back that there was no misrepresentation to Proskauer and that it did not hide documents, and the owner challenged the documentary evidence behind the allegation.

Fact finding ahead

However, Oing said the dispute over the memo requires further fact finding, and he noted that Proskauer’s arguments are better suited for a summary judgement decision, in which a case is decided before trial, further down the road.

“Of course, you know, at this point the plaintiff has survived the motion to dismiss. They may not survive the summary judgement motion, depending on how it plays out during discover,” he said.

Oing did throw out OSG’s claim asserting legal malpractice for “breach of duty of loyalty”, which he said was already covered by the first claim.

OSG controls a fleet of 88 tankers, tank-barge units and LNG carriers, including newbuildings and chartered-in ships.


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