32 NewsQuarterly 1 (2012-2013)

handle is hein.journals/newsqtrly32 and id is 1 raw text is: Thinking About Tax Malpractice
by Michael B. Lang*

W hen tax practitioners think of who addresses substandard behavior by their
colleagues they think of the IRS Office of Professional Responsibility (OPR) and
they are right to do so. OPR's mandate, funding and staffing have expanded greatly in
recent years as part of an effort to hold those who work in the tax field to higher
standards. But OPR, like state bar ethics committees, focuses on professional disci-
pline. It is of no help to the client whose tax lawyer has mishandled the client's
representation. This remains the province of malpractice and related causes of action.
This article will briefly review some basic tax malpractice- related issues, as well as how
tax lawyers may reduce their malpractice risk.
Basic Issues
An unhappy client may seek redress from his tax lawyer through any one of
numerous causes of action. Some arise under tort or contract law, such as negligence,
breach of contract, breach of fiduciary duty, intentional misrepresentation (known as
deceit), negligent misrepresentation, civil conspiracy, breach of covenant of good
faith, intentional or negligent infliction of emotional distress, or aiding and abetting a
breach of fiduciary duty. Others may arise under statutes, such as unfair trade practice
provisions, RICO, or securities laws. Plaintiffs' claims often include multiple causes of
action because of differences as to the application of the statute of limitations, measure
of damages, ability to recover legal fees, to whom liability extends and defenses.
Despite such differences, such causes of action generally require proof that (1) the
defendant owed a duty to the plaintiff, be it under tort law, a contract, or a statute; (2)
the defendant breached the duty; (3) the breach was the cause (referred to as
proximate cause in tort cases) of an injury to the plaintiff; and (4) the injury resulted
in actual damages to the plaintiff. Certain causes of action may require additional
elements of proof-for example, deceit requires a showing of scienter-but the basic
four elements are the core of the various causes of action.
A traditional negligence action involves a breach of the duty of care or a failure to
exercise care, the duty of care requiring the exercise of competence and diligence
normally exercised by lawyers in similar circumstances. Restatement (Third) of the
Law Governing Lawyers § 52(1) (2000) (Restatement); see M.R.P.C. 1.1 and 1.3.
* Professor of Law, Chapman University School of Law, Orange, CA.

continued on page 27

Aftermath of NFIB v. Sebelus
(1) Health Insurance Tax       8
(Penalty) Upheld
(2) It's Not a Tax (Statutorily),  13
but It Is a Tax (Constitutionally)
(3) The Supreme Court Has Spoken: 15
Now What Should Employers Do
About Their Group Health Plans?

Opinion Point
Diagnosis of and Proposed
Remedies for Structural Problems
in the Federal Tax System


Points to Remember
(1) The Postman (Usually) Rings  20
Twice: Resolving State Tax Liabilities
After a Federal Tax Adjustment
(2) Validity of Guidance Questioned 21
by the Courts
(3) Entergy v. Commissioner:   23
The Untenable Circuit Split
Book Review                    26
The ABA Property Tax Deskbook
Boxscore                       32
CLE Calendar                   33
.I     ATION
m  ASetion  American Bar Association


Thinking About Tax Malpractice
From the Chair
Rudolph R. Ramelli
Interview with Mark Prater


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