MSouth Equity Partners, an Atlanta-based private equity investment firm, has sued the legal firm, Alston & Bird LLP (“A&B”), in Fulton County Superior Court in Atlanta, GA, seeking to reclaim more than $7.6 million paid in federal and state taxes. The plaintiffs allege that lawyers from A&B gave improper legal advice informing the client that the IRS would not challenge a proposed merger between a controlled company and another investment firm as a tax avoidance scheme.
The complaint contained affidavits from (1) the former chair of the tax section of the Atlanta Bar Association and the State Bar of Georgia, and (2) a professor of legal ethics from Mercer University’s Walter F. George School of Law, which asserted that the advice given by A&B, and its failure to recognize or admit the mistake, constituted legal malpractice.
A&B allegedly added to its initial mistake by failing to notify the client of the issue after the IRS had initiated an audit in 2014. The firm also advised MSouth to agree to indemnify the buyer of the company for any outstanding tax liability resulting from the sale.
MSouth is also seeking punitive damages, legal fees and, pre-judgment interest on the basis that A&B demonstrated “willful misconduct, malice, and fraud,” and a “conscious indifference to the potential consequences” resulting to its clients. MSouth Equity Partners, L.P. v. Alston & Bird, LLP, Fulton County Superior Court, No. 2017:CV-287263.