Lack of privity defeats claim against counsel for Ponzi schemer.
Certain investors invested money with Donald Lacey and business entities owned by Donald Lacey in what turned out to be a Ponzi scheme. The law firm of FlorenceGordonBrown, P.C. and attorney David Bernhardt, provided legal representation and services to Donald Lacey and his business entities. After discovering that the investment was a Ponzi scheme, the investors filed suit in the Richmond Circuit Court against Bernhardt and the law firm alleging legal malpractice and fraud. The defendants filed a demurrer. The circuit court sustained the demurrer on the grounds that: (1) with respect to the legal malpractice claim, the plaintiffs failed to allege privity between the defendants and the plaintiffs; (2) the plaintiffs failed to identify any contract of which they were third-party beneficiaries; (3) since there was no privity between the law firm and the investors, and there was no allegation that Donald Lacey retained the law firm in order to bestow a benefit on the investors, the legal malpractice claim could not stand; (4) the plaintiffs also failed to allege with particularity the elements of fraud by the defendants; and (5) while the plaintiffs alleged that the law firm aided and abetted the fraud of Donald Lacey, the Supreme Court of Virginia has never specifically recognized a claim of aiding and abetting a tort.