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July 13, 1993

LIPSKY, GOODKIN & CO., a general partnership, ROBBINS, GREENE, HOROWITZ & CO., a general partnership, ROCHLIN, GREENBLATT & GALLO, a general partnership, ALAN GREENBLATT, individually, ROBERT ROCHLIN, individually, and MARK LIPSKY, individually, Defendants.

The opinion of the court was delivered by: CHARLES E. STEWART, JR.

 STEWART, District Judge:

 Defendants Lipsky, Goodkin & Co. ("LGC"), Mark Lipsky, Alan Greenblatt and Robert Rochlin move, pursuant to Federal Rules of Civil Procedure ("Fed. R. Civ. P.") 12(b) and 9(b), to dismiss the amended complaint of plaintiffs Anthony and Michelle Cuccolo. As set forth below, the motion is converted to one for summary judgment pursuant to Fed. R. Civ. P. 56 and is denied in part and granted in part.


 In 1975, the Cuccolos retained the accounting firm that eventually became defendant LGC, with whom defendants Lipsky, Greenblatt and Rochlin were affiliated. Am. Compl. P 10. LGC provided accounting services and tax planning advice to the Cuccolos and to Tobron Office Furniture, Inc. ("Tobron"), a company owned by Anthony Cuccolo.

 In 1988, Greenblatt and Rochlin joined a new firm, defendant Robbins, Greene, Horowitz & Co. ("RGHC"); three years later they started defendant Rochlin, Greenblatt & Gallo ("RGG"). Am. Compl. PP 59, 61. As Greenblatt and Rochlin changed their firm affiliations, the Cuccolo and Tobron accounts did so as well. Am. Compl. P 62. RGG performed accounting and tax services for the Cuccolos and Tobron until June, 1991. Id. Neither RGHC nor RGG have been served with process in this action.

 The Cuccolos allege that in 1982 and 1984 Greenblatt recommended certain investments to reduce their income tax exposure. *fn1" Am. Compl. PP 13, 37. Pursuant to these recommendations, in 1982 the Cuccolos purchased limited partnership interests in Transpac Oil Drilling Limited Partnership 1982-16 ("Transpac Partnership") for an aggregate purchase price of $ 126,000.00. Am. Compl. PP 15, 36. Two years later, the Cuccolos purchased limited partnership interests in Taylor Residential Real Estate Limited Partnership ("Taylor Residential") for $ 378,591.00, including interest. Am. Compl. PP 38, 56. Greenblatt allegedly told the Cuccolos that he had investigated both investments and had determined that they were legitimate and would withstand scrutiny by the Internal Revenue Service ("IRS"). Am. Compl. PP 14, 38. The Cuccolos also maintain that they were never advised about the economic and tax risks of these investments. Am. Compl. PP 15, 39.

 Because of numerous improprieties, neither the Transpac Partnership nor the Taylor Residential investments performed as the Cuccolos anticipated. The offering materials of both investments contained misstatements and omissions. Am. Compl. PP 27, 28, 41. In addition, both ventures were controlled by John Galanis, who had a history of improper business practices. Am. Compl. PP 26, 28, 42. Indeed, Galanis and others were convicted of conspiracy and of operating a racketeering enterprise in connection with these two investments. See United States v. Galanis, 87-851 (S.D.N.Y.).

 Sometime before 1991, the IRS challenged the Transpac Partnership and Taylor Residential investments, and concluded that they were not legitimate tax shelters. Consequently, the investments did not provide the tax benefits that the Cuccolos had expected. Instead, the plaintiffs have paid tax deficiencies and penalties of approximately $ 500,000.00, and anticipate having to pay an additional $ 500,000.00. Am. Compl. P 68; Cuccolo Aff. PP 18-20, Exs. C, E, F.

 The Cuccolos claim they were unaware of the improprieties involving their investments until March of 1991, when they received notices of personal tax liability from the IRS and the state of New Jersey. Cuccolo Aff. PP 13, 16. However, they acknowledge that prior to that time they received notices from the IRS and correspondence from lawyers concerning the Transpac Partnership and Taylor Residential investments. Am. Compl. P 63; Cuccolo Aff. PP 8, 10. The Cuccolos claim they never read any of this information, but instead promptly turned it over to the defendants. Id. They also claim they executed certain documents pursuant to the advice of the defendants. Cuccolo Aff. P 11. Finally, the Cuccolos maintain that they asked if there was any action they should take, and that the defendants--and Greenblatt in particular--"repeatedly assured [us] that these matters were being handled so as to insure that [our] substantial interests were protected." Cuccolo Aff. P 12.

 Greenblatt contests the Cuccolos' claim that they were not fully informed about the situation involving these investments until March of 1991. Specifically, Greenblatt points out that in 1986 Anthony Cuccolo executed an agreement that retained counsel in connection with the Taylor Residential investment. Greenblatt Aff. PP 9, 11, Exs. A, C. Similarly, the Cuccolos apparently retained counsel in connection with the Transpac Partnership investment. Greenblatt Aff. PP 18-19, Exs. H-J.

 The Cuccolos' amended complaint contains three causes of action. The first two relate to the investments in Transpac Partnership and Taylor Residential. The first cause of action alleges that the defendants committed accountant malpractice. Am. Compl. PP 71-81. The second alleges that the defendants committed common law fraud and deceit and also violated certain federal securities statutes. Am. Compl. PP 82-93.

 The third cause of action alleges that from 1986 to 1990 the defendants committed accountant malpractice in preparing the Cuccolos' tax returns. Specifically, the defendants included "Tobron's total ordinary earnings as dividends on plaintiffs' New Jersey income tax returns" instead of reporting only the actual dividends they received. Am. Compl. PP 98, 102. The defendants also improperly computed the Cuccolos' New Jersey tax credits for taxes paid to New York State. Id. As a result, the Cuccolos will incur tax deficiencies and penalties with their New Jersey income taxes. Am. Compl. P 105. In April, 1992, the Cuccolos commenced the instant action in the Supreme Court of New York State, New York ...

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