With Chill in the Air, a Fresh Law Firm Lawsuit-Palooza
There never seems to be a shortage of litigation involving large law firms as either defendants or plaintiffs.
Since we published our last roundup of such suits, several firms have been able to resolve long-running cases brought against them. On Aug. 15, for instance, Venable won the dismissal of a securities fraud suit in which ESG Capital Partners alleged that the firm and a former firm client defrauded the plaintiffs by taking $11.25 million to buy pre-IPO Facebook shares in a deal that never materialized. A federal judge in California ruled that ESG failed to adequately plead its claims under the Private Securities Litigation Reform Act and that additional claims it filed were untimely. (The suit is now on appeal.)
In New York's appellate division, Paul Hastings won the dismissal of a lingering claim in a $55 million malpractice suit accusing the firm of giving faulty advice on a loan related to the bankruptcy of retailer Steve & Barry's, sibling publication New York Law Journal reported Aug. 26. And in Florida, Shook, Hardy & Bacon agreed to pay $5 million to settle a lawsuit involving allegations that the firm helped facilitate a grocery trading scam run by infamous University of Miami athletic booster Nevin Shapiro, Daily Business Review reported Sept. 9.
Cadwalader Wickersham & Taft, meanwhile, suffered a blow in September in connection with a two-year-old, $13 million malpractice suit brought against it by Red Zone, an investment vehicle run by the owner of the Washington Redskins. As the NYLJ reported, a New York state court judge found that the firm failed to warn Red Zone that a letter memorializing an oral agreement did not adequately limit Red Zone's liability in a proxy fight for Six Flags Inc.
Other firms continue to bring suits of their own to collect on overdue bills. Arent Fox sued former clients Tranen Capital Ltd. and Kenneth Landgaard for $292,760 in New York federal court on Aug. 30; Arnold & Porter sued a Florida eye surgeon Oct. 29 to recover $3 million in allegedly unpaid bills for the firm's work on a Medicare fraud case; Manatt, Phelps & Phillips is seeking $83,735 from former client Edward Brady through a New York state court action filed Aug. 28; and Patton Boggs has launched two suits recently to recover fees, one filed in D.C. on Sept. 27 in which the firm is seeking more than $900,000 from Keystone Global, and another filed in Virginia state court Oct. 28 in a bid to recoup more than $200,000 from former client BaySys International.
Below is a collection of the latest suits The Am Law Daily has come across in which large firms find themselves on the defensive.
Dorsey & Whitney: Real estate law firm Cox, Castle & Nicholson and its insurer, Vigilant Insurance Co., sued Dorsey and several contractors in San Francisco state court Oct. 30 for allegedly botching a building repair that affected floors of a building Cox Castle later occupied. Dorsey—which sublet space from Bank of America at the building in question, 555 California Street, starting in 2005—oversaw the construction of an HVAC condenser system and related piping, according to the complaint. In April 2011, when Cox Castle was then subleasing the space, a pipe connected to the condenser system broke, causing "millions of dollars of damage." Cox and Vigilant are now trying to blame Dorsey and the contractors for the damage, bringing claims for negligence, breach of contract, equitable indemnity, breach of warranty, professional negligence and declaratory relief. A Dorsey spokesman declined to comment.
Edwards Wildman & Palmer: Former client National Union Fire Insurance Co. sued Edwards Wildman in New York state court Sept. 13 over its alleged mishandling of an assignment following the fatal collapse of a Boston freeway tunnel ceiling in 2006. National Union had hired Edwards Wildman to advise on whether it owed a defense and indemnity to one of its policyholders but instead ended up facing legal claims totaling more than $70 million, according to the complaint. National Union also accuses Edwards Wildman of failing to disclose what the insurer claims was a serious conflict of interest the firm had when it took on the assignment. The suit, which names both the firm and partner John Hughes as defendants, alleges breach of fiduciary duty, legal malpractice, breach of contract, fraudulent concealment and negligent misrepresentation and seeks more than $23 million in damages. An Edwards Wildman spokesman said in a statement, "We believe the allegations in the complaint have no merit and we will vigorously defend against them."
Kaye Scholer: The ex-wife of a deceased Kaye Scholer partner sued the firm Oct. 28 in New York state court for allegedly failing to pay her survivor benefits under a 1991 partner retirement plan. Barbara Pepper claims her ex-husband, Allan Pepper, designated her "as a beneficiary" when the couple—who divorced in 2011—was still married, "and confirmed her right to receive such benefits in her divorce decree." Allan Pepper retired from Kaye Scholer in 2007 and began receiving an unspecified monthly payment from the firm until he died in February 2013. At that point, the suit claims, Kaye Scholer told Pepper she did not qualify as a "surviving spouse." Pepper also argues that the plan is subject to the Equal Retirement Income Security Act—a claim the firm denies. In a statement, Kaye Scholer managing partner Michael Solow said, “Barbara and Allan Pepper divorced years before he died. She was not his surviving spouse at the time of his death, as the plan requires for receiving benefits." A copy of the retirement plan included in the court filings shows retired partners receive base payments totaling $150,000 a year.
Latham & Watkins: A federal judge in Washington, D.C., ruled Oct. 23 that a discrimination suit brought against Latham by a legal secretary who once worked at the firm can proceed, albeit in a limited form. As sibling publication The Blog of Legal Times reports, plaintiff Demetria Peart claims Latham fired her after refusing to accommodate her pregnancy. The judge allowed Peart's claim for pregnancy discrimination to move forward, but agreed with Latham that she should not be allowed to press a hostile work environment claim against the firm. The judge also dismissed her claims for breach of contract and emotional distress.
McDermott Will & Emery: The firm and its New York landlord are feuding over the amount of taxes McDermott owes on an office lease it signed in 2005. As the NYLJ reports, McDermott went to court in September to compel arbitration in the dispute, saying that as much as $16 million could be at issue over the life of the lease. McDermott had disputed $1.04 million in real estate taxes the landlord—340 Madison Fee LLC—said it is owed, claiming the amount was calculated incorrectly. In an answer and counterclaim filed Oct. 10 in New York state court, 340 Madison contends that the firm waited too long to seek arbitration and that under the terms of the lease, any disputed bill must be paid before arbitration is requested.
Stroock & Stroock & Lavan: In an $80 million malpractice suit filed in New York state court late last month, real estate developer Heritage Partners and two of its executives claim Stroock's poor advice led the plaintiffs to default on a mortgage loan connected to a condo conversion project in lower Manhattan. The plaintiffs, who hired Stroock in 2003 and fell into default during the economic downturn in 2009, allege in the suit that Stroock was negligent in part because it assigned "an inexperienced associate attorney" to represent Heritage. The company also blames Stroock for failing to advise Heritage that it could restructure the loan under federal bankruptcy laws. In a statement, a Stroock spokesman said, "Our firm rendered appropriate, professional and comprehensive legal counsel to this client throughout the matter."
Thompson Hine: Former Thompson Hine legal secretary Valerie Medcalf sued the firm in New York federal court Oct. 25 for employment discrimination, wrongful termination and other claims stemming from her seven years of employment there and subsequent firing in February 2012. According to the complaint, when Medcalf became pregnant in 2011, the firm's restrictive medical appointment policies caused her to "worry for her job whenever she would go to a prenatal appointment." After giving birth, she claims, a series of postpartum mental health issues kept her away from work for longer than she intended. When she returned, Medcalf says she discovered emails sent between Thompson Hine partner George Walsh and his wife mocking Medcalf's medical conditions and her child. Medcalf confronted the partner's wife via email and told the firm about the interaction, the suits says. Six days later, she was fired. Medcalf, who said she earned $56,000 in 2005 and $83,000 by the time she was fired, seeks several million dollars in damages. (Her complaint also alleges that the firm gave her inadequate accommodations for pumping breast milk.) In a statement, a firm spokeswoman said, "Ms. Medcalf’s claims regarding her termination or events surrounding her termination have already been dismissed twice," referring to a previous federal suit against Walsh and another complaint filed with the Equal Employment Opportunity Commission. "We are confident that it will be determined that the firm was more than fair in dealing with Ms. Medcalf's situation."