The Appellate Division, First Department, recently unanimously affirmed a judgment of $17.2 million against Cadwalader, Wickersham & Taft in a legal malpractice action alleging that the law firm failed to properly draft an agreement and side letter and as a result, its client had to pay its investment advisor $10 million instead of $2 million in a dispute over fees earned in an acquisition. Red Zone v. Cadwalader, Wickersham & Taft1
Cadwalader had drafted an agreement and side letter on behalf of Red Zone LLC, a private equity firm, with Red Zone’s investment advisor UBS Securities LLC concerning UBS’s fees in Red Zone’s successful takeover of Six Flags, Inc., owner and operator of multiple amusement parks. The side agreement was intended to modify the agreement’s terms concerning UBS’s fees. UBS commenced an action against Red Zone after Red Zone maintained UBS had earned only a $2 million consulting fee, and not the full $10 million addressed in the engagement agreement.
