10 Recent Malpractice Suits Against BigLaw

Not surprisingly, the economic downturn has people turning over stones looking for money.

It seems like lawyers have been one of the big targets lately.

We’ve rounded up recent activity in 10 malpractice claims against major law firms.

#10 Buchanan Ingersoll & Rooney, the wind-down committee of defunct Clark, Ladner, Fortenbaugh & Young, and a former partner of both firms, Stephen Cohen (who is now at Fox Rothschild), agreed to pay $10.6 million to settle claims arising out of a shareholders agreement Cohen allegedly screwed up. The parties discovered a reg rights provision was improperly drafted when it allowed some former executives to sell off five times as many shares as intended, due to a reverse stock split. We’ll have to see how Jason Mendelson feels about negotiating registration rights provisions in light of this. (Although the deal probably got screwed up in the first place because they started with a perfectly good provision and negotiated it until no one understood it, which I’ve seen happen all too often before)

#9 Earlier this month, Foley & Lardner reached a confidential settlement in a malpractice suit by Vaxiion Therapeutics Inc., which claimed the firm missed a deadline for the provisional application for an international patent by four days. That, in turn, allegedly allowed a competitor to profit from the same intellectual property.

#8 McDermott Will & Emery was able to get confidential treatment in a malpractice settlement of its own last month. MWE had allegedly delayed the bankruptcy filing of its client St. Vincent’s Hospitals to the detriment of other creditors but to the benefit of two of the firm’s other clients who were financial advisors on the matter. The original suit sought damages in excess of $200 million.

#7 Day Pitney and litigation partner Robert Rose have been sued by International Flavors & Fragrances, who claim the lawyers filed to assert claims against the insurance company in a timely fashion. To add insult to injury, the plaintiff says the firm billed $150,000 in 2008 when the firm’s litigation efforts “were principally dedicated to litigating their failure to timely assert IFF’s claims.”

#6(A) In a BigLaw double dip, Greenberg Traurig is facing a malpractice suit for failing to discover that Bank of America, the largest creditor to defunct law firm Heller Ehrman, had terminated its security interest. Heller’s creditors claim that the treatment of B of A as a secured creditor, rather than unsecured as it technically was, fouled up negotiations with the creditor and prematurely forced the firm into bankruptcy. What’s worst is that GT failed to do the most basic of due-diligence tasks: a UCC search would have revealed the termination months prior to the bankruptcy.

#6(B) Greenberg did get good news in another pending malpractice claim. The firm got a stay in a New York action pending fact finding in arbitration with a developer who claims the firm and New York office chairman Robert Ivanhoe had an irreparable conflict when Ivanhoe took a personal stake in the client’s competitor.

#5 Mayer Brown is similarly in trouble due to UCC filing statements. The firm allegedly failed to file a continuation (much like the B of A lawyer, who hasn’t gotten in trouble yet), which caused the creditor to lose priority on a $8 million note.

#4 Proskauer has been dragged into a mess involving Swedish heiresses and stolen Warhols. The simplest part of the case is her allegation that the firm overbilled her and mishandled the case to the tune of almost $9 million in damages.

#3 In May, Akin Gump was hit with a $72.6 million verdict, which it has announced it will appeal, for failing adequately to prepare and prosecute patents on behalf of client Air Measurement Technologies, Inc.

#2 Cadwalader is still trying to extricate itself from a mess of suits related to securitization work. Most notably, in May, Nomura was allowed to proceed with a $70 million suit for a failed ABS. Nomura was originally represented by Mark Dreier. Cadwalader’s counsel is a little more reliable; the firm is represented by Evan Chesler and David Marriott of Cravath. Another $2.55 million claim against Cadwalader was allowed to proceed. It’s not all bad news, though, one claim by K-Mart was dismissed.

And the big winner for the week is

#1 Dewey & LeBoeuf. The firm is facing a $3 billion (yes, billion with a B) malpractice suit arising out of work for General American Life Insurance Company, a Missouri insurance company that recently went into bankruptcy. General American claims LeBoeuf Lamb (this all happened in 1999, prior to the merger with Dewey Ballantine) favored another client, Met Life, in a sale of a General American division. It’s not clear whether LeBoeuf represented Met Life in that sale (which would be a pretty clear conflict) or just in other general work. But one thing is for sure, if you were doing an insurance M&A deal in the 90s and didn’t think LeBoeuf had represented the other party, you were retarded. The firm pretty had that market pretty well cornered.

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