Firm Brawl!

by lawshucks on May 17, 2010

We’ve written about plenty of fights between firms before: see, e.g., Morgan Lewis v. Fish & Richardson, Ropes & Gray v. Kirkland & Ellis, and perhaps most interestingly, Paul Weiss v. Wachtell.

Now we’ve got a four-way battle royale on our hands.

While it’s not as juicy as stealing clients or cleaning up someone else’s mess, it does have another audience favorite (you people really like schadenfreude): malpractice.

And the “M” word is being thrown around all over the place.

The firms and story after the jump.

It all starts with that hotbed of liability: tax shelters.  According to the National Law Journal:

In a complaint filed Dec. 30, 2009, [accounting firm] BDO [Seidman] accuses Morgan Lewis of breaching its professional obligations in 2000 when it was both serving as outside counsel to BDO and advising the managers of the Tax Solutions Group, a BDO subsidiary. The group’s tax products made millions for BDO and the tax group’s managers.

The legal work on the products was done by current and former Morgan Lewis lawyers:

Charles Engros Jr., who manages the firm’s New York office; Paul Vogt, now general counsel at DMG Information; Miriam Fisher, a Morgan Lewis partner in Washington; Melvin Lefkowitz, now a partner at Hogan Lovells; and William Gardner, who retired from Morgan Lewis in 2007.

That work went on until around December, 2000, when the IRS notified the accountants that the “Sentinel Transaction” was actually an illegal tax shelter.  In 2002, the IRS started prosecuting BDO.

Then everything started to crumble.  It’s a little complicated, but BDO claims the lawyers had a conflict from representing managers of a subsidiary and that the lawyers knew the product would expose the accountants to criminal liability.

More importantly for our audience, that’s when the fur started flying among the firms.

The firms are pointing fingers at one another in a $9 million malpractice lawsuit brought by BDO against Morgan Lewis in the District of Columbia Superior Court. The Chicago-based accounting and consulting firm accuses Morgan Lewis of professional negligence, breach of contract, breach of fiduciary duty, fraud and constructive fraud. BDO argues that, over a period of several years, Morgan Lewis breached its professional obligations to BDO “with disastrous results.” The $9 million accounts for the fees that BDO paid to Morgan Lewis. BDO, which is represented by Lucinda Bach, a Washington partner at DLA Piper, has also asked for as-yet-uncalculated damages.

Morgan Lewis is not the kind of fool to represent itself.  The firm brought in James Fogelman of Gibson Dunn, who promptly moved for dismissal, but didn’t stop there.  He also wants sanctions against BDO and DLA.

On March 16, Morgan Lewis’ lawyers filed a motion with Judge Brook Hedge, asking her to sanction BDO and DLA Piper for allegedly making a series of false statements in the complaint despite having been shown “substantial evidence” of their falsity the year before. Hedge has yet to rule on the motions to dismiss and for sanctions. The next hearing in the case is set for June 11. In the meantime, discovery has been stayed pending the outcome of another issue.

That “other issue” brings in yet another firm.

On March 23, Hedge granted a motion to intervene from BDO’s former general counsel, Scott Univer, who is being represented by Bingham McCutchen in the malpractice case. Univer argues that, because Gibson Dunn has represented him for nearly three years as a potential witness in the criminal investigation of the tax group, the firm should be disqualified from representing Morgan Lewis.

Throw Vedder Price in for good measure: part of Morgan Lewis’s defense seems to be that it picked up where Vedder left off.

  • guest

    Dig deeper into Univer's motion to disqualify and you'll find a fifth firm (Skadden) involved and pretty salacious material attached to his motion.

    • lawshucks

      Don't be a tease!

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