Last time around, we focused on BigLaw deals – deals in which the firms themselves were the principals, or at least the suitors. Much as we like to make client disputes about the firms, we’ll continue the break from client work and this time we’ll turn our attention to litigation in which the firms are the parties.
It’s particularly timely because there was one lawsuit this week in which the firms weren’t parties, but boy did they have a vested interest.
The New York Court of Appeals handed lawyers and accountants their biggest win since Stoneridge, holding in Kirschner v. KPMG and Teachers’ Retirement System of Louisiana v. PricewaterhouseCoopers that, in New York at least, the doctrines of in pari delicto and imputation are alive and well. That means, if you believe the dissent, that the court has “effectively immunize[d] auditors and other outside professionals from liability wherever any corporate insider engages in fraud.”
Should you ever run into Phil Anker of Wilmer Hale (KPMG) or Paul Clement of King & Spalding (PWC), you should buy them drinks with the money your firms save on malpractice insurance (and presumably pass along in the form of higher distributions and salaries, right?).
Whether it be firms suing each other, firms suing clients, clients suing firms, or (former) associates or partners suing firms, law firms spend plenty of time in court defending their own actions.
All those legal variants of the busdriver’s holiday, plus layoff news, after the jump.
Unfortunately, those precedents are only binding in New York, so K&L Gates and Thompson & Knight will be forced to defend their alleged roles in a “Ponzi-like” scheme in Oregon.
Fee Fights and Malpractice
These two are probably the most common sources of firms-as-parties litigation, and they almost invariably go hand in hand – after all, losing clients have to blame somebody, right? If only their lawyers had worked harder, been smarter, bribed the judge, whatever, surely they couldn’t have lost on the merits…
It hasn’t been a good run on appeal for firms facing malpractice claims. A suit Weil Gotshal says has been “repeatedly dismissed” was reinstated on appeal in Missouri, and Saul Ewing lost on appeal, too, in a malpractice claim arising out of fees in a family-court case.
U.S. Precious Metals wants to get off the hook for $2.3 million in outstanding fees owed to Duane Morris for some litigation.
Boies Schiller‘s David Boies, who is kinda busy, allegedly only paid $5 million worth of attention, not $10 million, to G.K. Las Vegas LP – the firm, of course, denies the allegations. And the parties can’t even agree on where the case should be heard or what law should apply.
One of the more-interesting fee disputes revolves around POM Wonderful and its bizarre efforts to have records sealed about an FTC investigation that was already a public record. Hogan & Hartson, Covington & Burling, and a former Winston & Strawn partner all had roles in the mess that defies easy summarization. The fee part has been settled (confidentially, of course) and an apology was given, but no sanctions.
Ethics & Conflicts
The Johnson & Johnson investment in Elan has been a rocky deal from the start. A year ago, we wrote about how Cravath and/or Cahill Gordon made a big mistake in their due diligence, which ended up taking $115 million out of that deal and into the coffers of a venture partner. That was one of the many problems with the deal that led Elan to commission an internal investigation, that and some derivative litigation. Elan turned to McKenna Long partner R. William Ide III, who knew a little about pharma deals, having previously been the GC of Monsanto. Anyway, now his independence is being questioned and the report’s findings are at the center of yet another brouhaha.
Conflicts got Winston & Strawn in trouble, and cost the firm the lucrative job of defending Pfizer in a $1 billion suit when a Utah magistrate disqualified the firm. The problems revolved around Gene Schaerr, a former Sidley Austin lawyer who had previously done work for plaintiff BYU.
Wilson Sonsini is facing the full onslaught from a former IP client. Existence Genetics claims the firm hid conflicts, overbilled, didn’t apply discounts, refused to return records, etc.
Disqualifying opposing counsel is a time-honored strategy, one Jackson Lewis just ended up on the wrong side of.
Manatt Phelps & Phillips didn’t admit any wrongdoing but did agree to pay $550,000 to New York State to settle the firm’s misdeeds in the investigation of corruption in the state’s pension investments. The firm is also banned from appearing before pension funds for 15 years.
They probably won’t be doing any work in Jamaica any time soon, either.
As far as we know, none of those firms’ breaches were called “egregious,” which is how Judge Manuel Real (who, admittedly, has issues of his own) described McGuireWoods’s ethical lapses in the Bar/Bri antitrust case.
Akin Gump passed a potential conflicts stumble in the Raj Rajaratnam insider trading case. The firm represents a company for which a witness for the prosecution is general counsel. There were some concerns they might go easy on him, but they promised not to take the gloves off for their client.
Conflicts are tricky and not just for lawyers, which led to a unique spin on the problem this week, when a Boies Schiller flak caused a journalism conflict for her fiance.
David Kronenberg was an associate at Baker & McKenzie in Chicago from 2004 to 2007, when he was allegedly laid off in violation of the ADA. Kronenberg claimed the firm failed to accommodate his degenerative spinal condition, so the firm tried to subpoena his mental-health records. That fishing expedition was summarily shot down.
One of the longest-running disputes between a firm and a former partner has been going on at Sonnenschein, which just got denied cert. by the Supreme Court. The firm goes back to trial with Douglas Rosenthal over comp he says he earned for work he brought in.
It hasn’t come to litigation yet, but Wildman Harrold‘s refusal to release a group of departing partners from the 90-day runoff period before lateralling isn’t exactly buying the firm much goodwill.
Steptoe & Johnson got a stinky burger joint shut down.
None in BigLaw since our last post, but there were a few non-BigLaw layoffs of lawyers. A Florida foreclosure mill will be laying off “probably less [sic] than 100″ workers. Over in the UK, regional firm McGrigors will be making redundant 40 people (2nd item) and the lawyer for the Birmingham City Council saw his post cut from the city’s budget.