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Statute of Limitations Could Decide Former Client's $20 Million Suit Against Morgan Lewis
Dispute involves breach of contract claim
The Legal Intelligencer
January 30, 2008
After more than two weeks of testimony and years of previous litigation, the $20 million case that pits water filtration company Purolite against its former law firm, Morgan Lewis & Bockius, could come down to the first question on the verdict sheet -- whether the case is barred by the statute of limitations.
Although attorneys for both sides in Bro-Tech v. Morgan Lewis spent the majority of Tuesday morning's closing statements discussing whether Purolite and its owners, Stefan and Don Brodie, should prevail in their breach of contract claim against the firm, they concluded with discussions of whether the claim was properly filed within the four-year statute of limitations. Bro-Tech is the parent company of Purolite.
The case is being tried in Philadelphia's Commerce Court Program before Senior Judge Albert W. Sheppard Jr. and revolves around the alleged advice given in 1993 to Purolite by Morgan Lewis to continue to sell its products to Cuban companies despite the U.S. trade embargo against the country.
Both sides said Morgan Lewis' original advice in 1993 was for the company to stop all sales to Cuba and a memorandum was sent to all employees to that effect. When two Purolite sales people from Canada and the United Kingdom called to say such a move would put them in violation of their respective countries' blocking orders, Morgan Lewis advised Purolite days later to continue to sell to Cuba from foreign offices but to ensure that there was no U.S. involvement with those sales, Purolite's attorney told the jury.
The blocking orders, the attorneys said, were issued by Canada and the United Kingdom and prohibited companies from stopping sales to Cuba if the reason was to comply with the U.S. embargo.
The Brodies were indicted in 1999 for violating the Trading With the Enemy Act and ultimately pled guilty to a lesser charge.
The suit against Morgan Lewis -- which Purolite's attorney, Marc E. Kasowitz of Kasowitz Benson Torres & Friedman in New York, described as the company's general counsel for more than 20 years -- was filed on Feb. 11, 2004.
Nancy Gellman of Conrad O'Brien Gellman & Rohn took the lectern after her colleague William O'Brien finished his closing arguments on Morgan Lewis' behalf. She explained to the jury that the Brodies had several opportunities prior to Feb. 10, 2000, to initiate the suit.
She pointed to February 1997, when the Brodies first found out they were being investigated by the U.S. Customs Service. In June 1999, the U.S. Attorney's Office issued new subpoenas and, in September of that year, Morgan Lewis attorneys talked with the U.S. Attorney's Office to try to help their client, without success.
In October 1999, Gellman said, target letters were sent to the Brodies warning that the federal government was prepared to indict them. It was also in 1999 that Stefan Brodie instructed his employees, against the firm's advice, to stop all sales to Cuba, she said.
During this time, she said, the Brodies had other lawyers helping with the criminal cases and could have asked them about Morgan Lewis' conduct. She said there were plenty of instances during that time period when Purolite could have become aware of a potential claim against the firm.
In response to Gellman's comments, Kasowitz retook the lectern and said the Brodies weren't idly sitting by during this time but were "fighting for their lives."
He said the brothers still had trust in their longtime counsel and wouldn't have sued Morgan Lewis while the firm was still retained by Purolite.
Throughout the government investigations, the Brodies were relying on the defense they said Morgan Lewis assured them would work -- the "foreign sovereign compulsion defense," Kasowitz said.
That defense basically avers that the Brodies and Purolite had to follow the laws of the other countries over those of the United States, he said.
It wasn't until 2001, when a federal district judge rejected the defense, that the Brodies knew they had a claim against Morgan Lewis, he said.
The remainder of the jury sheet asks whether Morgan Lewis breached its contractual obligations to Purolite, whether that was the cause of Purolite's and the Brodies' harm, and what damages if any should be awarded to the plaintiffs, according to the attorneys' closing arguments.
The Brodies are seeking almost $20.4 million in damages. The demand was much higher originally, but the tort claims were dismissed before trial, according to the Brodies' local counsel, Clifford E. Haines of Haines & Associates.
Kasowitz said more than $7.3 million was for legal fees in the federal case against the Brodies and Purolite, more than $10.4 million was for the cost to secure financing for the company during the investigations and trial, and nearly $2.6 million was for additional raw materials and freight costs to the company.
Both Kasowitz and O'Brien talked to the jury about "truth and responsibility," with each saying the other's client never took responsibility for what happened.
Kasowitz said the Brodies took responsibility for what happened by pleading guilty to one count of the indictment against them, which he said was not related to sales of goods to Cuba from the United States.
The real question, he said, is who is responsible for getting the Brodies and Purolite into trouble. He said Stefan Brodie asked Morgan Lewis several times whether he should stop sales to Cuba.
"If there's one thing in this case that's clear ... it's if the Brodies and Purolite stopped all sales to Cuba ... then all of the events you've been hearing about for the past 2 1/2 weeks never would have taken place," Kasowitz told the jury.
O'Brien told the jury that the Brodies ignored Morgan Lewis' advice to avoid any U.S. involvement in sales to Cuba, making about $2.1 million in sales to the country from 1993 until they were indicted. O'Brien disputed Kasowitz's statement that his clients were indicted for sales to Cuba involving non-U.S. offices. He said documents showed the federal prosecutors were only interested in the Brodies' sales to Cuba if they were connected to the company's U.S. operations.
"They traded with Cuba because they were making a lot of money," O'Brien said. "They didn't like to be told what to do.
"They did exactly what the lawyers told them not to do."
O'Brien said that in the middle of the investigations, the company began using "code words" for Cuba such as "the island" or "the Caribbean."
"If you're doing the right thing, why would you have to have code words?" O'Brien asked the jury.
Kasowitz took his opportunity in closing statements to reiterate the facts of the case. He also pointed out that Morgan Lewis' expert witness, Homer Moyer of Miller & Chevalier, agreed with several of Kasowitz's points, including the argument that if the Brodies stopped selling to Cuba, they would have been fully protected.
O'Brien spent his time focusing on the personalities in the case, attempting to reinforce the credentials of his witnesses. He had Morgan Lewis partners John C. Dodds and Nathan J. Andrisani and former partner Ed Dennis -- who all testified -- stand so the jury could see them one more time.
The jury was set to get their charge around 2 p.m. and had to break for the day by 3:45 p.m., so a verdict was not expected Tuesday. The jurors are set to be back in court by 9 a.m. today.
