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Ex-Client Files Malpractice Suit Against Kaye Scholer, Claiming Discovery Errors
New York Law Journal
June 26, 2008
Kaye Scholer has been hit with a legal malpractice suit by a former client that claims the New York law firm's discovery mistakes forced it to enter into a $107 million antitrust settlement.
Chemical and plastics giant Celanese on Wednesday filed a 33-page complaint against Kaye Scholer in federal court in Dallas. The law firm had represented Celanese from 2002 to 2006 in multi-district litigation brought by Celanese customers charging price-fixing in the market for polyester fibers.
Celanese alleges Kaye Scholer negligently failed to produce hundreds of thousands of pages of documents to plaintiffs in the antitrust case, which was being litigated in federal court in North Carolina.
In a June 2006 order, the North Carolina judge sanctioned Celanese $114,000 in fees and expenses, but said he would consider further sanctions on evaluating the impact of the discovery misconduct. An October 2006 sanctions motion by plaintiffs asked for a range of findings against Celanese, including one that the company acted in bad faith and that an adverse inference should be drawn against it on key issues.
The judge said he would evaluate the need for such sanctions as the case proceeded. Celanese said in its suit that the prospect of sanctions that would have hampered its ability to defend itself at trial forced it to enter into a settlement in May 2008.
"The negligence and malpractice of Kaye Scholer and the consequences of that negligence caused the chances of Celanese's prevailing at trial to decrease dramatically," the company said.
The company fired Kaye Scholer in July 2006 and hired Hector Torres of Kasowitz, Benson, Torres & Friedman to continue to represent it. The Kasowitz firm is also representing Celanese in its suit against Kaye Scholer.
The suit also names as individual plaintiffs Kaye Scholer partner and executive committee member Michael D. Blechman and former special counsel Robert B. Bernstein.
Celanese claims it would have only paid a nuisance settlement without the threat of sanctions and is asking in damages the difference between that nominal amount and the $107 million it paid.
A spokesman for Kaye Scholer declined comment Wednesday, citing a firm policy against discussing active litigation. Apparently anticipating Celanese's complaint, the firm filed its own lawsuit against the company last week, seeking alleged unpaid legal fees as well as a declaratory judgment that Kaye Scholer's work met professional standards.
"There is a bona fide dispute and actual controversy among the parties concerning the extent to which Kaye Scholer's legal services to the Celanese Entities were in accordance with the standards of care ordinarily provided by professionals providing legal representation and consistent with any fiduciary duty owed to the Celanese Entities," the firm said in its complaint.
