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Ruling Knocks Law Firm Off $100 Million Legal Dispute
Daily Business Review
September 23, 2008
The Kenny Nachwalter law firm has been disqualified from a $100 million legal dispute among air cargo carriers that has been in federal and state court litigation for a decade and touched some of Miami's leading law firms.
The 3rd District Court of Appeal weighed in last week by excluding the firm from the case over mistaken discovery disclosures in a decision that is far from bringing the underlying dispute to a close.
In March 2001, Southern Air and Aerofloral agreed to merge to form Latin Air with Southern Air's principals and Aerofloral's assets, according to pleadings by a third cargo carrier, Atlas Air. The merging companies were Greenberg Traurig clients, and Greenberg shareholder Jeffrey Tenen was named the new company's manager.
Aerofloral filed for Chapter 11 bankruptcy protection in June 2001 a month after the creation of Latin Air. But Atlas Air cried foul, alleging Aerofloral shifted its assets to orchestrate a "bust out" -- dodge paying a debt by moving assets to another concern and declaring bankruptcy.
Atlas sued Southern Air in Miami-Dade Circuit Court that August, claiming civil conspiracy, fraud and negligent misrepresentation in a $100 million debt obligation on its "wet lease" of two Boeing 747s to Aerofloral. Under the wet lease, Atlas agreed to supply the aircraft and crew, and Aerofloral agreed to pay for rent and fuel.
U.S. Bankruptcy Judge Robert Mark in Miami converted Aerofloral's Chapter 11 proceeding to a Chapter 7 liquidation case days later. The case concluded in March 2007.
Atlas filed for Chapter 11 protection in 2004 and added the Greenberg Traurig firm and shareholders Tenen, James Leshaw and Kenneth Hoffman to its Southern Air lawsuit in 2005. The complaint claimed Leshaw made misrepresentations to Atlas to assist in the transfer of Aerofloral assets to Latin Air, and Hoffman helped work on the merger deal, which ultimately never went through.
Mark appointed another high-profile Miami firm, Kluger Peretz Kaplan & Berlin, to maintain 54 boxes of documents as counsel for James Felton, the bankruptcy trustee.
During discovery in the suit by Atlas against Greenberg, Atlas attorney David Garbett of Garbett Stiphany Allen & Roza hired Merrill Corp., which specializes in document management, to distribute materials to the parties.
But Merrill inadvertently delivered about 150 documents containing privileged information to Lauren Ravkind, a Kenny Nachwalter shareholder representing Greenberg, according to court papers. After Atlas learned that Ravkind saw the documents, the carrier asked Miami-Dade Circuit Judge Gill Freeman to disqualify her firm.
Freeman disqualified the lawyer but not the firm, causing both parties to appeal on the same grounds. Kenny Nachwalter name shareholder Michael Nachwalter argued if the firm could stay in the case, so could Ravkind.
"The burden of Atlas's mistake should fall on Atlas," he wrote, arguing the carrier failed to ensure its privileged documents were kept separate.
Atlas wanted the disqualification of Ravkind to extend to the whole firm.
"This is not a case where a party fails to adequately review its own records before producing them," Atlas attorney Phillip Allen III, a partner with Garbett Stiphany, wrote in a 3rd DCA petition. "The parties' mutually engaged document-management professional inadvertently commingled documents in its possession and then misdelivered the documents."
3rd DCA Judge Leslie Rothenberg, who wrote a concurring opinion on the per curiam decision, concluded the disputed documents went beyond Ravkind to at least one other Kenny Nachwalter attorney, but the extent of the disclosure remains a mystery because Ravkind cited attorney-client and work-product privileges in refusing to answer questions in a deposition.
"It is impossible to determine the extent of the tactical advantage Kenny Nachwalter may have obtained by viewing the privileged documents," Rothenberg wrote. Judge David Gersten and Senior Judge Alan Schwartz supported the unsigned order.
Greenberg spokeswoman Jill Perry in New York said the firm is considering whether to appeal.
"We believe the allegations are outrageous and without merit. The case arises from the firm's appropriate representation of its client," she said. "We expect to be fully vindicated in this matter through the court process."
Other attorneys involved in this case remained mum. The firms of Kenny Nachwalter, Garbett Stiphany and Kluger Peretz either declined comment or did not return calls seeking comment by deadline.
