A federal appeals court has reinstated a fraud lawsuit against K&L Gates and two of its former partners alleging that the attorneys exploited their past representation of a publishing executive to undermine his efforts to acquire assets from a bankruptcy sale.
Roy Brown, CEO of Brown Publishing Co., retained K&L while making a bid to take control of the company’s assets by Chapter 11 through another company, Brown Media.
Edward Fox and Eric Moser, then partners at K&L, represented Brown in the lead up to the bankruptcy, but the firm told Brown to obtain new counsel before the sale, according to court papers.
Brown Media submitted a stalking horse bid for Brown Publishing’s assets, but the bid was beat out by PNC Bank Group, which included a bank that provided financing to Brown Publishing that was also a “sometimes” client of K&L.
In 2013, Brown filed a suit against K&L and the partners alleging breach of fiduciary duty, tortious interference and common law fraud. Eastern District Judge Arthur D. Spatt granted K&L’s motion to dismiss based on res judicata grounds, writing that the suit was a “thinly disguised collateral attack” on the bankruptcy orders.
But a panel of the U.S. Court of Appeals for the Second Circuit disagreed with Spatt and remanded Brown v. K&L Gates, 15-4185-cv, for further proceedings.
Writing for the court, Judge Peter Hall said the panel disagreed with Spatt’s view that the plaintiffs should have addressed their claims in the bankruptcy proceedings.
Hall was joined by Judge Debra Ann Livingston and Eastern District Judge Nicholas Garaufis, who sat on the panel by designation.
Manhattan solo attorney Daniel Abrams represented Brown. In an email, he said his clients are thankful for the opportunity to pursue their claims.
“The appeal was about Mr. Brown and Brown Media Corp. having a day in court,” he said.
Anthony Acampora of Silverman Acampora represents the defendants. He did not respond to a request for comment.
Fox is now a partner at Seyfarth Shaw and Eric Moser is a name partner at Rich Michaelson Magaliff Moser.