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Chicago-based Gardner Carton & Douglas has been hit with a $17.2 million jury verdict for failing to protect the interests of a shareholder allegedly pushed out of a high-tech company that hired the law firm to handle corporate matters. The verdict stems from a case filed by a 50% shareholder of a satellite telecommunications company who asserted that attorneys with Gardner Carton “cast their lot” with the other 50% shareholder after a dispute arose between the two owners. The lawsuit, filed in the state circuit court for Prince George’s County, Md., alleged legal malpractice, breach of fiduciary duty and tortious interference against Gardner Carton, which, the plaintiff charged, was obligated to represent the company as a whole. The case demonstrates the conflicts resulting when disputes arise among equal shareholders owners in companies that hire law firms to represent the interests of the entity, not the individuals. “The real concern is that attorneys always have to ask themselves who is their client and what is the obligation,” said the plaintiff’s attorney, Creighton Magid, a partner at Dorsey & Whitney. In a written statement, Gardner Carton & Douglas Chairman Harold L. Kaplan called the jury’s verdict “disappointing.” He said the firm “had an engagement letter . . . which clearly stated that GCD was representing the company, not the shareholders individually, and that GCD would be taking direction from the officers of the corporation in the order of the corporate hierarchy.” The statement also said that the trial court “reserved ruling on many significant legal issues challenging the jury’s finding.” The firm, represented at trial by Piper Rudnick, plans to file post-trial motions. Plaintiff Michael Ahan and the other 50% shareholder, Nader Modanlo, were owners of now-bankrupt Final Analysis Inc., which owned the majority of voting stock of another company, Final Analysis Communications Services. Both companies were involved in the 1990s with the development of satellite tracking systems. The companies were once valued at more than $550 million, Magid said. In 1998, disputes arose between the two men and they decided to restructure the companies, the plaintiff’s amended complaint said. Ahan claimed that although Gardner Carton was hired to act as outside general counsel, it drafted bylaws and contracts that left him disenfranchised and were designed to give his partner to full control of the companies.

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