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A Manhattan judge has ruled that a law firm accused of legal malpractice over advice it gave clients on mutual fund “late trading” can seek discovery from two other law firms, one of which is now representing the same clients in ongoing government investigations of late trading. Supreme Court Justice Rolando Acosta ordered LeBoeuf, Lamb, Greene & MacRae and Seward & Kissel to turn over documents to DLA Piper Rudnick Gray Cary on the grounds that their clients’ malpractice suit against DLA Piper had also placed the other two firms’ representations at issue. “Here, since plaintiffs claim that their problems were caused by the actions or inactions of defendants, any legal advice they received from any other lawyer . . . on any subject related to the reasonableness of their reliance on defendants’ advice is not subject to the attorney-client privilege,” Justice Acosta wrote in Goldberg v. Hirschberg. Ryan Goldberg and Michael Grady, former brokers with Brean Murray & Co., sued DLA Piper last year after they became targets of investigations by the Securities and Exchange Commission and state Attorney General Eliot Spitzer. The government claims late trading — in which brokers permit certain large clients to buy and sell shares in mutual funds after the close of market — is illegal. Brean Murray had carried out late trades for a number of large investors, including hedge fund Canary Capital Partners. The Brean Murray brokers claim they received advice in 2001 from Michael Hirschberg, a partner at the firm then known as Piper Rudnick, that late trading was legal. Hirschberg, now a partner in the New York office of KMZ Rosenman, is also named as a defendant in the malpractice suit. As damages, the brokers are seeking the $2 million in legal fees they have incurred in the course of the investigation, in which they have been represented by LeBoeuf Lamb. Justice Acosta said the damages request weakened any claim of attorney-client privilege. DLA Piper has argued that it should have access to documents from the other firms because the brokers also received legal advice on late trading from those firms. Both LeBoeuf and Seward & Kissel have denied providing such advice, but Justice Acosta said DLA Piper had the right to inquire into their roles. He also pointed out that questions about LeBoeuf’s role in particular had emanated from another source. Former Canary Capital head Edward Stern, Justice Acosta noted, had recently testified that Goldberg and Grady told him they had relied on the legal opinion of LeBoeuf Lamb in carrying out late trades. The judge said the documents to be turned over would include work product detailing LeBoeuf lawyers’ “mental impressions, conclusions, and strategic thoughts related to plaintiffs’ jeopardy from the investigations.” Though the judge denied the documents the protection of privilege, he said he would review them in chambers prior to disclosure.
Anthony Lin is a staff writer for the New York Law Journal , an ALM publication.

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