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Weil, Gotshal & Manges has settled a legal malpractice case just days before claims against it were to have gone before a jury. The law firm and two of its top partners had been on trial in Manhattan Supreme Court since May 5 over claims they had a conflict of interest when they represented the owners of a defunct New Jersey mall boutique in an unfair trade suit against Italian fashion house Fendi. The firm’s settlement with boutique owners Annette and Randi Fischer, terms of which are confidential, was announced in court Thursday morning, when the last witnesses were to have testified. Closing arguments in the trial before Manhattan Supreme Court Justice Richard Lowe had been scheduled for Friday, after which the jury was to receive the case. Legal malpractice trials involving firms like 1,200-lawyer Weil, Gotshal are relatively rare. Large law firms have almost always preferred to settle suits brought against them, fearful that juries will be unsympathetic and that prolonged trials will disrupt practices. Kenneth McCallion, the lawyer for the Fischers, declined to discuss the settlement but said talks had taken place sporadically in the period leading up to as well as during the trial. He said the trial had been “hard-fought on both sides.” In a statement, Weil, Gotshal said it “settled despite its confidence in the trial outcome to avoid the cost of what would have been an inevitably long appeals process.” The firm went on to state that the trial testimony of one of its experts, former Southern District of New York Judge John Martin, now of counsel at Debevoise & Plimpton, established that Weil, Gotshal’s “lawyers conducted themselves in a fully appropriate and professional manner.” Those lawyers were two of Weil, Gotshal’s most senior partners, litigator Robert Sugarman and antitrust and competition practice co-head Helene Jaffe. The two partners led the firm’s representation of the Fischers’ Fashion Boutique of Short Hills in its fight with Fendi. That representation began in 1993, two years after the Fischers claimed their Short Hills, N.J., boutique, which sold Fendi products under a franchise agreement, was put out of business by what they claimed was a campaign of disparagement by Fendi, which allegedly sought to wipe out competition to its own store in Manhattan. The Fischers’ suit against Fendi went to trial in federal court in 2000, producing a disappointing award of $110,000 for the Fischers, who had previously turned down a $1.4 million settlement offer by Fendi. Weil, Gotshal was technically the plaintiff in its dispute with the Fischers, having filed in 2003 to recover $2.7 million in unpaid legal fees. But Jaffe testified at trial that the fee suit followed discussions in which she claimed the Fischers threatened a malpractice suit against Weil, Gotshal. The Fischers counterclaimed for malpractice, asking for $15.6 million on the grounds that Weil, Gotshal was conflicted in its representation because it had begun representing the U.S. subsidiary of fashion house Prada in fall 1999, around the same time Prada entered a joint venture to buy control of Fendi. At trial, both Jaffe and Sugarman testified that they did not find out about their firm’s representation of Prada and its connection to Fendi until they were well into the 2000 trial. They both said it would not have affected their representation of the Fischers in any case. Ethics experts In addition to Martin, Weil, Gotshal, which was represented by Michael Feldberg of Allen & Overy, presented expert testimony by Fordham law professor Bruce Green, who said he thought no conflict existed because no direct ownership relationship existed between Fendi and Prada’s U.S. subsidiary. Hal Lieberman of Hinshaw & Culbertson, the former chief counsel of the First Department’s disciplinary committee, provided expert testimony for the Fischers in which he stated his opinion that a conflict did exist, which Weil, Gotshal should have detected by fall 1999. A major part of the Fischers’ case centered on Caroline Clarke, a former Fendi operations executive who they claim was able to testify about a companywide policy specifically aimed at destroying the Short Hills store by denigrating its products as inferior to those carried by the company-owned Manhattan store. In a videotaped deposition shown to the jury last week, Clarke said her boss, Bruno D’Angelo, incited his employees to “hate” the New Jersey store, which he felt was siphoning sales from Fendi’s New York store. The Fischers argued that Weil, Gotshal, particularly Sugarman, the lead trial counsel, should have but did not elicit such testimony from Clarke at trial. This failure to establish a companywide disparagement policy, they claim, in turn led Southern District Judge Miriam Goldman Cedarbaum to throw out claims which would have permitted Fashion Boutique to seek punitive damages. Sugarman said Clarke’s testimony did not adequately establish the existence of a companywide policy. He also testified that she was a problematic witness because she had changed her story from earlier depositions and court appearances. Martin’s testimony mostly focused on Sugarman’s handling of Clarke, which he described as “prudent” in light of her credibility problems. Weil, Gotshal’s representation of Prada, which focused on trademark issues, was led by partner Michael Epstein, then Jaffe’s practice co-chair. He testified that he was unaware of the Fendi transaction at the time the firm began its work for Prada, even though the deal had been reported in The New York Times and The Wall Street Journal. Fee dispute Randi Fischer was the last witness to testify in the case before the settlement. She testified that Jaffe told her about Weil, Gotshal’s Prada representation while the jury was deliberating in the Fendi trial. Though Fischer said she felt it was a “complete betrayal,” she said Jaffe reassured her that Prada was represented by “different lawyers on different floors in different parts of the firm.” The issue of Weil, Gotshal’s fees arose periodically throughout the trial and were the early focus of Feldberg’s cross-examination of Fischer, whose claim the firm estimated its total fees at around $250,000 he contested. Jaffe had previously testified that Fashion Boutique paid only $200,000 of its legal bills, causing firm Chairman Stephen Dannhauser to step in when the bills were around $2.3 million. Jaffe said Dannhauser offered a deal whereby Weil, Gotshal’s legal fees would be paid only out of the recovery in the Fendi suit, but the Fischers rejected the offer. They also rejected the firm’s offer to waive its bills altogether if the Fischers accepted Fendi’s $1.4 million settlement. Fischer testified that Jaffe again offered to waive the firm’s bills in 2003 in exchange for a promise not to sue the firm for legal malpractice. The boutique owners may have appeared unlikely clients for Weil, Gotshal, not to mention two of the firm’s most well-known partners, but Jaffe explained they had been brought in by former partner Dennis Block at the behest of Alan “Ace” Greenberg, chairman of investment bank Bear Stearns & Co. Randi Fischer explained during a court recess they had been introduced to Greenberg by Trump Organization executive Norma Foederer, who had been a loyal customer of the Short Hills boutique. In any case, the Weil, Gotshal partners were not the first high-powered lawyers to represent the Fischers. McCallion had originally subpoenaed the Anderson Kill & Olick partner who wrote Fendi’s lawyers in Rome in 1991 about their client’s “gross misconduct,” which he found “serious and quite disturbing” and said had “seriously damaged” his client, Fashion Boutique. Rudolph Giuliani left Anderson Kill not long after writing that letter. His testimony about it was ultimately deemed unnecessary to the case.

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