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Blackwater Security Consulting has been on the defensive for months, with Congress and federal investigators probing its role in a deadly shootout in Baghdad last September that left at least 17 Iraqis dead. But last week, the security firm went on the offensive and went after an unlikely target: Wiley Rein. On Jan. 23, Blackwater filed a $30 million malpractice suit against Wiley Rein, alleging that the law firm made costly missteps while defending the company in a wrongful death case brought on behalf of four former Blackwater employees who were killed in Iraq in 2004. The complaint, filed in D.C. Superior Court, claims that Wiley Rein lawyers neglected obvious case law and statutes in preparing their pleadings. As a result, Blackwater was barred from shifting the case from a state court in North Carolina to federal district court, where the security firm could have mounted a stronger defense, the complaint says. Two months after losing its initial bid to have the case transferred, Blackwater discarded its high-wattage Wiley Rein team, which included Fred Fielding, now White House counsel; Barbara Van Gelder, now an attorney with Morgan, Lewis & Bockius; Scott McCaleb, who is a partner with Wiley Rein; and Margaret Ryan, who is now a judge for the U.S. Court of Appeals for the Armed Forces. Ryan, a former judge advocate general who was confirmed to the bench in December 2006, is named separately from Wiley Rein in the malpractice suit. The complaint says that she led the team. Ryan and Fielding did not return calls seeking comment. Van Gelder declined to comment. “We do not believe the suit is meritorious,” says Bert Rein, a name partner at Wiley Rein. “And we are going to vigorously defend it.” Wiley Rein has not yet filed a response to the complaint and the firm’s ethics counsel, Dale Hausman, says Wiley Rein was given no advance warning that its former client was filing a lawsuit. Paulson & Nace’s Barry Nace, who is representing Blackwater, declined to comment. Blackwater did not respond to calls or e-mails. FEDERAL PLAY Blackwater hired Wiley Rein in January 2005, when the families of Stephen Helvenston, Mike Teague, Jerko Zovko, and Wesley Batalona — four Blackwater guards whose brutal killings in Fallujah in 2004 were captured on video and broadcast around the world — filed suit in Wake County Superior Court. The four guards were ambushed and killed. A mob then dragged their bodies through the streets and set them on fire. Images of two of their bodies hanging from a bridge over the Euphrates River provoked outrage in the United States. The families, represented by David Kirby of Kirby & Holt (a firm he founded with Democratic presidential candidate John Edwards in 1992), sued Blackwater for wrongful death and fraud, alleging that the company had shown a reckless disregard for their loved ones’ safety and violated contractual obligations in the process. Blackwater immediately sought to have the case removed to the U.S. District Court for the Eastern District of North Carolina. The Jan. 24, 2005, motion was filed by Fielding and Ryan. In federal court, Blackwater could have invoked previous cases in which judges had dismissed similar claims against battlefield contractors or ruled that they lacked “judicially discoverable and manageable standards,” the complaint says. But Chief U.S. District Judge Louise Flanagan granted the families’ motion to remand the case to state court in August 2005, ruling that it lacked federal jurisdiction. The complaint says that Flanagan would have ruled otherwise had Wiley Rein lawyers deployed a statute that gives federal jurisdiction to claims involving federal officers. (Blackwater contends that its contracted employees are de facto federal officers under the law.) The complaint — filed on behalf of Blackwater Security and Blackwater Lodge and Training Center — also alleges that Wiley lawyers ignored the 2005 Supreme Court decision in Grable & Sons Metal Products Inc. v. Darue Engineering & Manufacturing, which held that federal courts have jurisdiction over state-law claims that “implicate significant federal issues.” “Had [Wiley Rein] adhered to these duties, the Nordham lawsuit would have been dismissed and the litigation involving plaintiffs would have ended,” the complaint says. Legal malpractice experts say Blackwater had a legitimate interest in having the case removed to federal court, but the suit leans on a particular outcome — dismissal — that will be difficult to prove in court. “You remove to federal court because the assumption can be that a judge may be more experienced,” says Marc Mayerson, a complex insurance litigation partner at Spriggs & Hollingsworth who was not involved in the case. Federal judges may be more familiar with cases involving government contractors and have a deeper knowledge of the legal issues surrounding them, but “it’s hard to imagine damages that Blackwater could prove [that] because they’d have to show that they would get a different result in some fashion, and that seems kind of speculative,” Mayerson says. CHANGING COUNSEL In late August 2005, Blackwater appealed Flanagan’s decision to the U.S. Court of Appeals for the 4th Circuit. Again, the complaint alleges, Wiley Rein stumbled. At the time, Kirby was demanding a response to discovery requests in the state court, and the judge there, Donald Stephens, refused to grant Blackwater a stay pending the federal appeal. But the complaint says on Sept. 23, Wiley Rein “admitted to Blackwater in-house counsel” that the firm had not even considered asking the 4th Circuit to stay the state court proceedings. The complaint says Blackwater’s in-house counsel had to ask Wiley Rein lawyers to request a stay in the 4th Circuit, which they did on Sept. 28. Also in September, Joseph Schmitz, the former inspector general at the Defense Department, took over as chief operating officer and general counsel of the Prince Group, which controls Blackwater Security Consulting and Blackwater Lodge and Training Center Inc. He replaced Steve Capace. Shortly afterward in early October, Wiley Rein filed a motion to withdraw as counsel, and Blackwater replaced them with a team of lawyers from Greenberg Traurig — C. Allen Foster, Eric Rowe, and Michael Socarras — to handle the appeal. They tried to amend the removal petition to include the “federal officer” statute, but the 4th Circuit threw out the appeal in August 2006, ruling that “Blackwater failed to raise the issue before the district court.” Blackwater appealed the ruling to the Supreme Court, which declined to hear the case. On Dec. 12, 2006, Blackwater asked Chief Judge James Fox of the U.S. District Court for the Eastern District of North Carolina to order the case into arbitration and filed a $10 million counterclaim against the families for breach of contract. The security firm argued that the contract barred the victims’ families from suing. In May 2007, Fox ruled for Blackwater, forcing the dispute into arbitration and effectively freezing the state court proceedings.
Attila Berry can be contacted at [email protected]. Joe Palazzolo can be contacted at [email protected].

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