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A Manhattan Supreme Court judge has dismissed a legal malpractice claim against Weil, Gotshal & Manges but permitted a claim for breach of fiduciary duty to go forward. Annette and Randi Fischer, principals of Fashion Boutique of Short Hills Inc., had charged that Weil Gotshal had been conflicted in representing them in a suit against Fendi USA Inc. because the firm also represented Prada USA, which acquired a substantial interest in Fendi during the representation. Unlike their malpractice claim, the Fischers’ breach of fiduciary duty claim did not require a showing of proximate causation of damage, Manhattan Supreme Court Justice Richard B. Lowe wrote in Weil, Gotshal & Manges v. Fashion Boutique. Rather, they needed only to show that the alleged conflict was a significant factor in the alleged economic loss. “The litigation business which Weil Gotshal was receiving from Prada, beginning in late 1999, could arguably have adversely affected the quality of Weil Gotshal’s representation of Fashion Boutique in its action against Fendi, given Prada’s acquisition of an ownership interest in the parent company of Fendi, also in late 1999,” the judge wrote. The Fischers sued Weil Gotshal for $15.6 million in a counterclaim action following a suit by the law firm for $2.7 million in unpaid legal bills. The Fischers hired Weil Gotshal in 1993 to sue Fendi in federal court for conduct that allegedly violated the federal Lanham Act as well as New York state laws governing product disparagement and slander. Fashion Boutique, which sold only Fendi goods in its store in New Jersey’s Short Hills Mall, claimed that Fendi had engaged in a campaign to disparage Fashion Boutique, which competed with the company’s own Manhattan store. Weil Gotshal partners Helene D. Jaffe, currently co-chair of the firm’s trade and regulatory practice, and Robert G. Sugarman served as trial counsel. Both were also sued personally by Fashion Boutique. Southern District Judge Miriam Cederbaum dismissed the Lanham Act claim in October 1996, finding that, though some Fendi employees may have disparaged Fashion Boutique to customers, there was no evidence Fendi had initiated any of these communications or had an ongoing policy of disparagement. Relations between the Fischers and Weil Gotshal apparently began to deteriorate thereafter, and the firm moved to withdraw in May 1999. Cederbaum denied the motion because the case was on the eve of trial on the state law claims. Weil Gotshal began to represent Prada in trademark enforcement litigation in late 1999, around the same time the company acquired its interest in Fendi. In March 2000, Fendi offered a settlement of $1.4 million plus costs, which the Fischers rejected, against Weil Gotshal’s advice. After a trial in July and August 2000, a jury found Fendi liable in each cause of action and awarded the Fashion Boutique $110,000 in compensatory and punitive damages. Jaffe and Sugarman informed the Fischers during the trial of Weil Gotshal’s Prada representation. Cederbaum granted Weil Gotshal’s motion to withdraw in September 2000. In their malpractice claim, the Fischers alleged Weil Gotshal failed to make proper use of testimony by Caroline Clarke, a former executive director of operations at Fendi. Based on an e-mail Clarke sent to Weil Gotshal after her deposition, Fashion Boutique alleged Clarke could have testified “about hundreds of interactions with customers of Fashion Boutique in which managers of [Fendi] had made disparaging remarks about Fashion Boutique.” Fashion Boutique’s Lanham Act claims would have survived had Weil Gotshal made effective use of Clarke’s testimony and her “remarkable e-mail,” the Fischers alleged in their counterclaims. But Lowe found the e-mail less than remarkable. The “hundreds of interactions” Clarke mentions in the e-mail, he noted, were referred to Clarke by another employee who apparently disparaged Fashion Boutique to customers. Not only would Clarke’s testimony about her colleagues’ remarks be hearsay, the judge wrote, but these communications were also in response to customer calls, not initiated by Fendi. Nothing in Clarke’s e-mail supported the Fischers’ claim of an orchestrated campaign, the judge wrote, noting that she subsequently testified at trial that there was no such campaign. “[T]he documentary evidence adequately refutes Fashion Boutique’s allegations that, but for Weil Gotshal’s failure to make better use of Clarke’s testimony, Fashion Boutique would have been awarded a substantially greater amount of damages on its New York State law claims,” Lowe wrote. FIDUCIARY DUTY CLAIM Weil Gotshal had argued the breach of fiduciary duty claim should be dismissed as duplicative of the malpractice claim. The firm also argued there was no conflict in its representation of both Fashion Boutique and Prada because there was no “substantial relationship” between the two representations. But the judge disagreed. Citing Estate of Re v. Kornstein Veisz & Wexler, Lowe wrote, “attorneys must ‘be sensitive not only to obvious conflicts, but also to forces that might operate upon them subtly in a manner likely to diminish the quality of their work.’” The Weil Gotshal partners’ disclosure of the Prada representation to the Fischers, the judge continued, “suggests their awareness that the representation did entail at least a potential conflict.” Weil Gotshal was represented by Michael Feldberg, head of the litigation in the New York office of Allen & Overy. Feldberg, who said he had not yet read the full opinion, said he was gratified the malpractice claim had been dismissed and said he believed the fiduciary duty claim was “ultimately without merit on the law or factually.” Fashion Boutique was represented by Jeffrey Slade of Slade & Associates. Slade could not be reached for comment.

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