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Five Winston & Strawn lawyers, two former town supervisors and a raft of past and present public officials are among the 17 people to be deposed as the town of North Hempstead, N.Y., pursues a $36 million legal malpractice claim against the firm, its former outside counsel. The suit accuses Winston & Strawn of protecting its own interests at the expense of the town in a 1994 lawsuit that ended five years later with a $28 million verdict against the municipality. Because North Hempstead was forced to borrow money to pay off the judgment in favor of Sumitomo Bank of New York, the ultimate cost to the town’s taxpayers will exceed $47 million. Chicago-based Winston & Strawn also maintains offices in New York, Washington, D.C., Los Angeles, San Francisco, London, Paris and Geneva. It employs nearly 900 attorneys. The complaint, filed 11 months ago, accuses the firm of “purposeful failure” to raise and pursue a valid defense on behalf of the town when it was sued by Sumitomo. “Winston & Strawn failed to raise the available defense in order to avoid its own potential liability,” the complaint avers. In addition to the malpractice claim, North Hempstead has accused the law firm of breach of contract, breach of its fiduciary duties and violations of the state Code of Professional Responsibility. On Oct. 29, Nassau Supreme Court Justice Stephen A. Bucaria denied the firm’s motion to dismiss the case, stating that no such ruling could be made before completion of discovery. Town of North Hempstead v. Winston & Strawn LLP, No. 019050-2003. Garden City, N.Y., lawyer John Peirez represents North Hempstead. A Great Neck, N.Y., resident, he is also one of the taxpayers impacted by the judgment. Winston & Strawn gave the town “dead wrong advice,” Peirez said in an interview at his office. Defending the law firm are attorneys Guy Miller Struve and Amelia T.R. Starr from Manhattan’s Davis Polk & Wardwell. Also on the defense team are John Armentano and James Wicks of Farrell Fritz in Uniondale, N.Y. Armentano is a Law Journal columnist. Instead of commenting about the case, the defense issued a statement from Winston & Strawn partner Anthony J. D’Auria. “We believe that the claims of malpractice now being raised on behalf of the town of North Hempstead and its Solid Waste Management Authority are without merit both factually and legally,” he said. “We are confident that discovery will confirm this, and we look forward to moving for summary judgment at the close of discovery.” GARBAGE DISPOSAL The Solid Waste Management Authority referred to by D’Auria is the North Hempstead agency responsible for the town’s disposal of garbage. It is also a named plaintiff in the suit. At the root of the dispute between the town, the authority and their outside counsel is a set of 1992 agreements North Hempstead made to get rid of its garbage. That year, the state Department of Environmental Conservation banned the use of landfills statewide. Faced with an impending crisis, the town entered into an interlocking set of agreements with Sumitomo, the Suffolk County town of Babylon, N.Y., and a garbage carting company, North Hempstead Resources Inc. Under those agreements, North Hempstead Resources would transport recyclable waste to a Babylon recycling facility. It would also upgrade North Hempstead’s waste transfer station. In exchange for the right to be North Hempstead’s garbage company, North Hempstead Resources was to pay the town a “concession” fee of $8.5 million. It was to recoup that money from the town over time. To raise money for the fee, the company issued $16.9 million in promissory notes. Sumitomo was to act as the noteholders’ trustee. Payments from the town to the company would be routed to Sumitomo to retire the notes. Buttressing that final part of the deal was a formal “consent” document, signed by then-North Hempstead Supervisor Benjamin Zwirn and issued to Sumitomo. Accompanying the consent was a Winston & Strawn opinion letter vouching for its legitimacy. The consent contained clauses not replicated in the other agreements that made it harder for North Hempstead to cancel its deal with North Hempstead Resources by increasing the town’s responsibility to find a suitable replacement. According to North Hempstead’s complaint, that consent document was defective and unenforceable because, despite Winston & Strawn’s opinion letter, it had not been approved by the North Hempstead Town Board or the Solid Waste Management Authority board, as required by law. In December 1993, North Hempstead fired the company. It never found a replacement. Faced with the prospect of not getting paid, Sumitomo sued the town, alleging that it unnecessarily fired North Hempstead Resources and failed to make a good faith effort to find a replacement. Peirez, a partner in the firm of Reisman Peirez & Reisman, argues that the town’s best defense would have been to plead the invalidity of the consent document that contained the “good faith” requirement. But to do that, he alleged, Winston & Strawn would have had to admit that its opinion letter was incorrect, possibly opening itself up to liability. Instead, the town contends, Winston & Strawn’s lawyers elected to ignore the infirmity of the consent document and challenge the meaning of the good faith clause. While the Sumitomo jury agreed that the town had reason to fire North Hempstead Resources, it also found that the town did not make a good faith effort to replace the company. That verdict was later upheld by the Appellate Division 2nd Department. In 2001, the state Court of Appeals rejected the town’s petition for certiorari. According to the town’s complaint, it paid Winston & Strawn approximately $4 million to defend the Sumitomo matter. MOVING TO DISMISS Arguing for dismissal of the town’s case, Struve told the court that the question of whether Winston & Strawn should have challenged the validity of the consent, rather than arguing that the town had no duty of good faith, was “a question of judgment, not a question of malpractice.” He also contended that if Winston & Strawn had argued the infirmity of the consent document, it would have left the town open to an unjust enrichment claim, because it received the $8.5 million concession fee from North Hempstead Resources, but never made the corresponding payments to Sumitomo. Rejecting those premises, Peirez said that under the state’s Municipal Law, Town Law and Local Finance Law, there was no question that the consent was invalid and that even if Winston & Strawn had backed the town into an unjust enrichment scenario, North Hempstead’s liability would have been significantly less than it ultimately was. But it may also have left the law firm open to attack based upon its consequently faulty opinion letter. “There’s no question in our minds, based on the evaluation of all the facts, that Winston & Strawn decided to protect itself,” Peirez said in an interview. At oral argument, however, Bucaria questioned why the law firm should be held liable when neither Town Attorney Ivan Kline nor his successor, Howard S. Miller — now a Nassau district judge — rejected the firm’s defense strategy. “If we can’t assume there’s a certain knowledge and fluency by the town attorney, who else can we look to?” he asked. Among those scheduled to be deposed are Kline, who later worked for Winston & Strawn; Miller; former supervisors May Newburger and Zwirn, as well as three town councilmen. Also due to be examined are Winston & Strawn attorneys Joseph DiBenedetto, Robert Fischler, J. David Reich, Thomas Quigley and Dennis Kelley. The first of those depositions, Kline’s, was scheduled for Monday.

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