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A Delaware federal judge has found a New York law firm liable for legal malpractice for mishandling an arbitration resulting in a $10 million award against the firm’s client. Lawyers from the firm of Fox Horan & Camerini failed to adequately investigate the obligations contained in the agreement at issue in the arbitration and therefore failed to make an argument that would have prevented their client being found liable, ruled Judge Sue L. Robinson of the U.S. District Court for the District of Delaware. “As a result, defendant breached the Standard of Care it owed plaintiff in these regards,” she wrote in In re: TCW/Camil Holding L.L.C. Fox Horan, a 30-lawyer firm specializing in international arbitration, had been retained by TCW/Camil Holdings, a New York-based investment fund, and related companies in Brazil called Camil Holdings and Garial to represent them in an arbitration arising from a failed attempt to purchase a controlling interest in Brazil’s largest rice company. The Camil companies entered into an agreement with IRHE Holdings, a fund controlled by an Argentine family by which IRHE would invest in Camil Holdings as part of an effort to buy a controlling interest in rice company Josapar. In the event that effort failed, one section of the agreement stated that the parties would enter into negotiations to adjust the value of IRHE’s interest in Camil Holdings. Another section stated that, if negotiation failed to resolve the situation, TCW/Camil and Garial agreed “to cause” Camil Holdings to repurchase IRHE’s interest. When Camil Holdings failed to acquire control of Josapar, IRHE demanded repurchase of its shares. Robinson agreed with TCW/Camil’s contention that the “to cause” language meant the fund would make reasonable efforts to help Camil Holdings raise money to fund the Brazilian entity’s repurchase of IRHE’s interest, not that TCW/Camil itself had a repurchase obligation. But Eduardo Tabio and Eric Lindquist, the Fox Horan lawyers primarily responsible for the arbitration, took the different Camil entities’ obligations to be the same. In the terms of reference setting out the issues for arbitration, they agreed to language stating that the issue was whether “respondents,” defined collectively, were responsible for repurchasing IRHE’s shares. Noting that lawyers are entitled to discretion in deciding how to advance their clients’ cases, the judge said an excusable mistake of discretion required “some cognition of the position or argument.” “The evidence clearly shows that defendant did not even consider the argument that plaintiff only owed IRHE a duty ‘to cause’ Camil Holdings to repurchase,” Judge Robinson wrote. “Thus, defendant’s failure to present this argument cannot properly be called an honest mistake of judgment.” The Camil entities were found jointly and severally liable to IRHE for $10 million plus interest and part of IRHE’s attorney’s fees. Fox Horan had argued that its liability should be reduced because its clients were contributorily negligent. The firm cited in particular the knowledge and sophistication in the area of fund co-founder Carlos Christensen and in-house lawyer Carol Moody, a former corporate associate at Debevoise & Plimpton. Robinson rejected Fox Horan’s argument for contributory negligence, noting that Christensen was not a lawyer and Moody had no litigation or arbitration experience and other responsibilities preventing her from focusing on the arbitration. The judge noted that nothing in the record indicated Christensen or Moody directed the Fox Horan lawyers on what arguments to make. Stuart Grant of Wilmington’s Grant & Eisenhofer, which represented in TCW/Camil in the malpractice action, said his client had hired Fox Horan because of its reputation in arbitration practice, especially in matters involving Latin America. “You would expect people who hold themselves out as experts in international arbitration to look into the corporate identities and make sure of the obligations,” he said. Robinson’s decision states that Tabio had personal problems during the arbitration. Grant said the partner abandoned practice shortly after the arbitration, and most of the work in the case was handled by Lindquist. He said it was possible Tabio’s problems contributed to Fox Horan’s difficulties handling the case. Grant said his client was seeking $12 million in damages from the firm. The judge said she would set trial for damages in the fall. Fox Horan was represented by Ian Conner Bifferato of Wilmington’s Bifferato, Gentilotti & Biden. Neither Bifferato nor Lindquist returned calls seeking comment.

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