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A Nassau Supreme Court justice has eliminated all but one avenue of defense for Winston & Strawn in a malpractice suit brought against the Chicago-based law firm by the town of North Hempstead, N.Y. The town, which is seeking more than $36 million in damages, plus interest, filed Town of North Hempstead v. Winston & Strawn, No. 109050-2003, after being found liable for a $32 million judgment in a suit brought by the Sumitomo Bank of New York Trust Co. Winston & Strawn had defended North Hempstead in the Sumitomo matter, which arose after a solid waste management deal made in 1992 by town officials turned sour. Justice Stephen A. Bucaria last week denied Winston & Strawn’s summary judgment motion, observing in his 11-page ruling that the firm insulated itself from potential liability by conceding an affirmative defense that would have protected the town. After examining Winston & Strawn’s contentions, the judge concluded that only the firm’s “sophisticated client” defense presented issues of fact suitable for trial. That defense is based on the notion that the firm’s client, personified by then-Town Attorney Ivan O. Klein, made the strategic decision to waive the defense, breaking Winston & Strawn’s causal chain of liability. Klein ultimately left town government to work briefly with Winston & Strawn, which employs 819 attorneys in Chicago, Manhattan, Washington, D.C., and elsewhere. In the wake of the decision, town Supervisor Jon Kaiman — a former Nassau District Court judge — said in an interview that the ruling was only a preliminary step, albeit an important one, along the town’s road to recovery. Guy Miller Struve and Amelia T.R. Starr of Davis Polk & Wardwell represent Winston & Strawn. Local counsel for the defense team is John M. Armentano, a partner in Uniondale, N.Y.’s Farrell Fritz. “We believe that the court’s decision is mistaken on the law and the facts, and we intend to appeal,” Struve said in a statement. E. Christopher Murray and David Peirez of Garden City, N.Y.’s Reisman, Peirez & Reisman represent the town. Sumitomo sued North Hempstead in the mid-1990s after the town dismissed a company hired to manage its solid waste disposal, triggering a default in that company’s obligation to make promissory note payments to Sumitomo. The company, North Hempstead Resources Inc., was hired in response to a 1992 state Department of Environmental Conservation edict banning the use of landfills. Needing someplace to take its trash, the town entered into an interlocking set of agreements with Sumitomo, the company and the Suffolk County town of Babylon. Under one contract, Babylon agreed to handle North Hempstead’s recyclables. Under another deal, NHRI would upgrade North Hempstead’s waste transfer station, cull the recyclables and truck them to Babylon. In exchange for the right to be the town’s carting company, NHRI would pay North Hempstead a concession fee of $8.5 million, with an understanding that it would recoup that money from the town over time. To raise its concession fee money, NHRI issued $16.9 million in promissory notes. Sumitomo was to act as the noteholders’ trustee. A key component of the waste disposal deal was a consent form signed by then-Supervisor Benjamin L. Zwirn and issued to Sumitomo. That document committed the town to making a good-faith effort to replace NHRI if the town determined the company was not getting the job done. The “good faith” clause did not appear in the town’s other solid waste management agreements and created a new risk for the town. Although Zwirn never obtained town board approval to take that risk, Winston & Strawn issued an opinion letter to Sumitomo based upon it. In 1993, North Hempstead fired NHRI, and never found a replacement. Facing the prospect of not getting paid, Sumitomo sued the town alleging that it had unnecessarily fired NHRI and failed to make that good-faith effort. In the malpractice case, North Hempstead officials accused Winston & Strawn of passing up the town’s best defense against Sumitomo — that the opinion letter was faulty — because it could have made the firm liable to Sumitomo. Justice Bucaria last week rejected the firm’s argument that if the Zwirn consent was successfully challenged by Sumitomo, then the town may still have been liable under an unjust enrichment theory because it had received the $8.5 million payment from NHRI. “A review of the controlling authority reveals the weaknesses and fatal flaws in defendant’s reasoning as a matter of law,” Bucaria said. He explained that under established precedent, the consent form signed by Zwirn could never have been legally defensible because it was not authorized. Justice Bucaria also said that the feared Sumitomo unjust enrichment claim could not have succeeded as a matter of law and cannot stand as justification for Winston & Strawn’s failure to raise a fundamental defense that would have enabled the town to avoid liability altogether. He reasoned that because NHRI was contractually obligated to pay both the concession fee to the town and the note payments to Sumitomo, the town was entitled to keep its money. “Only because NHRI was judgmentproof, did Sumitomo assert claims against the town,” Bucaria said. LAST DEFENSE Only the firm’s “sophisticated client” defense — that then-Town Attorney Klein knew the consent was invalid and made the decision to forego that argument — presents a triable issue of fact, the judge said. Like Zwirn, Klein may not have had the unilateral authority to make that decision, the judge said. And, noting that Klein later went to work for Winston & Strawn, Bucaria said the former town attorney may have had “divided loyalties” undermining the credibility of deposition testimony he gave in the malpractice law suit. North Hempstead took no legal action against Klein individually. Current Town Attorney Richard Finkel said in an interview that the decision to proceed only against Winston & Strawn was made by a prior administration and that the statutory time for any suit against Klein has likely expired.

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