Husch Blackwell will continue to face claims that it aided and abetted a former client in an alleged investment scheme, following a New York appeals court ruling on Thursday that reinstated part of an investor lawsuit against the firm.
The First Department of the New York Supreme Court Appellate Division came down partly in favor of a group of investors—Gansett One LLC, SES Wealth Advisors LLC, GW Holdings LLC and Mast and Son. They sued Husch Blackwell over its representation of Kamran Nezami, a businessman who owned several medical companies, alleging that he began embezzling funds they provided as investments in the companies.
The investors alleged that they gave Nezami some $1.35 million, but that instead of putting it toward his businesses, he diverted company funds to pay for sports cars, a private security detail, planes and several homes. The investors further alleged that Husch Blackwell should share some of the liability for Nezami’s alleged actions because, at the time he attracted the investors, he had representation from Austin, Texas-based health care and corporate partner Diane Carter.
With the appellate ruling on Thursday, the Kansas City-based Am Law 200 firm will have to defend against revived claims that the firm and Carter aided and abetted an alleged embezzlement scheme by Nezami. The decision also held that Gansett One and the other investors could continue pursuing a claim that Husch Blackwell negligently supervised Carter in connection with her work for Nezami.
A lawyer for the investor plaintiffs, Elliot Ostrove of New Jersey’s Epstein Ostrove, welcomed the First Department’s ruling in an email on Friday.
“Lawyers and large law firms are not above the law,” Ostrove said. “We are obviously happy that the Appellate Division found that plaintiffs stated a claim so that we may bring the behavior of Husch Blackwell and Diane Carter to light and have an opportunity to seek redress for the damages our clients suffered as a result of their conduct.”
Also reached for comment Friday, a lawyer for Nezami, Adam Richards of Moses Ziegelman Richards & Notaro, said: “To the extent that there are any allegations against Mr. Nezami, he vehemently denies them.”
A Husch Blackwell spokesman didn’t immediately respond to a request for comment.
Although the case will now continue, it does so with a narrower set of claims than the investors initially brought in their complaint, filed in Manhattan state court in 2015. In addition to the aiding and abetting and negligent supervision allegations, the investors accused the firm of fraud, negligent misrepresentation and violating the federal Racketeer Influenced and Corrupt Organizations Act.
Through its outside defense counsel, led by Denver-based lawyer Carolyn Fairless of Wheeler Trigg O’Donnell, Husch Blackwell sought to have the case thrown out. Eventually, the firm persuaded New York Supreme Court Justice O. Peter Sherwood to dismiss the suit in its entirety. The judged ruled in November 2017 that the investors hadn’t done enough to state their claims and, as such, they deserved to be tossed.
Thursday’s appeals court ruling keeps much of Sherwood’s decision intact, but overrules his findings on the investors’ aiding and abetting and negligent supervision claims.