The depths of the economic downturn may be several years in the past, but litigation prompted by legal work done during that period are still making their way into court, according to a study released this week that showed the number of malpractice suits brought against law firms increasing between 2011 and 2012.
Prepared by insurance brokerage Ames & Gough, the study is based on a survey of seven insurers, the majority of which reported an uptick in the number of law firm malpractice claims they fielded last year. Many of the suits in question—most of them involving real estate–related work—were filed by clients hoping to recover from financial losses at the expense of their onetime lawyers. The study points to conflict of interest allegations as the most frequent cause of malpractice claims and notes that law firm mergers and a surge in lateral hiring are driving up such claims because of the potential conflicts both can create.
Based on The Am Law Daily's own recent scouring of court dockets around the country in search of litigation with law firms as defendants, the rise in malpractice suits could well spill into 2013. At the same time, plenty of firms are on the offensive these days, suing former clients over delinquent bills even in the wake of the explosive allegations DLA Piper unleashed by going to court in an effort to collect on what it claimed were nearly $680,000 in unpaid fees.
Among the more substantial suits we've seen in this category recently: a claim filed by Arent Fox against AXA Belgium and related entities in New York state court on April 10 over more than $1 million in allegedly unpaid fees connected to four distinct matters; Mayer Brown's claim against Institutional Financial Markets, formerly known as Cohen & Co. Inc., over $685,497 the firm says it earned for corporate work dating to 2003; Pillsbury Winthrop Shaw Pittman's effort to enforce an arbitration award, through a New York state court filing, requiring onetime client Philip Long to pay the firm $315,783; and Winston & Strawn's bid, in Washington, D.C., federal court, to recoup $494,760 Winston says it is owed by a company the firm claims hired it to represent a top executive's friend.
Such suits can be effective. In May, for instance, Patterson Belknap Webb & Tyler won a $1.5 million judgment from a New York state court judge when the former client it was suing failed to appear in court.
Davis Polk & Wardwell: Recruiter Alan Metz sued the firm in New York state court June 5, claiming he is owed $1.4 million for his role in Davis Polk's hiring of Hong Kong litigator Martin Rogers, who joined the firm earlier this year from Clifford Chance with 17 other lawyers. Metz claims he called William Barron, the head of Davis Polk's Hong Kong office, last summer to say he wanted to introduce Barron to "the head of the largest and highest quality litigation practice in Hong Kong." Though Metz acknowledges in the suit that he never named Rogers in that conversation, he says he was alarmed six months later to see an announcement that Davis Polk had hired the former Clifford Chance litigator. The firm declined to comment to sibling publication The Asian Lawyer (In other recruiter-related litigation news, Law360 reports that a New York state court judge recently ruled that CH Consulting Group is not owed a commission tied to the merger of Philadelphia's Montgomery McCracken Walker & Rhoads and New York firm Kurzman Karelsen & Frank because the recruiter couldn't produce a signed contract.)
Greenberg Traurig: A secretary in the firm's Los Angeles office alleges in a suit filed in California state court that Greenberg overloaded her with work and failed to accommodate her after she developed carpal tunnel syndrome, a wrist condition that makes it difficult for the sufferer to type for prolonged periods or lift heavy boxes. The secretary, Vanessa Sainz, claims she has suffered "severe emotional and psychological distress, past and future wage losses, and losses of benefit" since being put on involuntary unpaid leave in June 2012. In an April 15 response filed with the court, Greenberg, represented by Steptoe & Johnson, lodged 37 separate defenses, including that California law bars the suit because Sainz "is and was unable to perform the essential functions of any job position allegedly at issue in this action, even with reasonable accommodations." A Greenberg spokeswoman directed The Am Law Daily to the court filing, adding that the firm believes the claims have no merit and that it will "defend vigorously against them."
Herrick, Feinstein: The firm's work as a debt collector has come under fire in a proposed class action filed May 16 in U.S. district court in New Jersey. Plaintiff Ray Caprio claims Herrick tacked on more money for attorneys' fees than is allowed under the federal Fair Debt Collections Practice Act when it issued Caprio a notice for $2,933 in delinquent maintenance fees and late fees on behalf of the Amherst Mews Homeowners Association. The collection notice included $1,084 in attorneys' fees—37 percent of the total bill—and Caprio argues that the fees should not exceed 20 percent absent court approval. In a statement, the firm said, "The case is without merit and there is no basis for a class action," adding that a state court judge had already awarded a judgment in favor of its homeowners association client for the money Caprio owes.
McKenna Long & Aldridge: Winning a patent case wasn't enough for former McKenna client Walter Surface Technologies, which hit the Atlanta-based firm with a malpractice claim in its hometown in early June. The plaintiff claims that though it eventually won the case it hired McKenna to handle, mistakes the firm allegedly made along the way—which, in one instance, led to a judge imposing sanctions—required King & Spalding to take over the matter. Walter Surface seeks $3.5 million in the suit, according to sibling publication Daily Report.
Dechert: Days before a February trial was slated to begin, Dechert and former firm associate Ariel Ayanna settled litigation in which Ayanna alleged that he had been terminated because of the firm's "macho culture." Sibling publication The National Law Journal reports that U.S. district court judge Nathaniel Gorton in Massachusetts commended the two sides for preventing what "could have been a lengthy trial." Lawyers for Ayanna—who was fired in 2008, four months after returning from a paid leave taken to care for his children and mentally ill wife—declined to comment to NLJ, as did Dechert representatives.
Foley & Lardner: The firm shed allegations earlier this year that it was part of a Ponzi scheme perpetuated by now-bankrupt real estate investment company DBSI Inc. As The Am Law Daily reported when the suit was filed, DBSI litigation trustee James Zazzali alleged in a suit in Delaware federal court that Foley attorneys worked with DBSI principals as early as 2004 to create fraudulent investment and tax structures as part of a $500 million fund designed to attract new investors. The court closed the case in late January following an agreement by the two sides to dismiss it with prejudice.
Jackson Lewis: Charles Pautsch, a labor and employment litigator who founded a Milwaukee office for Jackson Lewis in 2010, sued the firm this February in Wisconsin state court for allegedly failing to uphold an indemnity agreement reached when Pautsch left the firm in January 2012 to launch a Milwaukee office for Arnstein & Lehr. Pautsch claimed in the suit, which was later moved to federal court in Milwaukee, that Jackson Lewis refused to foot the bill in 2012, as the agreement called for, when $517,156 in sanctions were levied against him in a noncompete case he started working on while at Jackson Lewis and took with him to his new firm. The two sides agreed to settle the case in April for undisclosed terms, and it was dismissed with prejudice June 12. Pautsch declined to comment, citing a confidentiality agreement. Brian Price, the Jackson Lewis partner who handled the suit for the firm, did not return a request for comment.
Sedgwick: A lawsuit brought by Wilson Campbell, a former Sedgwick associate and part-time municipal court judge in Jersey City, settled and was dismissed May 16 by a federal judge in Newark. Campbell, who is black, claimed that the firm discriminated against him and forced him to resign in 2009 after learning that he had a romantic affair with a white bailiff assigned to the court where he worked as a judge. Sedgwick had asserted that Campbell resigned voluntarily after informing the firm that New Jersey's Advisory Committee on Judicial Conduct had lodged an ethics complaint against him. New Jersey Law Journal contacted both parties following the suit's dismissal but did not receive comment.
Willkie Farr & Gallagher: A $104 million malpractice suit launched against the firm by real estate investor David Lichtenstein was thrown out in April, New York Law Journal reports. Lichtenstein had claimed the firm improperly advised him to put a hotel company he led, Extended Stay Inc., into bankruptcy. A New York state court judge found the bankruptcy was necessary and that Willkie did not act negligently. Thomas Kavaler, a Cahill Gordon & Reindel partner who represented Willkie, told the NYLJ, "We are gratified that the judge accurately saw that there was never anything to this claim at all." Lichtenstein's attorney declined to comment to the NYLJ.