Steven Katzman, attorney with Katzman Wasserman Bennardini & Rubinstein. (Melanie Bell)
The night before litigators in a legal malpractice lawsuit trial against Greenberg Traurig were to present closing arguments after a seven-week trial, the law firm and its former client, Dyadic International, agreed to settle.
Greenberg was the last of four law firms to settle the case Dyadic filed in 2009 against its outside accounting firm and legal firms. The company had alleged that Greenberg and the other defendants were responsible for destroying its value in 2007 by improperly recommending it halt trading and withdraw financial statements filed with the Securities and Exchange Commission after discovering possible fraud at the company’s Asia operations.
The March 1 settlement came hours after Palm Beach Circuit Judge Richard Oftedal ruled on two separate legal arguments, with Dyadic benefitting from one, and Greenberg from the other. The judge denied Greenberg the opportunity to allow jurors to divvy up fault in certain areas of the case and thereby limit the firm’s exposure, but he also ruled that Dyadic could not pursue an opportunities-lost damage model that buttressed its $700 million damages claim. The rulings came in response to motions for a directed verdict presented by each side.
For Dyadic, the ruling against its damages model meant it would only be able to ask the jury for out-of-pocket expenses, which amounted to $22 million and topped out at $34 million if pre-trial interest and other costs were included, said Steven Katzman, Dyadic’s counsel and a partner at Katzman, Wasserman, Bennardini & Rubinstein in Boca Raton.
While the final settlement amount is confidential, publicly traded Dyadic will have to release the net amount it received in the settlement— an amount that will be in the mid-seven figures, according to Dyadic.
“I’m very pleased for the client,” Katzman said. “I think the settlement vindicates them. I’m disappointed the jury did not get the chance to award the full measure of Dyadic’s damages.”
Greenberg said in a statement that it was pleased with the settlement.
“After 10 years of being threatened with meritless claims premised on actions which occurred over a decade ago,…we settled the suit for a very modest and insured, but confidential, amount,” the firm said. “We refused to bend to baseless and public threats, and deem our firm vindicated. We are pleased to put this litigation behind us, rather than continue with the cost and distraction it posed.”
Dyadic, a Jupiter-based biotechnology company, had sued four law firms and accounting giant Ernst & Young in 2009 for professional negligence and breach of fiduciary duty. Dyadic lost its arbitration against Ernst & Young but pursued the case against the four law firms. “Greenberg Traurig was the defendant we considered most culpable,” Katzman said.
At the crux of the lawsuit was Dyadic’s allegation that Greenberg improperly advised the company to halt trading, pull possibly unreliable financial statements it had filed with the SEC and put its CEO Mark Emalfarb on temporary leave when it discovered potential fraud in operations in Hong Kong and China.
The company’s moves prompted the SEC to de-list and de-register Dyadic before it was cleared of wrongdoing. The company argued that this cut the company’s value by millions and cost it $700 million in business. The financial documents later turned out to be fine.
Greenberg was represented by Stuart Singer, Markenzy Lapointe, Lauren Louis and Sashi Bach of Boies Schiller Flexner. They had argued that Greenberg was being sued merely for doing the right thing. They said Dyadic hurt itself when it failed to follow some of Greenberg’s advice, and that ultimately it is the role of the law firm to advise but it is up to a company to decide whether to follow that advice.
Dyadic’s trial counsel was Katzman and partner Charles Bennardini.
On the morning of March 2, Judge Oftedal brought in the jury, which was expecting to hear closing arguments, and announced that the parties had settled. The lawyers then met with jurors for about an hour, Katzman said.
In addition to Greenberg Traurig, the law firms listed in the complaint included Jenkens & Gilchrist, Bilzin Sumberg Baena Price & Axelrod, and Moscowitz & Moscowitz. The now defunct Jenkens & Gilchrist reached a $525,000 settlement in 2012. Moscowitz settled in 2015, and Bilzin settled in 2016, each for amounts in the low seven figures after fees and expenses.
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