Lawyers for Ruden McClosky settled a malpractice lawsuit brought by a group of local investors who invested in a hedge fund operated by the now-defunct law firm.
Miami attorney Andy Hall, who represented plaintiff Capital Partners High Yield Mezzanine Fund, said he was pleased with the $1.7 million settlement. The settlement, reached on the eve before the trial was to begin in Broward Circuit Court, was signed and paid late last month.
“We’re very pleased,” he said. “The damages are very close to what we settled for. Now we’re over and done and finished. Our client is thrilled.”
Among the investors is prominent Boca Raton radiologist Dr. Barbara Bear.
The case was one of 11 malpractice cases pending against Ruden and three related to the failure of two hedge funds operated by Ruden and its former partner Patrick Moran. In October, the first claim was paid out after a Broward jury awarded money to a former Broward County resident, Ryan Gill, who alleged he was defrauded $4.6 million through the hedge fund.
Once Fort Lauderdale’s largest law firm, Ruden filed for bankruptcy in late 2011, after several years of office closings and layoffs. The firm’s assets — and some 100 lawyers — were ultimately acquired by Fort Lauderdale law firm Greenspoon Marder.
However, Ruden’s $20 million malpractice insurance coverage continued, along with 11 pending lawsuits. Three of those suits targeted the firm’s little-known hedge funds and Moran.
Few knew that Ruden was operating two hedge funds called Ruden McClosky Capital Partners as a side business for years. The funds invested in startup technology companies and land in the Bahamas and, according to plaintiff attorneys, were risky and speculative.
Hall, of Hall, Lamb and Hall, asserts investors relying on legal advice from Moran and other Ruden attorneys made a $2 million loan to be secured by property in the Bahamas. They later discovered the borrower was declared incapacitated, was the subject of a guardianship and never held title to the Bahamian property, according to the suit. A relative of the borrower allegedly used fraudulent powers of attorney to enter into the loan agreements.
A third lawsuit in Palm Beach County, filed by the Alzheimer’s Disease and Related Disorders Association, is still pending. Moran, a former chairman of the association’s Southeast Florida chapter, is accused of using his check-writing authority to move $1.1 million from the association’s account to one of Ruden’s funds.
Moran is no longer practicing law in the state of Florida and was recently general counsel to the billionaire owner of the Ambassador Bridge in Detroit. He did not return calls for comment.
While named in the lawsuits, Moran will not have to pay the plaintiffs; all the settlements are coming out of Ruden’s malpractice insurance, Hall said.
Ryan Gill’s case involved an investor who came into an inheritance. Ruden was the law firm handling the estate of Gill’s father, who inherited a share of revenues from two beachfront hotels in Fort Lauderdale, the Yankee Trader and the Yankee Clipper.
Gill lost almost all of his $3.5 million investment. He complained that he was misled by Moran and Ruden about how risky the funds were and claimed they never told him they had conflicts of interest. The law firm stood to collect investment banking fees, finder’s fees and legal fees by directing clients to its funds.
Ruden and Moran are represented by Pete DeMahy of Coral Gables-based DeMahy Labrador & Drake. DeMahy did not return calls for comment.
Hall said his fees will be paid on a contingency basis.