A Manhattan Supreme Court judge has thrown out a real estate investor’s malpractice suit against Willkie Farr & Gallagher, finding the firm was not negligent in its advice. David Lichtenstein, chair and CEO of the Lightstone Group, sued the firm in June 2012 alleging $104 million in damages. Lichtenstein v. Willkie Farr & Gallagher, 652092/2012, claimed the firm inappropriately advised Lichtenstein to put a hotel company he led, Extended Stay Inc., into bankruptcy.
His complaint alleged that Willkie lawyers Marc Abrams and Matthew Feldman made "full-throated warnings" that Lichtenstein risked drastic personal exposure if he did not authorize a bankruptcy filing. Lichtenstein said this advice was wrong because he would prevail in any lawsuit for breach of fiduciary duty.
But Acting Supreme Court Justice Melvin Schweitzer (See Profile), ruling on Willkie’s motion to dismiss, said Lichtenstein admitted that the bankruptcy filing was necessary to prevent waste of Extended Stay’s assets. "Where a fiduciary (as Mr. Lichtenstein admits he was) fails to file for bankruptcy or delays filing in order to serve his personal interest, such as to avoid liability under a guaranty, and the corporation’s value is diminished as a result, he faces uncapped personal liability," the judge said. "Willkie was not negligent" and the firm provided advice consistent with the ordinary reasonable skill and knowledge possessed by a member of the legal profession, the judge said.
Thomas Kavaler, a Cahill Gordon & Reindel partner who represents Willkie, said in a statement, "We are gratified that the judge accurately saw that there was never anything to this claim at all." Lichtenstein’s attorney, Andrew Celli, a partner at Emery Celli Brinckerhoff & Abady, declined to comment.