A Fulton County judge tossed out a legal malpractice complaint against Taylor English Duma and attorney Michael Trotter three weeks before trial, ruling that, even if the firm were negligent, the plaintiff could not prove the firm caused his claimed losses.
Engineer Michael LaLonde claimed that a contract drawn up by Taylor English lawyers allowed his partners to dissolve their company and lose the rights to a medical device he invented, costing him millions of dollars in capital and potential profits.
But Judge Craig Schwall ruled that the company was facing failure no matter what, and that LaLonde’s acceptance of a settlement with his former investor stripped his case of the causation necessary to support his claims.
“Simply put,” said Schwall, “even if this court were to agree with plaintiff’s assertions and determine that defendants violated their standard of care as his counsel, plaintiff has not shown, and cannot uphold his burden to show, that defendants were the proximate cause of his damages and, therefore, his legal malpractice claim fails as a matter of law.”
LaLonde’s attorney, Lamar, Archer & Cofrin partner Robert Lamar, said he will “definitely” file an appeal.
“There are clear questions of fact as to every material fact that the court found undisputed,” said Lamar via email, “and the court’s legal analysis is flat out wrong.”
“The order is wrong on so many fronts that the big challenge on appeal will be the page limit in pointing out all the errors,” said Lamar, who represents LaLonde with firm colleague David Davenport.
Taylor English and Trotter are represented by Dana Maine and Kevin Stone with Freeman Mathis & Gary.
“This was very complicated case,” said Maine. “It had everything from venture capital money to patent issues to FDA approval to medical devices—it had a lot of really interesting issues that had nothing to do with the legal malpractice claims.”
Those complex issues led to three years of complex and expensive discovery, said Maine, and she was not surprised to hear that Lamar planned an appeal.
“I thought Bob did a great job trying to build a case,” said Maine. “We just never thought causation was there.”
“We obviously believe that the court’s order will withstand review at the Court of Appeals,” she said.
As detailed in court filings and Schwall’s order, LaLonde suffered from sleep apnea, a condition when one breathes erratically while asleep. One treatment involves using a “continuous positive airway pressure” [CPAP] device to provide a steady stream of air through a mask while sleeping.
The existing devices were large and cumbersome, so LaLonde began working on a small, more portable device with a blower and battery installed in the mask. In 2010 he approached Virginia-based PBM Capital Investments about funding a company to develop and market the device.
LaLonde retained Taylor English to represent him in drawing up an operating agreement under which PBM would provide $5 million in funding in return for two-thirds interest in the company, Zephyr Labs, renamed Deshum Medical after it launched.
LaLonde contributed his invention, patents and related assets in return for an agreed-upon value of $2.1 million, made up of $350,000 in cash and a one-third interest in the company.
Among the terms of the agreement was a stipulation that the company could be dissolved by a majority vote of the shareholders.
LaLonde worked with the Food and Drug Administration to secure clearance to proceed, but, according to PBM’s subsequent accounts, he had misled the company and its president and CEO Paul Manning about how far along he was in its design and about its ability to work as promised.
In 2013, PBM pulled the plug and fired LaLonde. Later that year, PBM sued in Lalonde in state and federal court in Virginia, asserting that he’d misrepresented his device to defraud the investment company of millions of dollars.
A few months later, the parties settled their dispute, with LaLonde accepting $310,000 and agreeing not to sue PBM.
In 2015, LaLonde sued Taylor English, Trotter and another lawyer, Aaron Kowan, who is no longer with the firm.
The complaint said Taylor English breached the standard of care by drafting an agreement that allowed Deshum to be dissolved without LaLonde’s consent.
In addition to costing him his equity in Zephyr/Deshum, LaLonde’s complaint said PBM had gone on to sell his device to another company and reap millions of dollars in profits.
Three court-ordered mediations, including one in March, failed to resolve the case. Last month, Kowan was dismissed with LaLonde’s consent.
Trial was to begin May 7 when Schwall entered his order on April 18 dismissing the case.
Schwall said LaLonde had testified after the vote to dissolve the company that Deshum would have faced dissolution in any case, since PBM’s original funding had been exhausted.
LaLonde said there was no evidence that PBM would have offered him a better deal than the one he signed off on.
In any case, Schwall said that, by accepting the settlement in 2013, LaLonde severed any claim for causation he might have made against Taylor English.
LaLonde, the order said, “was paid for his interest in Deshum. If he believed he was not getting the value of Deshum’s corporate opportunities, he had the litigation to pursue that claim. He could have, but did not utilize the process that was available, choosing instead to settle.”
Lamar said the order added to the unfairness of his client’s treatment.
“Mr. Lalonde invented a breakthrough medical device and paid the defendants $68,000 for one simple purpose,” he said—to protect him from having the investor “stealing” his invention and interest in the company.
“Defendants failed miserably and, just as Mr. Lalonde feared, without the legal protections he paid Mr. Trotter to provide, the investor stole the company just before the product was launched and made at least $75 million in profits—a third of which were due Mr. Lalonde.”
Maine, the defense lawyer, responded, “We’re very pleased that Taylor English and Mike Trotter were vindicated.
She added that it was particularly gratifying to represent Trotter, who joined the State Bar of Georgia in 1961 and was presented with a Daily Report “Lifetime Achievement Award” in 2016.
“It was a real privilege to work with Mike Trotter,” said Maine. Favorably concluding the litigation on his behalf was “the most meaningful part of receiving the judgment.”