Winston & Strawn’s Washington, D.C. offices on K Street. (Photo: Diego M. Radzinschi/ALM)
Winston & Strawn got played.
The firm all but admitted as much in the saga of ex-client James P. McLean Jr., who allegedly refused to pay a cent of his $500,000 bill.
It wasn’t just Winston. McLean in a deposition admitted that he also refused to pay DLA Piper’s entire $300,000 bill for legal work.
Hold on. You can’t even get a smartphone without a credit check. How did two of the biggest, most sophisticated law firms in the nation do so much work up front without ensuring that they were actually going to get paid?
He was “a very convincing fraudster,” Thomas Buchanan, the managing partner and head of litigation for Winston & Strawn’s Washington office, wrote in an email.
DLA co-managing partner for the Americas Stasia Kelly did not respond to a request for comment. McLean could not be reached for comment—his phone number is disconnected.
The cringe-worthy details of the case are buried deep in the docket of Winston & Strawn’s lawsuit for nonpayment against McLean, filed in 2013 in U.S. District Court for the District of Columbia.
On Friday, the U.S. Court of Appeals for the D.C. Circuit threw McLean a lifeline. Without ruling on the merits of the case, the panel found that the lower court wrongly granted summary judgment in favor of Winston & Strawn after McLean missed a deadline for filing a court document.
The case was remanded back to U.S. District Judge Emmet Sullivan—which means Winston & Strawn can now spend more money trying to collect from McLean.
But there’s no indication in the record that McLean ever had the means to pay the firm. In court papers, his address was a three-bedroom condo in Georgetown, South Carolina that was foreclosed on and sold for $56,000 in October, according to real estate website Estately.
In his 2014 deposition, he said he worked from home, and that one of his companies, Johnson & McLean (he called it a “mortgage model for solving the housing mortgage crisis, and it’s engaged in the brokering of oil”) never generated any income, while the other, Crumens Ltd., never actually came into existence.
Still, in the deposition transcript you get a taste of how he convinced the firms otherwise. He had a big deal pending with Shell, McLean claimed, a diesel fuel transaction worth $44 million. It was just held up at the moment due to logistical issues with two barges, but he was working with someone in Nigeria to get it resolved.
‘MY HOUSE WAS HIT BY LIGHTNING’ AND OTHER EXCUSES
The dispute with Winston & Strawn began in 2012 when McLean, acting in the name of his nascent venture Crumens Ltd., retained Buchanan to represent Edward Warneck.
Right off the bat, the arrangement was odd. Warneck, who filed for personal bankruptcy in 2014, was one of the founders of now-defunct Myrtle Beach, South Carolina-based Direct Air. According to court papers, he was facing “potential litigation involving the Department of Justice, the Department of Transportation, creditors of Direct Air and other matters relating to Mr. Warneck’s employment at Direct Air.”
McLean—who said he hired Buchanan based on a referral from former DLA partner Jim Miller—allegedly offered to foot Warneck’s legal bill as a “favor” to his friend. (According to Buchanan, McLean and Warneck were also connected by marriage.)
“McLean was referred to us by lawyers at DLA Piper,” Buchanan wrote in an email. “They vouched for him. In addition he was married into a wealthy family, although as it turns out the money had run out. We worked for four months and then cut him off. There was a lot of work to be done in a short time.”
Buchanan’s team got a great result. “Two of the other principals were indicted and are going to trial in January in federal court in NJ and the third plead guilty,” Bushanan wrote. “Ed [Warneck] was never charged and is a witness.”
There was just the matter of getting paid. The engagement letter makes no mention of an up-front retainer. It merely stipulated that if payment was more than a month late, the firm could charge a fee of 1 percent a month on the unpaid balance.
McLean, who was pro se in the district court proceedings, denied that he is responsible for Winston & Strawn’s bill. “There was never any agreement by defendant to personally pay for legal services,” he wrote in court papers. “There was a mutual understanding between Buchanan and defendant that if the anticipated transaction occurred and Crumens Ltd. came into existence, the only services it would be obliged to pay for were those directly related to litigation. There has never been any litigation.”
He might have a semi-plausible argument, except for all the emails that Winston & Strawn produced. In correspondence with Buchanan, McLean clearly indicated that he knew he was expected to pay the firm’s bill—and offered oh-so-many excuses for failing to do so.
Here’s a sampling:
June 28, 2012, McLean to Buchanan: “Tom, The wire will be sent from Abu Dhabi on Sunday or Monday. It could take several days to get here. Bank is not open on Friday or Saturday.”
October 5, 2012: “Tom, Since my house was hit by lightning I lost your bill and wiring instructions when the computers were fried. Please resend. I am expecting overseas money anytime.”
November 26, 2012: “Tom, The issues that needed to be completed to enable funding are expected but not guaranteed to be final in the next two or three days. There are no hitches only waiting it out, which I know none of us are happy with.”
December 14, 2012: “Tom, We are scheduled to fund next week unless there is some unforeseen closing problem. If closing does not happen, I will wire from the UAE directly to you.”
February 28, 2013: “Tom, If the wire is not received by close of business Friday, I will be on a plane to UAE Sunday night to personally get the wire sent and raise hell.”
And then there’s Buchanan, vainly trying to collect.
October 8, 2012: “JP, We need some certainty here. I can’t keep telling my partners that the money is coming ‘today.’
November 26, 2012: “Can we have a backup plan so that if the deal doesn’t close by Dec. 31 that you pay at least part of the outstanding balance from other funds?”
It culminated in this plaintive message from March 2013. “How can it take months to get a wire transfer of your funds from overseas? You promised a wire to me a year ago. I just don’t understand, and neither does the firm.”
Winston & Strawn’s lawyer, Paul Maloney of Carr Maloney, summed it up. “The only reason plaintiff continued representation for as long as it did was based on Mr. McLean’s repeated promises that he would pay outstanding legal fees,” he wrote.
But apparently he has no money. After Winston & Strawn sued him, McLean complained to the judge that it would be a financial hardship for him to travel from South Carolina to Washington, D.C. for a deposition. He submitted documents to back it up, prompting this shocked-sounding response from Maloney.
“The document filed under seal purports to show Mr. McLean’s assets and income. If believed, Mr. McLean appears impecunious,” Maloney wrote on behalf of Winston & Strawn. “With all due respect, it appears that Mr. McLean has grossly misled plaintiff, the court, or both.”
So what about DLA Piper?
According to Buchanan, DLA Piper was “supposedly handling a transaction for [McLean] from which he was getting a large return from which he was going to pay us. If the deal didn’t close he was going to pay us from other assets. Quite convincing unfortunately. At the time he was living in a large family estate according to [Warneck].”
In his 2014 deposition, McLean told Maloney that DLA Piper lawyers including Stasia Kelly “worked on mortgages” for him. Kelly could not be reached by phone in her office and did not respond to an email seeking comment.
Here’s an excerpt of Maloney questioning McLean about DLA Piper.
Q: Were their bills paid in full?
Q: How much do you owe them?
A: I don’t owe them anything
Q: How much of the bills were not paid?
A: All of it.
Q: And so you paid none of the bills?
A: That is correct.
Q: How much was their bill?
A: 300 and so odd thousand dollars.
McLean also said DLA Piper did not make a claim against him for unpaid fees.
As Winston & Strawn’s suit against McLean unfolded, Judge Sullivan seemed to get increasingly annoyed with the defendant.
He warned McLean that if he didn’t respond to Winston & Strawn’s motion for summary judgment by August 18, 2014, “the court may treat the motion as conceded and grant plaintiff’s motion.” In support, he cited Local Civil Rule 7(b).
McLean missed the deadline. On August 19, Sullivan ruled in Winston & Strawn’s favor, awarding the firm $494,760.40. “Mr. McLean has therefore known about this motion for summary judgment for nearly three months and received two warnings that failing to file a timely opposition would result in the motion being granted as conceded,” Sullivan wrote. “Judgment is entered in favor of plaintiff and against defendant James P. McLean, Jr.”
Mclean protested that he thought his response had to be postmarked by August 18 – which it was—not received by the court by August 18. (It arrived August 20.) And he pointed out that he sent his response to Winston & Strawn electronically on August 18. “An inadvertent two-day delay in getting documents into the court’s files is not prejudicial in the least to plaintiff,” he wrote.
Sullivan didn’t want to hear it. “Mr. McLean has attempted at every juncture to delay the prosecution and resolution of this case,” he wrote on October 1, 2014. “Mr. McLean’s failure to follow the clear dictates of Rule 5 do not constitute a basis for reconsideration.” (The rule states, “A paper is filed by delivering it: (A) to the clerk; or (B) to a judge who agrees to accept it for filing.” There’s nothing about postmarks.)
That’s the issue that the D.C. Circuit considered on appeal. The court gave McLean free legal representation, ordering that Anthony Shelley of Miller & Chevalier “be appointed as amicus curiae to present arguments in favor of appellant’s position.”
In a somewhat bloodless opinion, Senior Judge Harry Edwards wrote that Sullivan made a mistake. “Under the Federal Rules of Civil Procedure, a motion for summary judgment cannot be ‘conceded’ for want of opposition,” he wrote. “We agree with Appellant that, contrary to Rule 56, the District Court erred in granting summary judgment without determining whether Appellee’s assertions warranted judgment.”
Which means the case lives on.
Did the experience at least prompt Winston & Strawn to change how it vets potential clients? Buchanan said it hasn’t. The McLean experience has instead been viewed as a fluke.
“He was a first for me,” Buchann wrote.
Originally published on Litigation Daily. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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