In a blow to Cadwalader, Wickersham & Taft right before trial, a Manhattan judge has ruled that the law firm cannot present expert witnesses to defend against a legal malpractice claim.
The ruling comes in the long-running malpractice case brought by Red Zone, an investment vehicle run by Washington Redskins owner Daniel Snyder, against Cadwalader related to the advice it gave on an investment bank’s fee during a proxy fight at Six Flags Inc. Red Zone is seeking more than $22 million in damages, including interest, against Cadwalader, represented by Cravath Swaine & Moore.
With a jury trial scheduled to start next month, Manhattan Supreme Court Justice O. Peter Sherwood said “there are only two versions of the facts” regarding events 13 years ago that may have resulted in injury to Red Zone—“neither of which involve matters outside the ken of the typical juror.”
The case goes back to 2005, when Red Zone pursued a proxy contest at Six Flags to replace three of its seven directors. Cadwalader had represented Red Zone on its dealings with Six Flags, with then-partner Dennis Block advising Snyder. Red Zone also hired UBS Securities as a financial adviser.
In its malpractice suit, Red Zone alleged Cadwalader was negligent in preparing an August 2005 amendment that was supposed to limit UBS’ fees to $2 million, and as a result, UBS ended up winning a $10 million judgment against Red Zone for fees.
The trial is expected to examine Block’s advice on the amendment. In a January 2013 affidavit, Block claimed he explained to Snyder that the August 2005 amendment could not be read to cap UBS’ fee. “I recommended that Snyder not accept the UBS draft,” Block wrote. “After some further discussion, during which I reiterated my concerns about UBS’ language to Snyder, Snyder made the decision to sign the draft as proposed by UBS and executed the amendment letter.”
But according to Red Zone, Snyder and all the witnesses except one who still works for Cadwalader have sworn that no such warning ever happened.
The trial starting next month will likely feature some high-profile testimony, including from the Redskins owner himself; Block, now a shareholder at Greenberg Traurig; and William Mills, co-chair of Cadwalader’s corporate group, according to a list of potential witnesses filed in court.
Cadwalader was also seeking to call several expert witnesses to argue it acted reasonably and did not commit malpractice, including Howard A. Levine, a retired judge of the New York Court of Appeals; Debevoise & Plimpton partner Jeffrey Rosen; and Jack Nusbaum, former chairman of Willkie Farr & Gallagher.
Red Zone sought to preclude Cadwalader from presenting expert testimony, but Cadwalader insisted it was entitled to it.
In his ruling on experts last week, Sherwood said if the jury adopts facts argued by Red Zone, the failure of Cadwalader to memorialize the parties’ agreement is “prima facie proof of professional malpractice.”
Alternatively, Sherwood said “a finding of no malpractice should follow” if the jury finds, for instance, that Snyder and UBS, despite Block’s warning, agreed simply to clarify that the fee would be limited to $2 million if Red Zone won only three of seven board seats.
“None of this requires specialized knowledge,” Sherwood said, adding “no expert testimony is necessary.”
The ruling also means that Red Zone can’t present its own proposed expert witness, George Wang, a corporate transactions partner at Barton LLP.
After more than seven years of litigation, the parties are scheduled to pick a jury Sept. 26 and could start openings on Sept. 27, according to plaintiff’s attorney, solo practitioner Jeffrey Jannuzzo.
Jannuzzo declined to comment on the chance of a settlement before trial. In a statement, he said, “Cadwalader was stripped of all its distracting experts, and the jury trial issue remains what it always was—whether Dennis Block is telling the truth about an ‘oral warning’ in August 2005 that he never mentioned again until January 2013.”
“For Red Zone, it does not take an expert to prove that an ordinary lawyer should be able to get a one-page letter right,” he added.
Cravath partner David Marriott, longtime counsel to Cadwalader, did not immediately return a message seeking comment, neither did the firm’s representatives.