A former client of K&L Gates has sued the firm, a Dallas partner in the firm and another lawyer, alleging they all committed gross negligence by convincing him to invest $5 million in an oil and gas deal that left him "unprotected."
The background to Hazen NG v. K&L Gates, Julie Lennon and John Hardin, which was filed on Feb. 21 in Dallas’ 193rd District Court, is as follows, according to the original petition. Hazen NG (which the petition calls "Hazen") has had an ongoing attorney/client relationship with K&L Gates, Dallas K&L Gates partner John Hardin and Julie Lennon of the Gaedeke Group for numerous years.
In 2009, Lennon met for dinner with Dean Hazen (who the petition calls Dean), the managing partner of Hazen, to discuss ongoing legal matters. Lennon brought her neighbor Marc Lott to the dinner and introduced Lott to Dean in an effort to effectuate a partnership between Lott’s company, Daugherty Petroleum Inc. (DPI) and Hazen involving an oil and gas deal, the petition alleges.
The defendants knew that Dean had invested in oil and gas interests in the past, although he was not sophisticated in the oil and gas industry, the petition alleges.
The petition alleges that Dean, on behalf of Hazen, was "duped" into investing more than $3.1 million in the deal and that the defendants failed to put "any details in the agreement to protect Hazen and Dean from Lott and DPI." The petition goes on to state that the defendants pushed the deal through "in less than two weeks without doing any due diligence on behalf of Hazen and Dean."
"Hazen and Dean placed their trust in Defendants to protect their best interest. Instead, Defendants placed Lott and DPI’s interest ahead of Hazen and Dean’s. In doing so, Defendants placed their own interests ahead of Hazen and Dean’s so they could line their pockets with fees for putting the deal together. Left unprotected, Hazen eventually was forced to sink more than $5,000,000 into the deal and Lott and DPI put nothing," the petition alleges.
"Defendants even recognized the blatant conflict of interest and improperly and without making the appropriate disclosures, requested Hazen and Dean to waive the conflict of interest approximately one month after the conflict arose and twelve days after the deal was already consummated," the petition alleges. "Had the appropriate disclosures been made and had the appropriate due diligence been provided to Hazen, Hazen would have never agreed to the joint representation and never agreed to consummate the agreement . . . ."
In addition to gross negligence, the petition alleges breach of fiduciary duty and violations of the Deceptive Trade Practice Act against all of the defendants.
Lance Christopher Kassab, a partner in Houston’s The Kassab Law Firm who represents Hazen and Dean, says the most interesting aspect to his client’s allegations against the defendants "is that they acknowledge the adverse relationship between the two interests" by allegedly requesting a waiver from Hazen after the deal was completed.
"They did the transaction without disclosing the conflict to him and disclosing the waiver of conflict or advising him in any way about the conflict until 12 days after the deal is done," Kassab says.
Hardin declines to comment about the petition. Mike Rick, associate director for PR and communications for K&L Gates, also declines to comment. Lennon did not return a call for comment.