Bracewell & Giuliani is looking to remove to federal court a malpractice lawsuit filed against it in Pennsylvania state court given that, according to the firm, it has no current equity partners who reside in the state.
Bracewell was sued in the Bucks County Court of Common Pleas on February 15 by Craig and Mary Jo Sanford, who allege the firm didn’t do enough to recover the lost proceeds of the sale of their business, which was more than $12.5 million.
In its notice of removal filed with the Eastern District of Pennsylvania on Wednesday, Bracewell said it has no partners who are citizens of Pennsylvania, none who lived or worked there in 2012 when the Sanfords filed their writ of summons against the firm and none in 2013 when the Sanfords filed the complaint.
"The Sanfords attempt to avoid diversity by asserting that a former B&G nonequity, nonvoting contract partner, David Stockwell, is a resident of Pennsylvania," Bracewell said in its motion. "However, Mr. Stockwell has not been a partner in B&G since he retired on March 31, 2011, and was at no time an equity partner."
Stockwell didn’t work on the Sanfords’ legal matter, but rather referred it to a Bracewell partner in New York, according to the Sanfords’ complaint.
According to the complaint in Sanford v. Bracewell & Giuliani, the Sanfords owned and operated a medical waste disposal business. In 2005, the Sanfords sold the company for more than $14 million, ultimately leaving the couple with more than $12.5 million in U.S. bank accounts. A prior attorney for the couple told them to move the money to offshore accounts.
In 2007, the Sanfords met Jamie Smith, an apparent well-known international security expert, former Navy Seal and CIA operative, and owner and CEO of SCG International LLC. According to the complaint, SCG and Smith were represented to the Sanfords as having government contracts to provide security services to American forces in Iraq and Afghanistan as well as to provide training for air marshals. The Sanfords said in their complaint that Smith represented he had the knowledge and experience to move the Sanfords’ money offshore.
Under the terms of the deal, according to the complaint, Smith would hold the Sanfords’ money in a secured account and the Sanfords would earn interest on it. The money was to be returned May 27, 2009, according to the complaint.
During the term of the note, Craig Sanford repeatedly tried to check on the status of his money but was often told Smith would get back to him. In the spring of 2009, Sanford began receiving letters from an attorney for Smith who said the $12.5 million had not performed well in the market and that Smith wanted to reach a new payback agreement, according to the complaint.
Sanford insisted he didn’t "invest" his money and demanded a return of the full $12.5 million. When the note came due in May 2009, the Sanfords did not receive their money or a payback proposal from Smith, according to the complaint.
Craig Sanford spoke to his neighbor in the Pocono Mountains about his situation. That neighbor was Bracewell attorney Stockwell, then a partner in the New York and Dubai offices of Bracewell and a resident of Wayne County, Pa., according to the complaint.
Bracewell’s chief human resources officer said in a declaration attached to the firm’s motion that Stockwell lived in Dubai while employed by Bracewell and that a Pennsylvania residence he maintained in Bucks County was not his primary residence. She also reiterated that Stockwell was not an equity partner at the firm.
Bracewell agreed to represent the Sanfords, who paid the firm $50,000, they said in the complaint. New York white-collar defense partner Jonathan N. Halpern entered the engagement agreement with the Sanfords in September 2009. According to the engagement letter, attached to the complaint, Halpern would charge $700 an hour and another attorney no longer with the firm would charge $340 an hour. By March 2010, the parties agreed to terminate the representation and the file was returned to the Sanfords a month later, according to the complaint.
The Sanfords said in their complaint that Bracewell purportedly investigated the return of the couple’s $12.5 million. But the Sanfords said the work was "incomplete, inconclusive and inadequate to accomplish the goals" of the Sanfords. According to the complaint, Bracewell took "no steps" to locate or recover the Sanfords’ money. The Sanfords said in the complaint that Bracewell failed to contact Smith or seek an injunction prohibiting him from using or distributing the money.
"The work performed by the firm was not sophisticated, state of the art, or consistent with standard legal practice for firms that represent clients in situations similar to that of the Sanfords," they said in the complaint.
But according to an attorney for Bracewell, the firm accomplished what it was hired to do.
Bracewell is being represented by Fox Rothschild attorneys Abraham C. Reich, Peter C. Buckley and Steven M. Schneebaum.
"The goals for which the firm was hired were accomplished and that’s why the representation terminated," Buckley said. "The firm was not hired to file litigation, just to investigate and tee up the next steps and when that next step was determined to be a lawsuit in Virginia where B&G doesn’t have an office" the firm connected the Sanfords with a former Bracewell attorney in Virginia who proceeded with a lawsuit against Smith.
New counsel for the Sanfords was later able to trace the money, but by that time much of it was dissipated or dispersed, according to the Sanfords’ complaint.
With new counsel, the Sanfords filed a lawsuit against Smith and SCG in the U.S. District Court for the Eastern District of Virginia. It was then determined $10 million of their money was placed in a trust account for a new company, SCG LLC, and the remaining $2.5 million was in an SCG International bank account in Mississippi.
According to the complaint, at least $1.5 million of the Sanfords’ money was in Smith’s possession during the time Bracewell represented the couple. Much of the money was given to Smith’s family members or other businesses between 2011 and 2012, leaving time for Bracewell to have recovered the money before it was dispersed, the Sanfords argued in the complaint.
To date, the Sanfords have not received any of the $12.5 million or the $9 million they say they are owed in interest, according to the complaint.
"The firm’s negligence, carelessness and failure to perform its duties was the legal cause of the loss of some or all of the money which the Sanfords had given to Jamie Smith," the Sanfords said in the complaint.
Clifford E. Haines of Haines & Associates represents the Sanfords in their suit against Bracewell. He wasn’t immediately available for comment.
The Sanfords were successful in getting a $9.5 million judgment against Smith in the Virginia litigation. In November 2012, the U.S. Court of Appeals for the Fourth Circuit upheld that judgment.