Receiver or Trustee in Legal Malpractice Case?

Law.com reports on a legal malpractice case involving Smith, Gambrell & Russell which may well turn on whether the plaintiff in the action is simply a trustee or a receiver of the plaintiff company.  As one reads this scandal filled case, which includes the suicide of the plaintiff company's former CEO,Kirk S. Wright,who was awaiting sentencing on Federal Charges the importance of this distinction comes to light:
"Smith, Gambrell & Russell's answer to an $80 million malpractice action filed against the firm by the bankruptcy trustee for one of its former clients takes an unusual, philosophical tack, starting with an excerpt from a recent decision from the 7th U.S. Circuit Court of Appeals.. Lamar "Mickey" Mixson at Bondurant, Mixson & Elmore, who represents Smith Gambrell and co-defendant C. Gladwyn Goins, a former counsel in the firm's Washington, D.C., office, said in an interview that Perkins is only a trustee. While with the firm, Goins served as outside general counsel to IMA.

By being the trustee, Mixson said, Perkins "stands in the shoes of the corporation" -- a corporation that, according to the trustee, ran a Ponzi scheme. The law doesn't allow lawbreakers to recover financially, Mixson noted, adding, "He can't recover any more than the corporation can."

Not so, countered Robert E. Shields, Perkins' lawyer at Doffermyre, Shields, Canfield & Knowles. Shields pointed to the wrongful conduct of IMA principal Kirk S. Wright, who killed himself while awaiting sentencing for his federal fraud and money laundering convictions.
Shields said Wright's actions can't be attributed to the company or Perkins because other IMA officers and directors were not aware of and did not participate in Wright's crimes.

"He was not the alter ego for the company in these circumstances," Shields said.

Shields added that Perkins isn't just the trustee -- he's also the receiver, which means he can recover.

"It was in his role as a receiver that he filed this suit," Shields said, explaining that Perkins first was appointed receiver when the case was initiated in Fulton County Superior Court, and again in the federal action filed by the Securities and Exchange Commission. "The receiver represents the creditors" and doesn't stand in the shoes of the company, he said.

ConnectU, Facebook and Collateral Estoppel in Legal Malpractice

Legal Pad Blog Reports that the ConnectU people who successfully sued Facebook are in a dispute with Quinn Emanuel over fees.  We wonder if anyone has considered the collateral estoppel effect of fee arbitrations on legal malpractice cases. The teaser from Legal Pad is:
"San Jose Federal Judge James Ware ruled that the settlement should be enforced and appointed special master George Fisher to do the enforcing. In his report, Fisher writes that the “ConnectU shareholders have threatened a malpractice action against Quinn Emanuel” without explaining much more. Fisher also relates that there is currently an arbitration in New York State Supreme Court between the firm and ConnectU over the fee dispute. "

Legal Pad reports the dispute between ConnectU and Facebook is:
"A quick refresher: ConnectU founders Tyler and Cameron Winklevoss sued Facebook founder and Harvard pal Mark Zuckerberg, accusing him of stealing their ideas to start his hotter-than-hot social networking site. After reaching a settlement earlier this year, ConnectU said it had been hoodwinked by Facebook about the value of the company’s stock and so got gypped out of big payout. The company tried to back out of the deal and fired its lawyers at Quinn Emanuel, the high-profile L.A. trial firm that advised on the settlement. Then Quinn filed a lien against any money ConnectU would recover from Facebook. "

The Mintz Legal Malpractice Case

Anthony Lin wrote yesterday in the NYLJ about the Shelly v. Bodian case, Index No. 602254/05, currently being litigated in Supreme Court, New York County.

The case highlights some interesting principals of legal malpractice which warrant examination.  We'll take a further look at the motion to dismiss in this case, which was decided last year.

Is it legal malpractice to represent both a small company [closely held] and one of its originators, while suing another?  Need the attorney advise, and perhaps remind the originator that the company and not he may be liable for legal fees?  This is a secondary problem discussed by Justice Goodman.  She writes:  "The fifth cause of action alleges that defendants failed to advise plaintiff Joseph P. Shelly, Jr. that he was not personally liable for the legal fees that the defendants were entitled to receive as a result of their defense of an entity in which Shelly had an interest."

Attorney-Defendants in the case argued that partial payment of their fees and an equivocal letter provided a defense to this cause of action.  The court found that evidence offered in a motion to dismiss must "conclusively establish a defense as a matter of law before a court may dismiss a claim pursuant to CPLR 3211(a)(1).  Equivocal letters are insufficient, and the court denied a motion to dismiss.

Self-Aggrandizement and Legal Malpractice

Anthony Lin writes today in the NYLJ about the Shelly v. Bodian case, Index No. 602254/05, currently being litigated in Supreme Court, New York County, and discusses a recent decision of Justice Emily Jane Goodman.  Justice Goodman has a fair number of legal malpractice cases on her docket.

Lin's article highlights a well known meme in legal professional circles;  lateral movement between biglaw firms.  One publication, NY Lawyer is highly sensitive to movement of attorneys between large law firms.  "NY Lawyers on the Move" or "The Problem of Poached Lawyers" is a staple of this particular magazine.

Is Shelly "A legal malpractice suit against the current New York managing partner of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo claiming he was too preoccupied with his lateral movement among firms to timely file a lawsuit " as Lin writes?  Perhaps.
 
The case highlights some interesting principals of legal malpractice which warrant examination.  We'll take a look at the motion to dismiss in this case, which was decided last year.

Is it legal malpractice to allow amendment of an answer which then leads to dismissal of a cause of action because the original answer failed to allege statute of limitations and the amended answer successfully alleged statute of limitations?  Justice Goodman held that it was not legal malpractice, because she, and the majority of courts permit amendment of answers absent prejudice, which she describes as "investment of time/expense in engaging in substantial discovery, motion practice or trial preparation."  If there is no investment, there is no prejudice, and a reasonable [if hypothetical] court would have allowed amendment.  Ergo, no malpractice.