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If You Think Being Sued for Malpractice Is Bad ...

Just last week, BigLaw firm Weil Gotshal settled a malpractice action based on claims that the firm's attorneys had a conflict of interest between their client, a small boutique owner and its adversary, a large fashion house.   Now, just little more than a week later,  another action grounded on conflict of interest allegations has surfaced against Sullivan & Cromwell, as reported in Complaint Accuses Sullivan & Cromwell of Fraud. But this time, plaintiffs aren't calling the conflict of interest malpractice, they're calling it fraud.

From the article, here's a summary of the allegations against Sullivan & Cromwell:

At the heart of this dispute is Flintkote Co., which manufactured and sold vinyl floor tiles, cement pipes and other asbestos-laden products. Two years ago, Flintkote collapsed under the weight of more than 157,000 personal injury and wrongful death claims and wound up in bankruptcy court, where it remains.  Its principal creditors -- asbestos claimants now represented by Snyder -- say that about 20 years ago Flintkote's parent siphoned at least $500 million in funds that should have gone to pay victims. And they say Sullivan & Cromwell orchestrated the raid while serving as Flintkote's counsel [...]

Snyder said that Sullivan & Cromwell provided legal advice to Imperial Tobacco and Flintkote simultaneously, while its true loyalty lay with the parent company. "Our view of the case is that Sullivan & Cromwell was Imperial Tobacco's Trojan Horse inside Flintkote," he said.

In one sense, a firm might be better off facing suits for fraud rather than malpractice since the former are likely harder to prove.  At the same time, BigLaw firms won't find much sympathy with jurors if sued for fraud, which means that they're probably more likely to settle these claims if they reach trial.   Finally, if fraud claims against firms become more common, lawyers may need to check with their malpractice insurers to determine whether their coverage includes suits for fraud.

Posted by Carolyn Elefant on May 30, 2006 at 05:05 PM | Permalink | Comments (0)

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