A firm prerequisite to the purchase of a manufacturing company for a pair of would-be equity investors was the absolute assurance that they would not be held personally liable for any issues relevant to the company's pension plan if their business venture tanked.
They gained that requisite assurance from a law firm they relied upon for counsel, with its lawyers insisting that no liability would attach if the acquisition was structured in a certain way.
The investors scrupulously complied with the steps outlined by attorneys from Jaffe Raitt Heuer & Weiss PC, acting with confidence that they were effectively shielded from any downsides in the event that pension-related liability issues surfaced.
Ultimately, such issues did arise, and the partners were stunned to find that they were indeed on the hook for deficiencies in the company's benefit plan, which was unfunded. When their business failed, fund principals went after them personally, claiming that they owed millions of dollars to pensioners.
They took the matter to court -- and won.
In litigation concluded in federal court last week, a jury found that Jaffe Raitt was negligent in the advice it provided the two men, with the firm wrongly instructing that the contemplated transaction could be concluded without risk.
That was indeed not the case. As noted by the investors' attorney, the advice received regarding liability "was flatly wrong, and if they had been informed that liability would spread, they would not have bought the company."
The law firm will now pay heavily for what the jury concluded was clear negligence that directly caused the plaintiffs' harm. The investors were awarded damages of nearly $5 million, which included an amount set aside to fully cover pension fund-related withdrawal liabilities.