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Lawyers accused of costing clients $2M with bad advice

Some bad advice from his attorney cost a businessman and his partners nearly $2 million in damages in a breach of contract case. That is according to a legal malpractice case the man has filed against the law firm that represented him in the litigation.

The original case is fairly complex, but centers largely on the purchase of a business, MNW Partners LLC, by another company, Prospect Energy Corp., for about $3.3 million. One of the clauses in the purchase agreement stipulated that neither party would “institute, maintain or prosecute” any legal claim against the other.

Later, the three partners who sold MNW became dissatisfied with the deal. Going through a new entity they owned, they hired a law firm. Among their concerns was that, due to the terms of the purchase agreement, suing Prospect would expose them to being sued personally.

Attorneys for the firm investigated this important legal question. They concluded that the partners’ personal assets were legally protected from possible countersuit by Prospect.

But the law firm was wrong. When the plaintiffs went ahead with the suit in the name of their company, Prospect sued them as individuals. The trial ended in Prospect’s favor, and the three partners were ordered to pay $1,959,998 in damages for breaching the clause in the purchase agreement. The verdict was upheld on appeal.

One of the partners has now filed a legal malpractice claim against the law firm. Besides calling the work behind the attorneys’ incorrect liability claim negligent, he says the firm switched which lawyer was working on his case without telling him for more than a year.

Source: The Southeast Texas Record, “Dallas businessman seeks $2M from Arnold & Itkin for legal malpractice,” Marilyn Tennissen, Feb. 24, 2014