Articles By Topic
By Topic: Legal Malpractice
From Vol. 5 No.42 (Nov. 9, 2012)
A perennial question in the case of hedge fund frauds is: How wide is the scope of civil liability? A hedge fund manager that engages in fraud is almost definitely liable civilly, but frequently has few or no assets to satisfy a judgment. (A criminal conviction of a manager that engages in fraud may offer symbolic satisfaction to investors, but cannot make investors whole.) On the other hand, the chain of culpability connecting a hedge fund service provider to a fraud is often attenuated, but service providers usually remain robustly solvent even after a client is exposed as a fraud. Therefore, in the wake of hedge fund frauds, investors have sued service providers (e.g., law or accounting firms) in an effort to recoup losses. See “SEC Receiver for Arthur Nadel’s Scoop Capital Hedge Funds Moves to Settle Malpractice Claim Against Law Firm Holland & Knight,” The Hedge Fund Law Report, Vol. 5, No. 36 (Sep. 20, 2012). Investor claims against hedge fund service providers are often tenuous, but offer a real possibility to collect on any judgment. A recent federal court decision illustrates these themes in connection with a malpractice suit brought against law firm Winston & Strawn (W&S) by the trustee of the estate of bankrupt hedge funds. This article discusses the factual background in the action; the trustee’s claims against W&S; and the Court’s decision and analysis.Read Full Article …
From Vol. 5 No.36 (Sep. 20, 2012)
SEC Receiver for Arthur Nadel’s Scoop Capital Hedge Funds Moves to Settle Malpractice Claim Against Law Firm Holland & Knight
In January 2009, hedge fund sponsor Arthur Nadel disappeared, and his $300 million Ponzi scheme collapsed. Law firm Holland & Knight LLP, and one of its partners (together, H&K), had provided legal services to Nadel’s funds and management companies. A receiver for Nadel’s funds was appointed at the request of the Securities and Exchange Commission. As part of his efforts to recover funds for investors, the receiver sued H&K for malpractice. H&K has recently agreed to settle that malpractice litigation for $25 million. The receiver has asked the court supervising the receivership to approve the settlement. This article provides background on Nadel’s fraud and summarizes the terms of the H&K settlement.Read Full Article …
From Vol. 4 No.28 (Aug. 19, 2011)
Arbitration Award in Connection with an Unceremonious Departure from Oaktree Capital Management Precludes Legal Malpractice Claim Against Attorney Retained to Advise on Departure
The partnership agreements and similar governing documents of many hedge fund management companies provide that disputes among partners will be subject to mandatory arbitration, sometimes with a potential appeal to court. But that potential appeal often turns out to be a right with little force: arbitration awards are rarely overturned on direct appeal, and – as this article discusses – can even have preclusive effect in collateral litigation. See, on the former point, “A Prime Broker that Fails to Diligently Investigate the Sources of Funds in a Hedge Fund’s Margin Account May Be Jointly and Severally Liable, with the Fund and Its Manager, for Fraud by the Manager, to the Extent of Funds in the Account,” The Hedge Fund Law Report, Vol. 3, No. 47 (Dec. 3, 2010).Read Full Article …
From Vol. 1 No.1 (Mar. 3, 2008)
New York Supreme Court Orders Separate Trial on Existence of Attorney-Client Relationship between Former Hedge Fund Principal and Outside Lawyer and Firm
- Helie, former principal of hedge fund adviser Gramercy, sued Gramercy’s outside law firm alleging malpractice resulting in Helie’s receipt of less than the market value of his interest in Gramercy upon termination.
- Defendant law firm subpoenaed documents containing financial information from Gramercy.
- Question was whether enforcement of the subpoena would result in improper revelation of client confidences or secrets.
- Court held that client financial information sought by subpoena constitutes client confidences or secrets.
- Court noted that “right to part of the curtain of confidentiality must be sparingly applied.”
- Instead of deciding whether to enforce subpoena, court ordered separate trial on whether an attorney-client relationship existed between Helie and outside firm, which was a necessary element of Helie’s malpractice claim.