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The law firm Jaffe Raitt Heuer & Weiss P.C. can’t avoid a claim of legal malpractice related to advice it provided to a private investment firm and its executives over multiemployer pension fund liability ( Cohen v. Jaffe Raitt Heuer & Weiss, P.C. , 2017 BL 227043, E.D. Mich., No. 2:16-cv-11484, 6/30/17 ).
There are issues of fact on whether the law firm failed in its duty of care in providing legal advice as well as issues related to causation and damages, Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan held June 30. In his order, Steeh denied the parties’ cross motions for summary judgment, allowing SSL Assets LLC and its executives to move forward to trial against the law firm.
SSL Assets alleged that Jaffe provided faulty legal advice that ultimately made the investment firm liable for $3.9 million in withdrawal liability under the Employee Retirement Income Security Act and made it invest several millions in supporting a newly acquired company.
An employer that participates in a multiemployer pension plan and withdraws from the plan is liable for its share of any underfunded benefits, also known as withdrawal liability. At issue in this case is the concept of controlled group liability under ERISA, whereby other entities could be responsible for the withdrawal liability of a plan sponsor based on common ownership.
SSL Assets, an affiliate of CoBe Capital LLC, and its executives are in the business of buying and turning around distressed businesses. In 2012, the executives moved to buy LSI Corp., a company that participated in a multiemployer pension plan that at the time was underfunded.
One of the SSL Assets executives approached Jaffe seeking advice on how to avoid exposure to LSI’s $3.9 million liability. The law firm advised that SSL Assets and its executives had no direct exposure for the liability.
In their request for summary judgment, the parties disagreed on whether a client-attorney relationship existed. Steeh held that the executives had a client-attorney relationship with Jaffe. However, the judge wasn’t able to decide whether Jaffe and three of its attorneys represented SSL Assets.
Steeh further considered the parties’ arguments in relation to the duty of care in providing legal advice to the executives. However, he was unable to decide because there were disputed issues of fact.
Stinson Leaonard Street LLP and Mark S. Baumkel represent SSL Assets and the executives. Plunkett & Cooney represents Jaffe Raitt
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