By Samson Habte
June 27 — New York's highest court June 2 vacated a $17.2 million verdict that a private equity fund run by Washington Redskins owner Daniel Snyder won in a malpractice suit that accused Cadwalader, Wickersham & Taft LLP of “botching a one-page contract” ( Red Zone LLC v. Cadwalader, Wickersham & Taft LLP, 2016 BL 174808, N.Y., No. 5, 6/2/16 , modifying 988 N.Y.S.2d 588, 30 Law. Man. Prof. Conduct 433).
The New York Court of Appeals said a trial judge erred in dismissing Cadwalader's statute of limitations defense, and in deciding there weren't any triable questions of fact as to whether the firm performed negligently when it represented Snyder in connection with his private equity firm's efforts to acquire Six Flags Inc. and its theme parks.
The short memorandum opinion resolved an appeal that generated more than 300 pages of appellate briefing and nearly 3,000 pages of exhibits.
Snyder's private equity firm, Red Zone LLC, accused Cadwalader of botching a contract purportedly intended to cap at $2 million the fees UBS Securities LLC was to receive for acting as Red Zone's financial adviser during Red Zone's attempt to acquire Six Flags.
After the Six Flags transaction, UBS sued Red Zone and won a ruling that it was entitled to $10 million in fees.
Red Zone then sued Cadwalader for malpractice. The law firm argued the complaint was filed too late because its representation of Red Zone in connection with the UBS transaction ended in 2005—six years before the company filed suit.
But a trial judge and appellate panel said the continuous representation doctrine tolled the three-year statute of limitations.
“Although defendant drafted the [contract] in 2005, it provided legal advice throughout the UBS litigation from 2007 through late 2010,” the appellate court said. “Although plaintiff was represented by other counsel in the UBS litigation, plaintiff and its trial counsel continued to confer with defendant and share privileged documents regarding its defense strategy.”
The high court disagreed, saying the lower tribunals failed to analyze the continuous representation issue properly.
“Specifically,” it said, “triable questions of fact exist regarding whether the statute of limitations was tolled by the continuous representation doctrine in light of: the significant gap in time between the alleged malpractice and the later communications between the parties; the changed nature of the alleged legal representation of plaintiff by defendant; the absence of any clear delineation of the period of such representation; and defendant's submission of affidavits disclaiming any mutual understanding of legal representation after 2005.”
The court of appeals said the evidence also suggested that “material triable questions of fact exist regarding whether defendant failed to exercise the ordinary reasonable skill and knowledge commonly possessed by members of the legal profession.”
In an affidavit, the former Cadwalader lawyer who advised Red Zone during its negotiations with UBS claimed he repeatedly warned Snyder about flaws in the contract that was intended to limit the fees Red Zone would pay UBS.
Snyder, in his own affidavit, used the phrase “outright lie” four times to rebut those claims from former Cadwalader lawyer Dennis J. Block.
Snyder and Red Zone further argued that Block's statements in his affidavit were contradicted by prior deposition testimony he provided during Red Zone's unsuccessful litigation against UBS over the investment bank's fees.
The court of appeals said the appellate division erred in determining that Block's affidavit in this case “flatly contradic[ted] his prior deposition testimony” in the UBS litigation. Accordingly, the court said Block's affidavit “should have been considered in opposition to [Red Zone's] motion” for summary judgment in this malpractice case.
David R. Marriott of Cravath, Swaine & Moore LLP, New York, represented Cadwalader, Wickersham & Taft LLP.
Jeffrey A. Jannuzzo, New York, represented Red Zone.
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Copyright © 2016 American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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