Legal Malpractice

Fraud and Avoidance of Fees in California and New York

By (Andrew Lavoott Bluestone)

In today's NYLJ  article by Drew Combs we see the interim outcome we see the basic outline of the attorney-client relationship gone bad.

"A California venture capitalist who has admitted to bribing New York state pension officials has sued Gibson Dunn & Crutcher over $1.3 million in fees the firm seeks for representing him during the investigation that precipitated that admission.

Elliott Broidy's lawsuit—filed March 15 in Los Angeles Superior Court—comes in response to a Gibson Dunn motion to have an arbitrator in New York resolve the fee dispute between the two parties (NYLJ, Feb. 18). Mr. Broidy wants the disagreement handled in California.

The clash stems from work done by Gibson Dunn on behalf of Mr. Broidy and his Markstone Capital Group private equity firm while both were targets of an investigation into "pay-to-play" investments made by the New York State Common Retirement Fund.

Wherever the matter is ultimately decided, Mr. Broidy also claims in his complaint that Gibson Dunn is not entitled to any legal fees because it committed fraud by failing to obtain appropriate conflicts waivers while representing him.

Mr. Broidy seeks an order compelling Gibson Dunn to dismiss the New York arbitration proceedings as well as orders preventing the firm from any further efforts to collect the $1.3 million in legal fees it claims it is owed.

At the heart of the dispute, according to Mr. Broidy's complaint, are two retainer agreements and an engagement letter prepared by Gibson Dunn in connection with the pension probe.

Under terms of the first retainer agreement, Mr. Broidy's complaint maintains, any dispute that might arise between the investor and the law firm would be submitted to arbitration in Los Angeles and California law would govern.

Mr. Broidy alleges that in April 2009, New York-based Gibson Dunn partner Randy Mastro "demanded" that Mr. Broidy sign a new retainer with the firm on his own behalf. Mr. Broidy says in his complaint that Mr. Mastro allegedly assured him that the terms of the two were otherwise the same, and acknowledges signing the new agreement."

Full post as published by New York Attorney Malpractice Blog on March 22, 2010 (boomark / email).