Legal Malpractice

Receiver or Trustee in Legal Malpractice Case?

By (Andrew Lavoott Bluestone)

Law.Com reports on a legal malpractice case  involving Smith, Gambrell & Russell which may well turn on whether the plaintiff in the action is simply a trustee or a receiver of the plaintiff company.  As one reads this scandal filled case, which includes the suicide of the plaintiff company's former CEO,Kirk S. Wright,who was awaiting sentencing on Federal Charges the importance of this distinction comes to light:

"Smith, Gambrell & Russell's answer to an $80 million malpractice action filed against the firm by the bankruptcy trustee for one of its former clients takes an unusual, philosophical tack, starting with an excerpt from a recent decision from the 7th U.S. Circuit Court of Appeals.. Lamar "Mickey" Mixson at Bondurant, Mixson & Elmore, who represents Smith Gambrell and co-defendant C. Gladwyn Goins, a former counsel in the firm's Washington, D.C., office, said in an interview that Perkins is only a trustee. While with the firm, Goins served as outside general counsel to IMA.

By being the trustee, Mixson said, Perkins "stands in the shoes of the corporation" -- a corporation that, according to the trustee, ran a Ponzi scheme. The law doesn't allow lawbreakers to recover financially, Mixson noted, adding, "He can't recover any more than the corporation can."

Not so, countered Robert E. Shields, Perkins' lawyer at Doffermyre, Shields, Canfield & Knowles. Shields pointed to the wrongful conduct of IMA principal Kirk S. Wright, who killed himself while awaiting sentencing for his federal fraud and money laundering convictions.

Shields said Wright's actions can't be attributed to the company or Perkins because other IMA officers and directors were not aware of and did not participate in Wright's crimes.

"He was not the alter ego for the company in these circumstances," Shields said.

Shields added that Perkins isn't just the trustee -- he's also the receiver, which means he can recover.

"It was in his role as a receiver that he filed this suit," Shields said, explaining that Perkins first was appointed receiver when the case was initiated in Fulton County Superior Court, and again in the federal action filed by the Securities and Exchange Commission. "The receiver represents the creditors" and doesn't stand in the shoes of the company, he said.

Full post as published by New York Attorney Malpractice Blog on September 16, 2008 (boomark / email).