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Wednesday, March 11, 2009

BigLaw Firm Ponies Up $10 Million to Settle Malpractice Suit

BigLaw Firm Ponies Up $10 Million to Settle Malpractice Suit
The San Francisco Recorder by Amanda Royal - March 11, 2009

SAN FRANCISCO, CA - Pillsbury Winthrop Shaw Pittman has reached a $10 million settlement in a malpractice dispute with bankrupt client SonicBlue, a court filing Tuesday shows. The firm will pay $7.6 million and forgo $2.4 million in outstanding fees to SonicBlue's estate, according to the filing, which awaits approval by a bankruptcy judge at a hearing slated for March 31. SonicBlue's estate had sued Pillsbury for malpractice and breach of fiduciary duty, demanding the firm return $4.2 million in fees and pay $11 million in damages. "The creditors committee is pleased with the terms of the settlement," said Ron Oliner, a partner at Duane Morris who represents the creditors committee in the bankruptcy.

Pillsbury General Counsel Ronald Van Buskirk declined to comment beyond pointing at language in the settlement saying the deal had been reached to the parties' mutual satisfaction. Pillsbury represented the SonicBlue estate from the filing of its bankruptcy petition in 2003 until 2007 when it came to light that the firm had failed to disclose to the court a 2002 pre-bankruptcy promise to creditors. The firm promised in a letter to three hedge funds, which had invested in a $75 million bond issue, that they would be repaid in full should SonicBlue enter bankruptcy protection. Pillsbury attorneys later described the letter as a "scrivener's error." The hedge funds threatened to sue for repayment in September 2006. In a 2005 internal e-mail sent by Pillsbury partner William Freeman about the retainer SonicBlue had paid, he told partner Craig Barbarosh that the firm had "major exposure here." Citing the potential conflicts, the bankruptcy judge removed Pillsbury from the case in March 2007. In early 2008, the bankruptcy trustee, Dennis Connolly of Alston & Bird, sued Pillsbury over the undisclosed promise, as well as a failure to disclose that it had received payments from SonicBlue within 90 days of the bankruptcy filing. Any firm that participates in a bankruptcy must disclose such "preference payments" because they can represent a conflict of interest and sometimes must be returned to distribute to other creditors.

The settlement comes as a result of mediation in February between the parties, which was ordered by Judge Marilyn Morgan of the U.S. Bankruptcy Court for the Northern District of California in San Jose. She denied Pillsbury a jury trial in November, and had set a bench trial for this fall in the event mediation failed. Howard, Rice, Nemerovski, Canady, Falk & Rabkin litigation chairman Bernard Burk, who represents Pillsbury, referred comment to Pillsbury's Van Buskirk. Another firm involved in SonicBlue's bankruptcy, Levene, Neale, Bender, Rankin & Brill, settled for $2.5 million in November, and forfeited $2.2 million in fees it was owed. The firm, which was accused of failing to disclose preference payments, did not have to pay back $1.2 million in fees it had already collected. The court-appointed trustee, Connolly of Alston & Bird, is out of the office for the week and could not be reached for comment. The SonicBlue estate paid out about $75 million to creditors last fall after a liquidation plan was approved.

10 comments:

smiling said...

So sad to see some of the biggest, and money hungry animal attorneys, taking a hit. LOL. I love it.

Foley Sq. Court Officer said...

How Sweet It Is!...the buzz is that these skunks will be taking a big hit in New York also...How Sweet It Is! Don't you just love it when the ethically corrupt attorneys get nailed and are revealed to the world for the whores that they are! But when a white shoe law firm gets nailed it's too much to hope for!

Anonymous said...

Do the partners have to kick in money on this deal? It couldn't happen to a nicer bunch of douchebags. We want to see more of this.

D'oh Boy said...

It's fun to pick on the Pillsbury Dough Boy since they have ripped off so much Dough, Boys.

Anonymous said...

The Pillsbury Doughboy has taken the practice of hiring former Judges and employees of the judicial system to new levels surpassing even the old white shoe dinosaurs. This is a fertile for an investigation. The ways the waters are parted are truly amazing!

Anonymous said...

as a former employee I saw the way things are fixed by the Doughboys. Just one thing, they hired the former Admin Judge L.M. to open the doors. They send solicitations to all the banks undercutting the rates of all the other law firms attempting to "steal"(their word) the business, they are snakes. The US Atty would be pleased to see what he would find if they held the Doughboys up to the light.

Anonymous said...

I heard that Pillsbury was told do it or they were going to get nicked for a whole lot more! And some people would get sanctioned. The dough boys got away cheap on this one. Be advised however that there a few large mines in the waters that are due to pop up on the dough boys.

white shoe said...

a partner at Pillsbury told me that there is a vault list on the folks going from the Doughboy to cut expenses. Basking Bob Robbins maybe on the list, now no nattering people

Anonymous said...

word in the CH is that Pillsbury is going to take a big time fall. Several other legal blogs have bits and pieces of this.

DDC insider said...

Pillsbury has deep hooks in the DDC

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