Legal Malpractice - San Francisco, California. December, 2003
Confidential Settlement: $1,150,000

This was a legal malpractice case against a formerly large (now defunct) international firm for its failure to properly secure intellectual property rights of a group of investor lenders. The clients originally loaned $2,000,000 to a semi startup company and were to receive (as security) the company’s intellectual property, including the source code to the program under development, which was the only thing of value. The company’s attorneys undertook the process of documenting the transaction and properly recording the security. They didn’t do it correctly and when the startup eventually went into bankruptcy, the lenders discovered they were unsecured creditors. Instead of recovering most of the amounts loaned to the company, they were only able to recover pennies on the dollar. This legal malpractice case took over seven years to bring to finality because of the bankruptcy of the underlying company, and then the subsequent bankruptcy of the defendant law firm. The most challenging issue in this case (among many, many challenging issues) was that the negligent law firm claimed that the plaintiffs were not the firm’s clients and had no duty to them. The firm claimed even if it was negligent, only its client, the company who borrowed the money (which had gone bankrupt) could assert a claim. We were able to show that the history of the relationships between the Plaintiffs and the law firm led the plaintiffs to believe they could rely on the law firm for the work, even if they werent the actual clients.