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Legal Ethics

Lewis Brisbois Can’t Use SLAPP Law as Shield Against Ex-Client’s Malpractice Suit

Posted Jul 22, 2010 3:35 PM CDT
By Martha Neil

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A law firm known for its insurance expertise has arguably now made a bad situation worse--twice--by litigating insurance-related issues.

Sued for malpractice by ex-client Kmart Corp., Lewis Brisbois Bisgaard & Smith invoked the protection of a California civil rights statute, contending that its effort to seek a declaratory judgment on behalf of another client fell within the arena of safeguarded public participation, reports the National Law Journal.

But a state appeals court wasn't persuaded, not only nixing the law firm's claim that the malpractice suit was barred by California's law against so-called SLAPP actions (strategic lawsuits against public participation) but awarding costs to Kmart.

The discount retailer is seeking $13 million in a malpractice case concerning the law firm's earlier representation of both Kmart and its carrier, National Union Fire Insurance Co., in a case brought by two men injured in a vacant store.

They won a verdict of $26.4 million in 1998, which had grown to roughly $35 million, with interest, by the time it was affirmed on appeal. National Union had a policy limit of $25 million and Kmart by then was bankrupt, according to the National Law Journal. So Lewis Brisbois sued another Kmart insurer, Liberty Mutual, seeking a declaratory judgment that it was responsible for the additional $9 million or so.

It appears that this declaratory judgment suit was successful only in limiting National Union's coverage to $25 million, not in obtaining the $9 million from Liberty Mutual. Hence, Kmart, which has been back in the black for years, sued Lewis Brisbois for malpractice. The ex-client contends the law firm breached its duty to Kmart by helping National Union limit its liability to $25 million, the legal publication recounts.

In a written statement, Lewis Brisbois says it is disappointed with Monday's ruling (PDF) by California's 2nd District Court of Appeal. "The firm believes its conduct was appropriate," it states, "and will continue to aggressively defend against the allegations."

Related coverage:

Bloomberg (Feb. 2010): "Kmart’s Former CEO Must Pay More Than $10 Million"

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