Posted Aug 01, 2007 04:53 pm CDT
A private equity firm’s selection of New York City bankruptcy powerhouse Weil Gotshal & Manges to handle a $245 million claim against Chicago-based Mayer Brown Rowe & Maw probably wouldn’t have been possible in the not-so-distant past.
That’s because Weil likely would have been conflicted out of representing Thomas H. Lee Partners concerning the purchase of the now-bankrupt Refco Inc. commodities brokerage, since Weil also represented Lee in the 2004 deal, reports the Wall Street Journal. However, that standard of legal ethics has changed in recent years, and appropriately so, an expert says.
Today, it’s okay for a law firm to represent a client like Lee in a malpractice case against opposing counsel in an earlier deal, so long as the same firm lawyers aren’t representing the client in both matters, according to Stephen Gillers of New York University School of Law. Having the same law firm in both matters can also be more efficient for the client, he says, because the firm “is largely up to speed on the underlying facts” the second time around.
There’s still a potential pitfall, though, the paper points out: The firm’s attorneys in the 2004 deal conceivably could be called as witnesses, but that isn’t appropriate if the firm is also counsel in the same case.
The Lee firm’s suit against Mayer Brown–which the law firm vows to defend vigorously–is detailed in an earlier ABAJournal.com post and a New York Law Journal article reprinted by Law.com. Lee is claiming that Mayer Brown helped Refco cover up earlier sham loan transactions that weren’t disclosed at the time of the purchase. The suit was filed in federal court in Manhattan.