Legal Ethics
Los Angeles Law Firm to Pay $2.5M to Settle SonicBlue Malpractice Claim
Posted Oct 28, 2008, 10:34 am CST
By Debra Cassens Weiss
A Los Angeles law firm has agreed to pay $2.5 million to settle a malpractice claim by the trustee representing creditors in the bankruptcy of electronics company SonicBlue.
Levene, Neale, Bender, Rankin & Brill, the former counsel for the creditors committee, will pay $2.5 million and will not attempt to collect unpaid fees, the Daily Journal reports (sub. req.). However, the firm will be allowed to keep some $1 million in fees already collected. It does not admit liability in the settlement.
Levene was targeted by the bankruptcy trustee along with Pillsbury Winthrop Shaw Pittman, the former counsel for SonicBlue, for failure to disclose an alleged conflict of interest by Pillsbury.
Pillsbury was disqualified last year for failing to disclose that some of its lawyers assured three hedge funds they would be paid ahead of other creditors if SonicBlue declared bankruptcy. The trustee contends Pillsbury could have been responsible for any shortfall in payment to the hedge funds, so it would have been motivated as SonicBlue counsel to make sure they were paid in full.
The trustee had claimed Levene Neale failed to disclose the conflict and didn’t pursue claims against the hedge funds or Pillsbury. The trustee’s complaint against Pillsbury is still pending.