Trials & Litigation

Judge OKs malpractice suit over law firm's successful fight to uphold client's postnuptial agreement

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A New York trial court has OK’d a malpractice suit against Phillips Nizer, over the law firm’s handling of a divorce case that generated $1.4 million in legal fees for work done by 23 attorneys and 16 other professionals.

At issue is a 2000 postnuptial agreement that the firm helped negotiate and draft for client Elizabeth Berardi. It granted her a 49 percent interest in companies controlled by her husband, who operates bus companies. However, the pact did not specify whether she could liquidate her interest and, if so, how she could do so, reports the New York Law Journal (sub. req.).

A divorce ensued within five years, and Berardi again retained Phillips Nizer. Her husband, Eugene Berardi, challenged the postnup and she fought against its invalidation, winning the legal battle. However, unbeknownst to her, agreements made before 2000 with former shareholders and business partners in her husband’s companies limited the liquidity of her own interest, Elizabeth Berardi alleges in her complaint against the firm.

Although one Phillips Nizer lawyer learned of the restrictions in 2005, that attorney didn’t communicate this information to the senior partner on the case in a timely manner, Berardi alleges. If properly advised, the plaintiff says, she would have agreed to set aside the postnuptial agreement and sought an equitable distribution and a cash buyout from the marital estate.

She alleges that the law firm committed malpractice by defending the validity of the postnup without sufficient facts, asserts an additional claim for negligent supervision and further contends that there was a conflict of interest involved in the firm’s defense of a document that was drafted by Phillips Nizer, the legal publication reports.

Berardi also alleges that, under the circumstances, she was overbilled for the legal work that was performed by Phillips Nizer, which represented her until 2010.

Although unsuccessful in its motion to dismiss the case, the 70-attorney law firm is seeking $741,695 in a counterclaim for unpaid legal fees, and may appeal, partner George Berger of Phillips Nizer told the New York Law Journal on Monday.

“We don’t feel the judge dealt with the majority of the firm’s arguments on the merits,” he said.

In its motion, the firm asserted the statute of limitations as a defense and said Berardi’s complaint is legally insufficient and contradicted by documentary evidence. The firm called it a ploy to avoid payment for its legal services “masquerading” as a malpractice action.

Partner Theresa Maguire of Pollock & Maguire represents Berardi.

“We believe that Phillips Nizer’s own documents will demonstrate that they pursued this minority shareholder status for her but didn’t recognize what the ramifications of that status would be, until after they achieved the result,” Maguire told the New York Law Journal.

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