Reed Smith Can Sue Other Law Firms for Contributory Negligence in Malpractice

01/28/13

On last Thursday, the Appellate Division, First Department, gave a ruling where a law firm, accused of malpractice in advising over a matter can bring lawsuits for contributory negligence against other law firms which also participated in the same work, but were not sued by the original plaintiff.


In the instant case, Millennium Import, a client of Reed Smith had sued the firm for malpractice for bad or erroneous legal advice. The company claimed that a breach of contract, which the company had to settle for a sum of $83 million, had resulted from the bad legal advice given by Reed Smith.

Subsequently, Reed smith brought third-party claims against three other law firms – Barack Ferrazzano Kirschbaum & Nagelberg, Berry & Perkins, and Fross Zelnick Lehrman & Zissu – for contributing in the negligence from which the claims of malpractice arose.

However, last year, Manhattan Supreme Court Justice Milton Tingling, had dismissed Reed Smith's third-party claims.

On appeal, the Appellate Division, First Department reversed the ruling by Tingling and held that Reed Smith had the right to sue the other law firms who had advised in the same matter, for contributory negligence.

Writing for the appellate court, Justice David Saxe observed, “Where several law firms allegedly participated in giving the advice that led to the plaintiff's damages, the sole law firm named as a defendant must be entitled to bring the other law firms in as parties t the action to ensure that it has the ability to fully protect its rights.”

In the case, Barrack Ferrazzano represented LVMH, the parent company of Millennium, and Reed Smith prepared its response to the party alleging breach of contract after conferring with Ferrazzano. Then Millennium had Berry & Perkins prepare another response in follow up to the same thread of communications after the other party openly alleged breach of contract. That response was shared with both Reed Smith and Ferrazzano. The response included a legal analysis by Fross Zelnick, another firm which represented LVMH, the parent company of Millennium.

However, the response was insufficient, Millennium lost the case and was found to have breached a contract with the winery which sued Millennium, and ultimately Millennium had to pay $83 million to settle.

Then Millennium sued Reed Smith for malpractice.

Reed Smith held that it had a defense of comparative negligence as Millennium and its agents had contributed to the damages. Then Reed Smith brought third-party claims against the other law firms.

Justice Tingling, at the court of first instance, dismissed Reed Smith's third-party claims as they were duplicative of Reed Smith's defense of comparative negligence.

However, the First Department disagreed and observed, “It is well settled that an attorney sued for malpractice may assert a third-party claim against another lawyer who advised plaintiff on the same matter.”

The case is Reed Smith v. James Berry, Appellate Division, First Department, Nos. 7816, 7816A, 7817, 7817A, 7818 and 7818A.