Imagine if you thought you were limiting a fee to a maximum of $2 million but were later told the fee would be $10 million. It would be quite a shock, especially if you were relying on advice from a prestigious law firm.
That's essentially what happened to an investment entity called Red Zone when it attempted to buy Six Flags through a proxy battle. In order to make the purchase, Red Zone needed a certain amount of financial advice from UBS Securities. An amendment to the contract appeared to cap the potential UBS fee at $2 million -- and the New York office of Cadwalader Wickersham & Taft allegedly told Red Zone that it did.
Later, however, UBS sued Red Zone over the fees and was awarded $10 million.
A former partner at Cadwalader claimed that he actually told Red Zone not to accept the contract amendment because it might not cap the UBS fee. Red Zone claimed that it received the opposite advice.
Red Zone was actually awarded $17.2 million in this case. However, the New York State Court of Appeals (that state's highest court) vacated that award in 2016 and the case was up for a new trial.
Last month, a judge ruled that Cadwalader would not be allowed to present expert witnesses on the issue, as the question of what advice was given wasn't "outside the ken of the typical juror."
That adverse ruling may be what convinced Cadwalader to settle, which it recently did for $22 million.
Legal malpractice can include giving bad advice
As we've discussed before on this blog, any legal malpractice claim must show that the attorney or firm had a specific duty to the client, that they failed in that duty and that financial damages were incurred.
Here, Cadwalader had a duty to exercise reasonable skill and knowledge when advising the client. The advice Red Zone claims to have received didn't hold up against a lawsuit, and Red Zone incurred a $10-million bill as a result. Under that understanding of the facts, the Cadwalader partner could be guilty of malpractice.
Have you been given bad legal advice that cost you money? It's possible you were the victim of legal malpractice. Have an experienced malpractice attorney evaluate your situation.