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Keywords

lawsuitlawyerappealmalpracticetrustlegal malpractice

Related Cases

Peterson v. Katten Muchin Rosenman LLP, 792 F.3d 789, 92 Fed.R.Serv.3d 249, 61 Bankr.Ct.Dec. 63

Facts

The trustee of several insolvent investor funds filed a lawsuit against Katten Muchin Rosenman LLP, alleging that the firm committed legal malpractice while advising the funds on loan transactions with entities controlled by Thomas Petters. The funds loaned money under the pretense that it was secured by inventory from Costco, but in reality, the funds were being misled by Petters, who was running a Ponzi scheme. The trustee contended that Katten failed to inform the funds of the risks involved in their arrangements, particularly the lack of direct verification with Costco and the reliance on Petters for repayments.

Issue

Did the law firm Katten Muchin Rosenman LLP commit legal malpractice by failing to adequately advise the funds about the risks associated with their loan transactions?

Rule

A transactions lawyer has a duty to inform clients about the risks associated with different legal structures and to provide legal advice that enables clients to make informed business decisions.

Analysis

The Court of Appeals found that the district court improperly dismissed the complaint by relying on a factual perspective that was not appropriate under Rule 12(b)(6). The court emphasized that the trustee's complaint alleged that Katten failed to advise the funds about the risks of their arrangements with Petters, particularly the lack of direct verification and the potential for fraud. The court noted that a competent transactions lawyer should have recognized the risks and provided appropriate legal advice to protect the funds' interests.

The Court of Appeals found that the district court improperly dismissed the complaint by relying on a factual perspective that was not appropriate under Rule 12(b)(6).

Conclusion

The Court of Appeals reversed the district court's dismissal of the complaint, holding that the trustee's allegations were sufficient to state a plausible claim for legal malpractice. The case was remanded for further proceedings.

The Court of Appeals reversed the district court's dismissal of the complaint, holding that the trustee's allegations were sufficient to state a plausible claim for legal malpractice.

Who won?

The trustee prevailed in the appeal because the Court of Appeals found that the allegations in the complaint were sufficient to support a legal malpractice claim against the law firm.

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Keywords

Related Cases

Peterson v. McGladrey & Pullen, LLP, 676 F.3d 594, 67 Collier Bankr.Cas.2d 418, 56 Bankr.Ct.Dec. 79, Bankr. L. Rep. P 82,195

Farese v. Scherer, 342 F.3d 1223, 16 Fla. L. Weekly Fed. C 1000

Rubio v. BNSF Railway Co., 548 F.Supp.2d 1220

Walker v. State Farm Mutual Automobile Ins. Co., 321 So.2d 833 (Mem)

McCoy v. Court of Appeals of Wisconsin, Dist. 1, 486 U.S. 429, 108 S.Ct. 1895, 100 L.Ed.2d 440, 56 USLW 4520