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Big law firm faces trial in suit alleging negligence

 

Andrew Wolfson and Jason Riley The Courier-Journal
The Courier Journal
February 7, 2011 ET

When Kentucky entrepreneur Joe Shane landed Wal-Mart as a customer for a wholesale supermar­ket supply dis­trib­utor in 1993, he thought it would be the deal of a lifetime -- lit­erally.

An avid endurance athlete, Shane had met Wal-Mart chairman Rob Walton on the Ironman Triathalon circuit. In exchange for secur­ing the Wal-Mart account though his relation­ship with Walton, Shane said he struck a handshake deal with the dis­trib­utor's chairman in the parking lot of Wal-Mart's headquar­ters.

The dis­trib­utor, St. Louis-based Bunzl Dis­tri­bution USA Inc. was to pay him commis­sions for as long as it did busi­ness with the retail gi­ant, Shane said. For sev­en years, it de­liv­ered -- paying him $1.4 million. But when Bunzl reduced his commis­sion in 2000, and lat­er terminated the con­tract entirely, Shane struck back, hiring the huge law firm Frost Brown Todd to enforce the oral agree­ment.

Yet, for reasons still in dis­pute, the attor­neys failed to cite, in the lawsuit, the oral con­tract Shane says was reached in the parking lot until a dead­line had passed and it was too late.

And now, in a sep­a­rate trial sched­uled to be­gin today in Jeffer­son Circuit Court, Shane is ask­ing that Frost Brown Todd pay a se­vere price for its al­leged neg­ligence: $93 million. That includes about $71 million in fu­ture commis­sions he says he would have received had the suit against Bunzl been pursued com­pe­tently.

Bunzl, which makes paper and plas­tic packaging, has made about $2.5 billion from the deal Shane negotiated, including $608 million last year alone, accord­ing to court records.

If Shane pre­vails and gets the dam­ages he's seeking, it would dwarf the largest ver­dict ev­er returned in a le­gal malpractice case in Kentucky, which was $5.1 million, accord­ing to the Kentucky Trial Court Review, a publication for lawyers and in­surers.

Out­side lawyers for Frost Brown Todd didn't respond Monday to requests for com­ment. The firm's chairman, John R. Crockett III, said it would be inappropriate to com­ment dur­ing trial.

Shane's current lawyer, William McMurry, said nei­ther he nor his client, who lives in Livingston County, could com­ment until af­ter the end of the trial.

In court papers, the law firm has offered sev­eral ex­pla­nations for its fail­ure to mention the oral con­tract before it was too late to include in Shane's suit. For starters, the firm says the case couldn't have been won based on that con­tract.

But McMurry said citing that deal was the only way Shane could have pre­vailed -- and he says he has found smoking guns to support that claim, including an internal law firm doc­u­ment in which one of Frost Brown Todd's lawyers acknowl­edged the firm "screwed up."

Shane, 62, also has an affidavit from Bunzl's for­mer chairman, Paul Lorenzi­ni, who in 2006 confirmed that he promised in the handshake agree­ment to give Shane commis­sions for as long as the compa­ny did busi­ness with Wal-Mart.

Frost Brown Todd, howev­er, said Lorenzi­ni had been fired by then and hated the compa­ny because of it.

Both sides have argued in court papers that the suit turns on whether lawyers may be held account­able for errors of judg­ment.

Frost Brown Todd, which today has 450 lawyers in 11 offices in five states, con­tends the mere fact that a court rules against a po­sition tak­en by a lawyer doesn't mean he was nec­essarily neg­ligent, or even wrong.

But McMurry has noted that the Kentucky Supreme Court has specif­ically rejected an "attor­ney-judg­ment" exception for malpractice cases. McMurry says lawyers should not be pro­tected in ways that doctors and oth­er pro­fes­sion­als are not.

Uni­versity of Kentucky law pro­fessor William Fortune said lawyers can make mis­takes of judg­ment that are "clearly unreasonable" and should be pun­ished. But he added that there is of­ten more than one strategy to try a case and that it's easy to "look at it af­ter the fact" and decide the attor­neys should have done some­thing differ­ently.

The events leading to the dis­pute began in Bentonville, Ark., on Sept. 30, 1993, when Shane said he asked Lorenzi­ni if he would pay him a commis­sion for getting Wal-Mart's busi­ness for as long as the retail­er did busi­ness with Bunzl.

"He said, 'Absolutely,' " Shane said in court pleadings. "I shook his hand."

The amount of the commis­sion was about 1 per­cent, depending on the prof­it mar­gin of the item sold, accord­ing to court records.

Bunzl paid Shane as promised until 2000 but then reduced his cut. Shane sued for breach of con­tract, as well as on oth­er grounds, and in 2001 Bunzl terminated the deal.

In its orig­inal suit against Bunzl, Frost Brown Todd didn't mention the oral con­tract, and in­stead cited what it dubbed a "letter agree­ment" au­thored by Bunzl in 1995. The written con­tract didn't mention any­thing about the con­tract con­tin­u­ing as long as Bunzl and Wal-Mart did busi­ness.

U.S. Dis­trict Judge Charles R. Simp­son III dismissed the breach of con­tract claim, saying it failed to spec­ify how the con­tract was breached, giv­en that the written agree­ment said noth­ing about its duration.

Bart Greenwald, Shane's lawyer at Frost Brown Todd, filed an amended complaint, still not mention­ing the oral con­tract but saying the breach was based on Bunzl's "conduct and promises" before and af­ter the 1995 written deal.

Simp­son again dismissed the claim, for the same rea­son.

Greenwald tried to file yet an­oth­er claim, this time specif­ically citing the oral con­tract, but by then it was too late. The time pe­riod for amending the suit had expired, accord­ing to a Simp­son deci­sion affirmed by the U.S. 6th Circuit Court of Appeals.

.

In 2008, Shane hired McMurry and sued the law firm for its al­leged mis­take.

"FBT's fail­ure to plead the oral con­tract was unquestionably the result of a lack of reasonable com­pe­tence -- a fact that FBT it­self rec­ognized, only too late," McMurry has said in pleadings.

.

In its defense, Frost Brown Todd says in court doc­u­ments that it made a "strate­gic deci­sion" not to mention the oral con­tract in the first and sec­ond complaints.

The suit would have been dismissed had it been filed on those grounds, the firm said, in part because of a rule requiring such con­tracts to be put into writing.

But accord­ing to an internal law firm doc­u­ment, when Bunzl raised the same argu­ment in the under­lying case, Greenwald said it was "so wrong that it is laugh­able."

Frost Brown Todd also has claimed that when Shane briefly abandoned the firm, then rehired it in 2003, he signed a re­lease promis­ing not to sue it for any work it had done pre­vi­ously.

But Jeffer­son Circuit Court Judge McKay Chauvin ruled in December that the waiv­er was invalid because ethics rules require clients to sign such re­leases only when rep­resented by "independent counsel -- not the firm he is ab­solving of liability.

Chauvin said Shane ei­ther had no lawyer when he signed it or was rep­resented by Frost Brown Todd, which could not be consid­ered "independent."

Reporter Andrew Wolf­son can be reached at (502) 582-7189. Reporter Ja­son Riley can be reached at (502) 584-2197.

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Source: The Courier Journal

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Big law firm faces trial in suit alleging negligence
Andrew Wolfson and Jason Riley The Courier-Journal
credit: Matt Stone/cj
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Plantiff Joe Shane, right, waits in court with his attorney William McMurray during a break in jury selection. Shane is suing the lawfirm of Frost, Brown and Todd for $90 million, alledging malpractice. (By Matt Stone, The Courier-Journal) Feb.7, 2011
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