Big law firm faces trial in suit alleging negligence
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.
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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.
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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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