Legal Malpractice

Bankruptcy Trustee's Action in Legal Malpractice against Alston & Bird

By (Andrew Lavoott Bluestone)

Law.Com reports that "Alston & Bird and and the bankruptcy trustee for one of its former clients, the beleaguered Friedman's Jewelers Inc., are on the verge of settling a suit over allegations that the firm committed legal malpractice. "

"Alston & Bird, which served as Friedman's outside general counsel from the 1990s until the company terminated their relationship in 2004, contributed to some of those troubles, according to Alan Cohen, Friedman's bankruptcy trustee. He filed a complicated adversary complaint on behalf of the Friedman's Creditor Trust against the law firm and five other defendants in the U.S. Bankruptcy Court for the Southern District of Georgia in January 2007.

The first claim is that Alston & Bird committed legal malpractice by failing to disclose material facts related to Friedman's $85 million investment in Crescent Jewelers Inc., which became irrecoverable when Crescent declared bankruptcy in 2004.

In the second claim, the trustee complains about the fees Alston charged Friedman's. He claims that Alston took $5 million in legal fees but did not give an equivalent value of services. In the third claim, the trustee alleges that Friedman's -- while it was insolvent -- paid Alston almost $700,000. That's more than the company should have paid, given its financial posture, under the Bankruptcy Code, according to the trustee.

Now, more than a year later, the parties are close to striking a deal to resolve those disputes. "

Full post as published by New York Attorney Malpractice Blog on June 10, 2008 (boomark / email).