DLA Piper says Morgan, Lewis & Bockius bungled representing one-time client BDO Seidman LLP. Gibson, Dunn & Crutcher says DLA Piper should be sanctioned for articulating that fantasy. And Bingham McCutchen argues Gibson Dunn shouldn’t be allowed in the case at all.
The firms are pointing fingers at one another in a $9 million malpractice lawsuit brought by BDO against Morgan Lewis in the District of Columbia Superior Court. The Chicago-based accounting and consulting firm accuses Morgan Lewis of professional negligence, breach of contract, breach of fiduciary duty, fraud and constructive fraud. BDO argues that, over a period of several years, Morgan Lewis breached its professional obligations to BDO “with disastrous results.” The $9 million accounts for the fees that BDO paid to Morgan Lewis. BDO, which is represented by Lucinda Bach, a Washington partner at DLA Piper, has also asked for as-yet-uncalculated damages.
Morgan Lewis has moved to dismiss the case and called for sanctions to be levied against BDO and DLA Piper. “We believe the matter is entirely without merit,” said James Fogelman, a Gibson Dunn partner in Los Angeles who leads the team representing Morgan Lewis.
In a complaint filed Dec. 30, 2009, BDO accuses Morgan Lewis of breaching its professional obligations in 2000 when it was both serving as outside counsel to BDO and advising the managers of the Tax Solutions Group, a BDO subsidiary. The group’s tax products made millions for BDO and the tax group’s managers. The three managers were BDO’s then-chairman, Denis Field, and two members of its board of directors, Charles Bee and Adrian Dicker.
The fortunes of the tax group began to darken in December 2000, when the Internal Revenue Service served BDO with a notice that some of the tax group’s offerings were actually illegal tax shelters. In 2002, the U.S. Department of Justice launched an enforcement action against BDO. And last year, Bee pleaded guilty to conspiracy to defraud the IRS, tax evasion and perjury, while Dicker pleaded guilty to conspiracy to defraud the IRS and tax evasion. Field and six others were indicted on similar charges in June.
BDO’s complaint aims to shift some of the cost of this debacle to five current and former Morgan Lewis lawyers who advised the tax group: Charles Engros Jr., who manages the firm’s New York office; Paul Vogt, now general counsel at DMG Information; Miriam Fisher, a Morgan Lewis partner in Washington; Melvin Lefkowitz, now a partner at Hogan Lovells; and William Gardner, who retired from Morgan Lewis in 2007.
The complaint alleges that the Morgan Lewis lawyers knew the tax products exposed BDO to criminal and civil liability but nevertheless negotiated contracts that gave Field, Bee and Dicker 30 percent of the tax group’s profits on top of their BDO compensation and obligated BDO to indemnify them against all claims arising out of the group’s work.
In its Feb. 9 motion to dismiss, Morgan Lewis called the lawsuit a “sham” and contended it only advised Field, Bee and Dicker on a few minor questions — none of which involved the questionable tax products. “There was nothing that Morgan Lewis knew about to warn BDO concerning BDO’s own conduct. … There was nothing more BDO needed to know,” Fogelman wrote.