A New York law firm sued in connection with a business deal gone awry, and accused of aiding in a scheme to defraud, saw the case against it dismissed thanks to a strategic and fervent defense waged by Goldberg Segalla partner Danielle N. Malaty.
Heard in the Northern District of Illinois, the case stemmed from a complaint by a plaintiff who claimed the target defendant — a wealthy investor — led an alleged racketeering scheme to defraud him and breach fiduciary duties.
The plaintiff sought funding for a business expansion. The defendant was to reimburse more than a half-million dollars in earnest money initially paid by the plaintiff as assurance for receipt of a letter of credit totaling $4.5 million. The plaintiff claimed he was repeatedly misled to believe financing would be provided, adding he was induced by means of influence and intense pressure to release the funds.
The law firm represented by Goldberg Segalla acted as a broker for the transaction. The plaintiff alleged the firm must have known about the investor’s actions since it engaged with the defendant prior to the transaction. The plaintiff also claimed the firm knew the investor did not personally possess the financial wherewithal to furnish him with multimillion-dollar financing.
The plaintiff’s claims were based on a theory that the firm’s failure to discredit the target defendant’s financial position while brokering the deal was tantamount to racketeering, conspiracy to commit fraud, and conspiracy to violate the Racketeering Influenced and Corrupt Organizations Act, commonly known as RICO. The plaintiff also theorized the law firm had to be aware of the investor’s alleged racketeering by mere virtue of its attorney-client relationship.
In all, the plaintiff filed a 10-count complaint against six defendants that included such claims as civil RICO and civil RICO conspiracy, fraud and conspiracy to commit fraud, breach of contract and unjust enrichment — all relating to the alleged scheme to defraud him.
In addition to the earnest money paid by the plaintiff, the suit also sought compensatory damages sustained by the defendants’ alleged wrongdoing, at an amount to be proven at trial including interest, as well as $1 million dollars in punitive damages and attorney fees.
Danielle — a Chicago-based partner in Goldberg Segalla’s Management and Professional Liability, and Employment and Labor practice groups — filed a motion to dismiss, scathingly refuting the plaintiff’s claims. She asserted the plaintiff’s complaint lacked any discernable pattern of racketeering. She also argued the plaintiff failed to show our client undertook services on behalf of the alleged enterprise, nor in excess of its individual self-interests.
Citing the help she received from Matthew S. Marrone, Goldberg Segalla’s Management and Professional Liability vice chair, Danielle also asserted the plaintiff’s complaint was silent as to any purported conspiracy to commit fraud, conversion, or RICO violation.
Following Danielle’s motion, the plaintiff amended his complaint, with his counsel giving pause to advancing her client’s theories. Thus, the amended complaint reframed the allegations against the law firm as “aiding and abetting.” In response, Danielle filed another motion to dismiss, arguing the facts of the case did not allow the plaintiff to suggest Goldberg Segalla’s client performed any wrongful act, was aware of its role as a part of the overall scheme, and knowingly and substantially assisted the principal violation.
Tipping the scales in the favor of our client was Danielle’s statute-of-limitations argument. In a final motion to dismiss, Danielle argued the Illinois statute was lacking in language restricting its application to legal malpractice claims or claims brought by an attorney’s client. Furthermore, the plain language of the statute directs that the two-year limitation applies to all claims against an attorney arising out of acts or omissions in the performance of professional services, and not just legal malpractice claims or claims brought against an attorney by a client.
Ultimately, Goldberg Segalla was able to bring closure to the case since each of its motions confronted the plaintiff’s flaws in his theory of liability, and our client was dismissed with prejudice.