Top Defense Results: McHale v. Silicon Valley Law Group

When a jury decided that Silicon Valley Law Group wasn't liable for allowing a client to enter into a transaction with a fraudulent investor, defense attorneys at Lerch Sturmer LLP hoped the verdict would sent a message. "You can't blame attorneys for every bad decision that follows on a transaction in question," said lead trial counsel Jerome N. Lerch.

"Lawyers advise," added co-counsel Debra S. Sturmer. "The clients make decisions."

Silicon Valley Law Group's former client Janet Dashiell and her company, 1031 Advance, went bankrupt after she sold her business to Edward H. Okum, later convicted of running a Ponzi scheme. Dashiell's company, which used real estate transactions to minimize capital gains taxes, went bankrupt in the process.

The bankruptcy trustee for the failed company - represented by New York-based lawyers at Golenbock Eiseman Assor Bell & Peskoe LLP - filed suit against Silicon Valley Law Group for negligence, asking a jury for $36 million plus costs and fees.

The trustee claimed the firm failed to stress the importance to Dashiell of attaining financial statements from Okum before selling the business to him. McHale v. Silicon Valley Law Group, CV10-4864 (N.D. Cal., filed Oct. 27, 2010).

But Silicon Valley Law Group's attorneys argued that the firm had been trying to put together the deal in good faith.

The firm had conducted due diligence, asking for information four times, it claimed. But the client, seeing the promise of $2.5 million and a big employment opportunity at the larger company, wanted to move forward more quickly. "She pressed to get the deal done and, in our view, she said, 'I want this deal to go through, stop,'" Lerch said.

"They didn't get further information, deal goes through, and, lo and behold, after four months the scheme is unraveled and Dashiell's company is bankrupt."

Trustee attorney Michael Devorkin said he decided not to appeal because of the difficulty in overturning a factual finding. He also noted that it was the last claim in the bankruptcy - his firm already recovered $137 million, including $27 million from other law firms, he said.

"We respect the jury's verdict, but we have a difference of opinion about the high standard we think lawyers should be held to," Devorkin said.

- HADLEY ROBINSON

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