New England Biz Law Update
Click here to view a follow-up story, “Vindication for (H)all,” from the November 2012 issue of New England In-House.
The law firm of Choate, Hall & Stewart is accustomed to putting up a good fight from the counsel table in Boston’s Business Litigation Session.
But in the wake of a $5 million-plus legal malpractice suit filed by one of its clients, the firm now finds itself preparing to take a seat in the defendant’s chair.
On Nov. 18, plaintiff Todd McMahon filed papers in Suffolk Superior Court accusing Choate and one-time partner Lawrence H. Gennari of failing to inform him that a candidate the firm had recommended for a business partnership had previously been accused of serious wrongdoing in U.S. Bankruptcy Court.
McMahon, who is represented by his brother, D. Sean McMahon of Boston, alleges that the trouble started in 2005 when he turned to Choate for help in putting together a septic company called Bluewater HLD.
During a meeting with corporate partner Gene T. Barton Jr., the plaintiff claims, he was advised to hire an executive with experience overseeing a similar business.
Gennari then entered the picture, allegedly recommending client Daniel Potter as a “very good business person” whose experience “would make a great fit for Bluewater.”
But what the firm failed to disclose, Sean McMahon says, were the details surrounding the bankruptcy of a video company run by Potter. Further, Choate neglected to tell his brother that, during the bankruptcy proceedings, an adversarial complaint had been lodged against Potter that accused him of embezzling company assets.
Had the law firm informed his brother about Potter’s history, Sean McMahon says, Todd never would have entered into the business agreement.
“But [the firm] deprived him of the ability to make an informed decision on a matter of vital business importance,” Sean McMahon says. “This was not a question of whether he likes peanut butter and jelly or butter on his toast. These were major facts [that] someone considering bringing a business partner on board would want to know about.”
With Potter and some of his associates from the botched video company hired, Sean McMahon says his brother was pushed out and forced to watch as Bluewater went into bankruptcy. In court filings, he alleges that, under Potter’s management, more than $1.5 million unlawfully was taken from the company, causing Todd to suffer large losses.
“What we are saying is that Larry Gennari and Choate, Hall & Stewart owed a duty of care to my brother and, therefore, should have told him about the Potter complaint,” Sean McMahon tells New England In-House. “And if [Gennari] felt for whatever reason that he couldn’t make such a disclosure, he shouldn’t have made the recommendation in the first place.”
Attorney McMahon, who admits he has reservations about representing a family member, says Potter paid Choate hundreds of thousands of dollars in legal fees over the years. The prospect of getting Potter back in business motivated Gennari to refrain from making the disclosure, he claims.
Gennari now practices at Gennari Aronson in Needham.
A call seeking comment was answered by his partner, Neil H. Aronson, who said the accusations are “baseless, unfair and totally frivolous. Even if you read [the plaintiff’s] complaint and accept everything in it as true, he doesn’t state any type of claim that has ever been recognized.”
Todd McMahon signed a release three years ago and previously sold his shares for more than $1 million, according to Aronson.
“Unfortunately, he is trying to embarrass people into a settlement, but the bottom line is that no one did anything wrong,” Aronson says. “[The plaintiff] is taking little bits of dashes and dots and trying to create a story. The only problem is that none of its true.”
Even though Aronson predicts the claim will be dismissed, the damage done to his partner’s reputation will be tough to repair, he says.
“Larry’s been practicing for over 20 years and has never been sued, but this guy just goes out and files a suit after he has signed a release and been paid a lot of money,” Aronson says. “It’s very frustrating to see him take advantage of the media to meet his goals, because of course when the case gets dismissed, that never makes the news.”
Choate is being represented by former Board of Bar Overseers Chairman George A. Berman. The Peabody & Arnold attorney points out that the suit is a corporate claim in which the plaintiff, as a shareholder, lacks standing.
“This would be true even if they had not already signed a release of the claim, which the complaint also alleges they have done,” he says. “This suit is frivolous, and [we] are confident it will be dismissed on that basis.”
