01 | 15 | 2007 Posted By Cassandra Crotty

Legal Malpractice Suit Addresses Interesting Bankruptcy Issues

Law.com recently reported, here, on an interesting New York legal malpractice case.  According to the article, the former partners of defunct New York law firm, Hall Dickler - known as a leading advertising law boutique - are facing a legal malpractice suit for failing to advise a company to file bankruptcy earlier than it did.  One of the lawyers involved in the case was quoted as saying that the case could allow a federal court to consider the question of whether lawyers can be held liable for advising on transactions that worsen a bankruptcy situation. 

The plaintiff supposedly took the position that only a Bankruptcy Court can determine whether a law firm's failure to advise a client to declare bankruptcy at a particular point in time is or is not malpractice.  However, the judge didn't seem to agree - withdrawing the case from bankruptcy court on the grounds that the malpractice claims were not "core" to the Chapter 11 proceeding and finding that the issue to be addressed is whether the defendants' legal advice to plaintiffs met the standard of care of a reasonable attorney in providing such advice under the facts presented.