Blank Rome can't ditch $4.5 mln malpractice case in Civ Pro brainteaser - Reuters

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The logo of law firm Blank Rome is seen at their legal offices in Philadelphia, Pennsylvania, U.S., June 10, 2021. REUTERS/Andrew Kelly

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(Reuters) - Hey, law nerds: Do you like complex civil procedure questions about alter egos, personal jurisdiction and forfeited legal defenses? How about if we toss in some questions about maritime attachment and the statute of limitations under the laws of England and Alabama?

If you've been hankering for the gift of a Civ Pro brainteaser, then today is your happy day: I bring you the exceedingly complex tale of a $4.5 million legal malpractice case against Blank Rome.

On Wednesday, New York State Supreme Court Justice Joel Cohen ruled that Blank Rome’s one-time clients Sonic Finance Inc and Pasha Finance Inc can proceed with claims that they ended up on the wrong side of a $4.5 million judgment in federal court in Manhattan because Blank Rome failed to assert a personal jurisdiction defense based on the U.S. Supreme Court’s 2014 ruling in Daimler AG v. Bauman.

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Cohen said that Blank Rome, represented by Akerman, may yet be able to show that personal jurisdiction in the federal court case is a red herring. But at this stage of the malpractice lawsuit, Cohen said, “The causal chain as alleged by [Sonic and Pasha], while admittedly circuitous, is enough to survive a motion to dismiss.”

Neither a Blank Rome spokeswoman nor Akerman lawyers representing the firm responded to email queries on Cohen’s ruling. Sonic counsel Matthew DeOreo of Tacopina, Seigel & DeOreo also did not respond to a request for comment.

The story begins back in the dim mist of 2008, when a company called Primera Maritime (Hellas) Limited defaulted on a derivative contract involving shipping freight rates. Primera’s counterparty, d’Amico Dry Limited, quickly obtained an unappealable $1.8 million judgment from the English High Court of Justice in London. But Primera refused to pay up, so d’Amico filed an action in Manhattan federal court to recognize and enforce the British judgment. It named Sonic and Pasha in an amended complaint as two of Primera’s many alter egos.

For the next nine years, Primera (which was not represented by Black Rome) and its alter egos fought d'Amico over New York’s subject matter jurisdiction. The trial court tossed the suit in 2011 because the British court was not sitting as an admiralty court when it entered the judgment. The 2nd U.S. Circuit Court of Appeals reinstated the case.

Primera and the alter egos moved again to dismiss d’Amico’s suit on subject matter jurisdictional grounds, this time arguing that the derivative contract was not a maritime contract. The trial judge held a bench trial and eventually agreed. In 2018, the 2nd Circuit once again reversed the dismissal and reinstate d'Amico's case.

While all of this was going on, the Supreme Court significantly tightened the test for personal jurisdiction over corporate defendants in its Daimler ruling. In the midst of the fight over subject matter jurisdiction, Sonic urged Blank Rome in May and October of 2015 to move as well to dismiss the d’Amico suit based on lack of personal jurisdiction.

Blank Rome balked, according to Sonic. The firm allegedly told Sonic in 2015 that it was well aware of Daimler, but that it would be a waste of time and money to move to dismiss based on personal jurisdiction. Blank Rome “sat on its hands,” Sonic alleged in its complaint.

Blank Rome maintains that it had preserved the personal jurisdiction issue in the 2015 answer to d’Amico’s complaint that the firm filed for Sonic and other alter egos. The law firm insisted in its motion to dismiss the malpractice suit that it left the personal jurisdiction issue simmering while the trial and appellate courts tussled over subject matter jurisdiction. When that question was finally resolved in d’Amico’s favor in 2018, Blank Rome said, it revived Sonic’s personal jurisdiction defense and asked U.S. District Judge John Koeltl of Manhattan to dismiss d’Amico’s case.

By then it was too late. Koeltl ruled in 2018 that under Daimler, New York did not have personal jurisdiction over Sonic and the other alter egos – but that they had forfeited the defense by waiting three years to move to dismiss the case on those grounds. Koeltl directed a judgment for d’Amico of the full amount of the British judgment, plus interest and attorneys’ fees.

The New York case, meanwhile, wasn’t d’Amico’s only play to enforce the judgment. It also brought an attachment action in Alabama against a ship owned by yet another Primera-related company, winning a 2018 judgment of nearly $3.8 million.

Sonic, Pasha and the other Primera defendants ultimately agreed to a $4.45 million settlement to resolve all of d’Amico's claims.

In their subsequent malpractice suit, Sonic and Pasha alleged that they would have been off the hook entirely if Blank Rome had simply moved to dismiss d’Amico’s New York case on personal jurisdiction grounds in 2015. That would have been the end of case before Koeltl, Sonic and Pasha said. It also would have precluded the Alabama attachment case, the alter egos contended, because that case would have been untimely under British and Alabama law if it hadn’t been for the pending New York suit.

Blank Rome countered that it was Primera that botched the personal jurisdiction defense by failing to raise it at all. Blank Rome's dismissal motion also insisted that the British judgment could have been enforced without a finding that New York had personal jurisdiction over the alter egos, so the forfeiture of that defense wasn’t the proximate cause of the judgment against Sonic and Pasha. Moreover, Blank Rome argued, the Alabama attachment would have gone forward regardless of New York’s personal jurisdiction, based on d’Amico arguments that the statute of limitations in attachment actions is discretionary.

The judge in the malpractice case said those arguments might still get Blank Rome off the hook. The firm, he wrote, may someday prove that, regardless of the forfeited personal jurisdiction defense, New York would have recognized the British judgment against Primera, forcing the alter egos to settle.

But for Blank Rome, someday is not today.

Opinions expressed here are those of the author. Reuters News, under the Trust Principles, is committed to integrity, independence and freedom from bias.

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Alison Frankel

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.

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