April 28, 2010 12:26 PM

Mayer Brown Dodges Another Refco Bullet

Posted by Zach Lowe

After a federal jury convicted him on five counts of fraud last July, former Mayer Brown partner Joseph Collins was handed a seven-year prison sentence for his role in Refco's massive accounting scandal. But so far plaintiffs have had a tough time convincing judges that the firm itself is a viable target for civil suits.

Now it appears we have another ruling in the Mayer Brown/Refco saga setting a standard that protects--to some degree--law firms from civil suits related to fraudulent acts committed by firm clients, according to The New York Law Journal, an Am Law Daily sibling publication. The NYLJ reports on the third dismissal of a case in which Refco debt holders or investors sought to hold Mayer Brown liable for the giant accounting fraud that destroyed Refco and resulted in guilty pleas from several key players. 

On Tuesday the U.S. Court of Appeals for the Second Circuit upheld a lower court decision tossing out a suit that sought damages from Mayer Brown for its role in crafting Refco offering documents that contained false information and helped perpetuate Refco's scam, the NYLJ reports. The firm indisputably helped Refco put together those documents, but the three-judge panel ruled that Mayer Brown is protected from litigation because the documents were directly attributed to Refco, not Mayer Brown, the Journal says. Plaintiffs lawyers from Grant & Eisenhofer complained after the ruling that the court was insulating third parties such as Mayer Brown from any civil liability. (The plaintiffs were also represented by Bernstein Litowitz Berger & Grossman.)

The three-judge panel acknowledged the law in this area has gotten slightly ambiguous but ruled that most of the relevant precedent, including the U.S. Supreme Court's landmark 2008 Stoneridge ruling, protects law firms from these sorts of suits, the NYLJ says. Another Refco-related suit against Mayer Brown is still pending in Manhattan federal district court, according to the Journal.

Williams & Connolly represented Mayer Brown in the case. Collins, who is represented by Cooley Godward Kronish, is appealing his conviction, the NYLJ says. 

Make a comment

Comments (0)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions


Report offensive comments to The Am Law Daily.

The comments to this entry are closed.

By: TwitterButtons.com

From the Newswire

Sign up to receive Legal Blog Watch by email
View a Sample