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April 20, 2011 4:28 PM

McGuireWoods Sued for Malpractice

Posted by Tom Huddleston Jr.

A pair of former clients have filed a malpractice suit against McGuireWoods, claiming the firm was negligent and breached its fiduciary duty when representing them in the 2009 bankruptcy filing of the National Heritage Foundation--a Falls Church, Virginia-based charity. The suit was filed on Tuesday in U.S. district court in Alexandria, Va.

John and Nancy Behrmann, a married couple, made contributions totaling slightly more than $1 million to establish a type of private foundation with NHF. The suit alleges that NHF confiscated almost $650,000 from the Behrmanns' foundation to pay off debts when it went bankrupt in 2009. (Click here to download the complaint.)

In February 2009, a committee formed by the bankruptcy court to represent the Behrmanns and other unsecured creditors retained McGuireWoods as counsel. The Behrmanns claim that instead of representing their interests, the firm and the committee collaborated with NHF, and approved a reorganization plan that worked against them.

As described in the complaint, the plan, confirmed by the bankruptcy court in October 2009, held that the people who set up foundations were not creditors of NHF and had no claims against the organization. It also allegedly contained language that releases the committee and McGuireWoods from any liability.

The Behrmanns, residents of Pennsylvania, are represented by Foster Friedman of Alexandria firm Wade, Friedman, Sutter & Dupray and Greenwood Village, Colo. firm G.W. Merrick & Associates. They claim that  $650,000 was confiscated. They are seeking compensatory and punitive damages, as well as legal fees.

Neither the Behrmanns' counsel nor McGuireWoods responded immediately to requests for comment.

At the time of NHF's bankruptcy filing, Forbes reported about the group's sketchy history of pseudo-altruism, which included a 2006 effort--struck down by Congress--to allow donors to receive a salary for serving as directors of their NHF-affiliated DAFs.  

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