The money market fund Reserve Management Company Inc. apparently had second thoughts about its malpractice suit against Dechert and K&L Gates. It dismissed the case against both firms with prejudice last Friday, according to a court filing.
As The Am Law Daily reported last month, the suit, filed in Washington, D.C. Superior Court, took issue with the advice the firms allegedly gave Reserve about the composition of its board. (It was not related to Reserve’s current troubles for allowing its money market mutual fund to dip below the $1 mark following the bankruptcy of Lehman Brothers.) Reserve alleged that the two firms failed to advise it that two of its board members were not independent. The oversight caused Reserve to spend $4 million in professional fees to escape an enforcement action from the SEC, according to its complaint. Both firms asserted that the complaint lacked merit.
Stephen Braga of Ropes & Gray represented Dechert, while Michael Sundermeyer of Williams & Connolly advised K&L Gates.
In an unusual press release, K&L Gates announced that it was “pleased, but certainly not surprised” by Reserve’s retreat. The firm, however, did not leave the matter at that. It implied that Reserve and its lawyers had engaged in unethical conduct, and, even more seriously, had attempted to blackmail the firm. The firm stated that Reserve’s counsel at Tew Cardenas in Miami tried to pressure it to pay an unspecified amount to avoid “unfavorable publicity for the firm and professional embarrassment to its lawyers.” K&L Gates notes that when it declined to make any payment, Reserve sued and “gave substantial publicity” to its filing. “Then, less than three weeks after the suit was filed, and with no offer of payment from K&L Gates forthcoming, Reserve itself offered to withdraw the suit — with prejudice — without any payment from the firm but with the request that K&L Gates agree not to sue Reserve and its counsel for malicious prosecution or to seek sanctions,” the firm wrote.
Matias Dorta of Tew Cardenas, who filed the suit for Reserve, was not immediately available for comment. A spokeswoman for Dechert declined to comment.
This article first appeared in The Am Law Litigation Daily on AmericanLawyer.com.
