Manhattan Supreme Court and the Thurgood Marshall U.S. Courthouse at Foley Square. Photo by Rick Kopstein/ALM

The investment arm of a deceased real estate executive is seeking to overturn an arbitration ruling that faulted Herrick Feinstein in a legal malpractice action but did not order the law firm to pay any damages.

Gordon Group Investments, formed by the late Sheldon Gordon, who found success in developing entertainment shopping centers, alleges in a petition filed in Manhattan Supreme Court this week that the ruling of JAMS arbitrator Robert Davidson in a legal malpractice arbitration against Herrick Feinstein disregarded the burden of proof and rendered the arbitration process unfair.

Gordon Group said it retained Herrick Feinstein in late 2009 after it was defrauded by a rogue bond trader who made unauthorized purchases of stock “in an elaborate pump and dump scheme.” Gordon Group said Herrick promptly filed in state court tort and other claims against the trader and others, but waited 13 months before considering the timeliness of the client's contract claim against Fortis Investment Services, a clearing broker that was acquired by BNP Paribas. The claim against Fortis was subject to arbitration before the Financial Industry Regulatory Authority.

Herrick did not seek a tolling agreement with Fortis or tell Gordon Group that Herrick's delay was destroying the value of its Fortis claim, Gordon Group claims. Gordon Group said it was advised by then-Herrick attorneys David Feuerstein and John Goldman.

Herrick, it claims, finally brought a FINRA arbitration against Fortis in March 2011, and argued then that its damages were $23.4 million plus interest, totaling $45 million. A FINRA panel in November 2015 awarded Gordon Group $11.3 million in compensatory damage but did not explicitly grant or deny interest.

In a legal malpractice arbitration brought against Herrick last year, Gordon Group argued the FINRA award was only based on the unauthorized trades that cleared Fortis inside the statute of limitations timeframe and a 9 percent statutory interest. Gordon Group's expert witness at the malpractice arbitration, Robert Smith, a former judge of the New York Court of Appeals, testified that it was “very likely” that the FINRA panel credited the statute of limitations defense asserted in the FINRA arbitration as a result of Herrick's inaction, Gordon Group said.

In a July decision, the arbitrator, Davidson, found Herrick's “failure to assure” that the statute of limitations on the Fortis claim was tolled or that the client was fully informed of the danger in waiting to bring a claim “fell below the ordinary and reasonable skill and knowledge” commonly possessed by a member of the profession. However, in considering damages, Davidson found “the truth of the matter is that no one knows how the arbitrators [in the FINRA action] came up with their number.”

Gordon Group's petition, filed Tuesday, argues that the arbitrator applied the wrong standard of proof and the ruling resulted in an unfair arbitration process. Its petition seeks to vacate the award and send the parties back to arbitration to establish damages.

“We believe the evidence shows that the damages including interest were roughly $28 million,” said James Kennedy, Gordon Group's attorney and a partner of Kennedy Berg in New York.

A Herrick Feinstein spokesman could not immediately comment. Feuerstein, now a partner at Feuerstein Kulick, did not return a message for comment, while Goldman, who left Herrick in September, declined to comment.