Arent Fox office in Washington, D.C. Photo by Diego Radzinschi/ALM

A $6 million legal malpractice case brought by a life insurance policy investor against Arent Fox and one of its partners is headed to trial after a federal judge mostly rejected efforts by both sides to clarify whether the firm had made an error.

Windsor Securities, which lent money to several trusts so they could take out life insurance policies for elderly people that would serve as collateral for the loans, said the firm and its partner, Julius Rousseau, gave bad advice that resulted in its efforts to collect under the policies being disputed. Windsor ended up switching lawyers and inking settlements, but said Arent Fox and its lawyer are to blame for its losses.

Both sides sought summary judgment, but U.S. District Judge George Daniels of the Southern District of New York ruled on March 27 that neither side's evidence was enough to prevail on the main issue before him. He granted Arent Fox a win on claims worth $38,000, but the judge wrote that premium-finance and legal experts disagreed on key points related to negligence and whether Arent Fox and its lawyer were the proximate cause of Windsor's losses.

Two of Windsor's claims—for breach of contract and breach of fiduciary duty—were cut from the suit completely, with the judge saying they were duplicative of the malpractice claim.

According to Windsor, Rousseau told the company that once the funds it loaned to the trusts came due, it simply needed to file a change-of-ownership form with the life insurance companies for it to get its hands on the policies. That legal theory was tested, however, when John Bitter, one of the insureds, died, and the trustee that held his policy disputed Windsor's entitlement to the death benefits.

The policy disputes turned on the agreements between Windsor and the trusts and how section 9620 of the California Commercial Code bore on the transfer of the insurance policies. In the Bitter case, an arbitration panel faulted Windsor for not invoking the default sales right in its agreements with the trust, and the company says Rousseau was negligent to have missed it.

Alan Frank of Alan L. Frank Law Associates, who represents Windsor, said in an email that “over $6 million” in damages was still on the table.

Peter Wang, a partner at Foley & Lardner who represents the defendants, declined to comment.