Ira Rennert's Fair Field estate in the Hamptons.

A $214 million malpractice lawsuit lodged this week by billionaire Ira Rennert served up a reminder that a merged law firm—in this case, Arnold & Porter Kaye Scholer—can't always avoid fallout from events that trace back to one of the firm's predecessors.

Rennert's investment company, The Renco Group Inc., filed suit on Tuesday in New York state court, alleging malpractice against his former lawyers from Kaye Scholer, now part of Arnold & Porter Kaye Scholer after a 2016 merger. The malpractice claim arises out of Kaye Scholer's defense work for Renco in a case brought by the bankruptcy trustee for Magnesium Corp. of America, a company that Rennert controlled for several years before it went bankrupt in 2001.

In that underlying case, MagCorp's bankruptcy trustee accused Rennert of siphoning more than $118 million from the magnesium company's coffers and alleged that the billionaire put at least some of that amount toward building a palatial, beachfront estate in the Hamptons on New York's Long Island. Ultimately, a federal jury sided with MagCorp's trustee and put Renco on the hook for damages of more than $117 million, an amount that, thanks to interest, later increased in a final judgment to about $214 million.