Blank Rome offices in Washington, D.C. Photo Credit: Diego M. Radzinschi/ALM

Blank Rome has reached a settlement agreement with a group of investors who allege the law firm was part of a real estate investment scheme in which they lost millions.

In a filing late Tuesday in the U.S. District Court for the Eastern District of Pennsylvania, the investor plaintiffs—Kilbride Investments Ltd., Busystore Ltd. and Bergfeld Co. Ltd.—moved to dismiss Blank Rome from their lawsuit. According to the filing, the plaintiffs and Blank Rome agreed to settle after a two-day mediation. A federal judge must still sign off on the agreement.

Blank Rome agreed that any judgment in the lawsuit would be reduced by the percentage share of liability attributed to Blank Rome. And that amount must be no less than the amount Blank Rome has agreed to pay in the settlement, which was not disclosed in the filing.

Two of the other defendants in the case, Cushman & Wakefield and JFK BLVD Acquisition GP, agreed to sign a stipulation acknowledging Blank Rome's dismissal from the case and agreeing that the final judgment would be reduced by the amount of Blank Rome's liability. But the other law firm defendant, Cozen O'Connor, refused to do so, the filing said.

The investor plaintiffs have claimed that Charles Naselsky, a disbarred lawyer who had worked at Cozen O'Connor until 2006 before joining Blank Rome, conspired with Philadelphia real estate developers to get the investors to put more than $27 million into a project that ultimately would be barred by zoning restrictions.

The investors alleged that the law firms were part of a scheme orchestrated by Eliyahu Weinstein, who was convicted of fraud and sentenced to 22 years in prison for operating a massive Ponzi scheme that stole money from members of the Orthodox Jewish community under the guise of investing in Philadelphia real estate projects.

Both law firms have fought the claims. They filed motions for summary judgment last year, asserting that the investors were only suing them because they were not able to recover damages from Weinstein.

Last week, U.S. District Senior Judge Jan DuBois of the Eastern District of Pennsylvania granted Cozen O'Connor's motion in part, ruling that the law firm could not be found liable for Naselsky's actions during the period when he was not employed at Cozen O'Connor.

John Harkins Jr. of Harkins Cunningham in Philadelphia represents Blank Rome. He said Blank Rome “certainly knew nothing about what [Naselsky's] clients were allegedly doing.”

Mary Kay Brown of Brown McGarry Nimeroff represents the plaintiffs. Jayne Risk of DLA Piper in Philadelphia represents Cushman & Wakefield, and William Harvey of Klehr Harrison Harvey Branzburg represents Cozen O'Connor. They did not respond immediately to calls seeking comment.