In 2000, Elizabeth Berardi hired New York law firm Phillips Nizer to help negotiate and draft a post-nuptial agreement with her husband. According to a May 17, 2016 article on abajournal.com titled, “Judge OKs malpractice suit over law firm’s successful fight to uphold client’s postnuptial agreement,” the agreement granted Ms. Berardi a 49% interest in her husband’s bus companies, but did not address whether she could liquidate that interest. Five years later, the Berardis started divorce proceedings, and Ms. Berardi hired Phillips Nizer again to represent her in the divorce. Mr. Berardi took the position that the agreement was invalid, but Ms. Berardi prevailed and the agreement was upheld.
Unfortunately, prior to 2000, the shareholders and business partners in the company limited the ability to liquidate the interest Ms. Berardi received in the Agreement. It is reported that a junior attorney at Phillips Nizer learned of the limitations before the divorce proceedings and failed to notify the senior partner.
Ms. Berardi filed a malpractice lawsuit against Phillips Nizer. She claims that had she known of the limitation, she could have agreed that the agreement was invalid and sought an equitable distribution of the marital assets and a cash buyout. She thus claims that the $1.4 million in legal fees was excessive under the circumstances. The firm sought to have the lawsuit dismissed, but the judge denied the dismissal. The firm has counter sued for the approximately $750,000 in unpaid legal fees.
Without weighing in on the validity or strength of either side’s allegations, we do believe that this is an unfortunate situation for both sides. It is important to keep in mind that even a seemingly minor detail can have a major impact. This is yet another cautionary tale for attorneys and legal consumers alike.