Many professionals who provide excellent services have satisfied clients who pay their bills timely. There are instances, however, when clients are dissatisfied with the services of their professionals and withhold payment claiming the professionals did not perform their services properly and, thus, should not be paid for them. Most professionals are loathe to sue their own clients, whether it be for philosophical reasons or because, pragmatically, the client will likely take his or her business elsewhere if sued. In some cases, litigation is inevitable. Faced with threats of professional liability lawsuits from clients who are withholding (typically large) fees, professionals have attempted to take strategic preemptive strikes against their clients and sue first.
The most high-profile preemptive strike came recently arising out of, perhaps, one of the most high-profile divorces in recent memory. The Boston-based law firm of Bingham McCutchen (“Bingham”) recently filed a lawsuit in the Massachusetts courts against its longtime client, Frank McCourt, the recently deposed owner of the Los Angeles Dodgers Major League Baseball franchise. In its Complaint, Bingham alleges that in late 2003, it provided legal services to Mr. McCourt in connection with his acquisition of the Dodgers. In anticipation of the acquisition, Mr. McCourt’s wife sought legal advice from Bingham on California community property law in an effort to protect assets from Mr. McCourt’s creditors. As has recently come to public light, Mr. McCourt borrowed significant amounts of money in connection with the acquisition.
Bingham alleges it provided the McCourts with advice in structuring their affairs in connection with the acquisition of the Dodgers to address the concerns Mrs. McCourt had raised. The McCourts requested Bingham prepare a contract for the purpose of protecting assets held in Mrs. McCourt’s name from any creditors of Mr. McCourt, particularly those loaning money in connection with the Dodgers acquisition. The resulting contract has been referred to as the Marital Property Agreement (“MPA”).
Bingham alleges that on March 22, 2004, it sent a draft of the MPA to the McCourts along with a letter explaining that the MPA would confirm all property titled in Mr. McCourt’s name would be his separate property and all property titled in Mrs. McCourt’s name would be her separate property. Although divorce planning was not the focus of Bingham’s engagement, the letter also explained that upon divorce, each spouse would keep his or her respective property. On March 31, 2004, a Bingham attorney met with the McCourts at their home and reviewed the MPA with them. At the conclusion of the meeting, the McCourts each signed three copies of the MPA. Mrs. McCourt then signed an additional three copies. On April 14, 2004, Mr. McCourt signed the additional three copies previously signed by Mrs. McCourt.
On October 27, 2009, Mr. McCourt fired Mrs. McCourt from her job as a senior executive of the Dodgers and Mrs. McCourt filed for divorce in California. The MPA became a major focus of the divorce proceedings, with Mrs. McCourt contending the division of property reflected in the MPA did not mean she had no rights in the Dodgers. At an 11-day trial in the divorce proceedings, there was evidence that the MPA contained two exhibits: Exhibit A listing Mr. McCourt’s property and Exhibit B listing Mrs. McCourt’s property. There were two different versions of Exhibit A. The “correct” version was consistent with the body of the MPA and was attached to the three copies signed by both the McCourts on March 31, 2004. There was also an earlier, superseded draft of Exhibit A that was erroneously attached to the three additional copies signed by Mr. McCourt on April 14, 2004. After Mr. McCourt signed the MPA, Bingham made the copies signed by Mr. McCourt on April 14, 2004 conform to the former three by replacing in Bingham’s files the earlier, incorrect draft of Exhibit A with the correct version. The California court declined to enforce the MPA, finding that there was not a sufficient meeting of the minds between the McCourts and holding that the MPA was not a valid agreement under California marital property law.
Following the court’s ruling, Mr. McCourt repeatedly threatened to sue Bingham for damages he alleged resulted from Bingham’s preparation of the MPA. Mr. McCourt also refused to pay the full amounts of Bingham’s bills for a variety of engagements, asserting that Bingham committed legal malpractice in drafting the MPA. Although Bingham claims it is owed hundreds of thousands of dollars in unpaid legal fees, Bingham did not file a fee claim. Instead, Bingham sought only a declaratory judgment that its services complied with the applicable professional standard of care.
Bingham’s declaratory judgment complaint was likely an effort to shortcut one of Mr. McCourt’s defenses to a fee claim and any professional liability claims that McCourt may assert by obtaining a ruling that Bingham complied with the applicable professional standard of care. It was also likely an attempt to win the “race to the courts” to establish home field advantage. By filing suit first, Bingham also was able to argue to the public in this highly publicized dispute that its services were proper.
Bingham’s tactic ultimately proved unsuccessful. Massachusetts Superior Court Judge Janet Sanders dismissed the action, noting that “virtually every state” had refused to allow a legal party “to beat the alleged victim of the tort to the courthouse.” Mr. McCourt’s attorney has claimed that although Mr. McCourt has threatened to sue Bingham, no suit is imminent because his divorce and disputes with Major League Baseball need to conclude before he can assess the damages incurred from Bingham’s actions. The lawsuit will likely be filed in a jurisdiction of McCourt’s choosing, giving him the home field advantage.