Alleged cut-and-paste mistake wasn’t reason for client’s claimed $636M loss, Proskauer argues
Image from Shutterstock.
Proskauer Rose is arguing that a bad business partner—and not a drafting mistake—is to blame for a client’s losses, which are alleged to be around $636 million.
Proskauer Rose argued Tuesday in a Massachusetts superior court that its former client couldn’t sue because his losses were caused by a business partner who breached several contractual provisions when he transferred a key asset to himself.
Law360 covered the hearing.
The former client, Robert Adelman, had argued that the contract drafted by Proskauer Rose wrongly included a provision that allowed the transfer. The provision was mistakenly copied from another contract in a “botched cut-and-paste,” according to Adelson’s opposition to summary judgment in the case.
Adelman pointed to a document produced in discovery in which someone from Proskauer Rose drew lines around the provision and wrote the F-word in the margin.
Adelman had hired Proskauer Rose to draft agreements when he and another partner decided to split his company venBio in two. The company initially operated a venture capital fund and a hedge fund. Adelman and the partner wanted to spin off the hedge fund and to install another person—Behzad Aghazadeh—as the majority owner and manager of the hedge fund business.
Adelman was supposed to continue to share the hedge fund profits as a minority owner. But Aghazadeh transferred a key asset known as the “Service Company” to a shell company that he largely owned, according to the opposition to summary judgment. The Service Company earned fees for managing the hedge funds.
The allegedly faulty provision allowed Aghazadeh to redeem any partner’s interest in connection with “strategic transactions.” Limited partners had no right to withhold approval and no right to an appraisal, Adelman argued.
A Proskauer Rose spokesperson didn’t immediately respond to the ABA Journal’s request for comment. The law firm’s motion for summary judgment says Proskauer Rose “caused Adelman no harm.”
“The face of the agreements flatly prohibited Aghazadeh from engaging in the transaction,” Proskauer Rose argued.
More specifically, Proskauer Rose argued, Aghazadeh violated five contractual provisions:
- A ban on selling the Service Company
- A disclosure requirement regarding benefits of strategic transactions
- A requirement for consent in advance of conflicted transactions
- Fiduciary duty requirements
- A requirement to share 27.5% of consideration for the transaction
“Each of Aghazadeh’s breaches severs the chain of causation between Proskauer’s alleged conduct and Adelman’s injury,” Proskauer Rose argued.