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Couple Sues
Sheppard Mullin for $68 Million
By Erin Carroll
Daily Journal Staff Writer
An Orange County couple has sued Sheppard,
Mullin, Richter & Hampton for $68 Million, claiming the law firm
bungled a merger between their telecommunications company,
TeleCore, and Florida-based Viasource.
Plaintiffs allege that lawyers at Sheppard
Mullin left loopholes in documents finalizing the merger,
resulting in them collecting "virtually nothing" from the
marriage of the companies.
"Instead of providing the highest quality
legal services, Sheppard Mullin delivered incompetence," the
complaint states.
The plaintiffs allege professional
negligence, breach of contract, breach of fiduciary duty, and
fraud among their causes of action. Sheppard Mullin partners
David M. Bosko and Alan H. Martin and associates Thomas N.
Stephens and Karen L Calhoun also are named in the suit.
"The long and the short of it is that, of
the $67 million, we got $1 million," plaintiff said Thursday.
"It’s been a nightmare."
Jon Bonn, Sheppard Mullin’s deputy general
counsel, said that firm lawyers had not seen the complaint yet
and did not have an immediate comment
The plaintiffs say they retained Sheppard
Mullin in April of 2000 to represent their interests in the
merger between their company, TeleCore, and Viasource. TeleCore
was a provider of broadband integration services to the
high-speed Internet industry and was valued at $150 million, the
complaint states.
The plaintiffs believed they were to
receive.$17 million in cash when the merged company went public,
the complaint alleges. Subsequently, they were to receive $50
million in Viasource stock, they contend.
Also as part of the agreement, plaintiff
agreed not to involve himself in the broadband industry for
three years, according to the complaint.
While the plaintiffs expected $67 million,
because of the wording of the document the couple were entitled
only to $1 million at the time of the initial public offering
and were unable to trade the stock they received, since
Viasource filed for Chapter 11 bankruptcy in November 2001, the
complaint states.
"The most amazing thing is [that] they say
lawyers are not magicians, and here the law firm made $150
million disappear," said Don Howarth of Howarth & Smith in Los
Angeles, who is representing the plaintiffs.
The plaintiffs also contend that Sheppard
Mullin’s representation of General Electric Capitol, a lender to
Viasource, influenced their handling of the merger. Plaintiff
signed a waiver over any conflict of interest matter.
However, Howarth believes "Sheppard,
Mullin concealed key facts regarding the way the final documents
benefitted General Electric Capital Corp. to the detriment of
the plaintiffs."
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