Law Firm - Houston | Dallas | Los Angeles | San Francisco | New York

Professional Liability Litigation

Diamond McCarthy has guided clients to effective outcomes in many large and highly complex professional liability cases. Our team of veteran trial lawyers investigates and prosecutes claims involving all types of malpractice and breach of fiduciary duties by auditors, lawyers and other professionals, including cases where they are actively complicit in fraudulent schemes that cripple a company or provide negligent advice and services that cause substantial financial ruin or losses.

Our team has litigated malpractice claims against global, national, regional and local professional services firms for over 20 years. We have an excellent reputation and track record in high-profile cases where egregious misconduct by professionals results in damages to a company that are often fatal. Our team regularly litigates malpractice claims against various professionals including accountants, auditors, law firms, consultants, financial advisors and others.

Professional Liability Claims in Bankruptcy and Insolvency Scenarios

Trustees, liquidators, creditors’ committees, corporations, CRO’s, financial entities, shareholders and other clients rely on Diamond McCarthy to resolve challenging litigation arising from large-scale corporate insolvencies and other financially-distressed situations. Our team has deep experience reconstructing the events that led to a company’s failure, identifying culpable parties and pursuing all available damages through asset recovery, negotiations and tenacious advocacy in the courtroom.

Investigating who and what killed the company is an extremely difficult and time-intensive process. Key witnesses have left the company and relocated, and critical evidence is either missing or scattered around the world. When our inquiry uncovers sophisticated Ponzi schemes or other unlawful activities, the company insiders and outsiders responsible have already gone to great lengths to cover their tracks and hide any ill-gotten gains.

Diamond McCarthy prosecutes claims against professionals that commit misdeeds and become entangled in these complex situations, including auditors and accountants, lawyers, asset and solvency valuation firms and banking professionals that advise on financial transactions, investments and valuations. We have handled cases involving virtually every type of misconduct by professionals that contributes to corporate insolvencies, including when they aid and abet officers and directors in illegal transactions, look the other way, are careless in failing to detect wrongdoing or provide negligent advice, opinions or services.

Audit and Accounting Malpractice

Diamond McCarthy is regularly involved in numerous high-stakes malpractice cases against audit and accounting firms of all sizes. Our lawyers have significant experience prosecuting claims arising from desk-top reviews, public and privately held company audits and special attest engagements performed on domestic and multi-national entities. We have resolved cases involving a variety of complex GAAP issues and GAAS failures in the United States, and under international standards in the U.K., Mexico, Italy, and China.

Our team is proficient in navigating difficult procedural and liability issues in audit and accounting malpractice cases, from battles over disputes of internal audit manuals and accountants’ internal GAAS/GAAP guidance to overcoming defenses such as in pari delicto and standing, contractual limitations on liability, contributory/comparative negligence and audit interference

What sets Diamond McCarthy apart from many firms is our multi-disciplinary approach to analyzing sophisticated accounting and financial transactions. We can customize our team to include lawyers that have backgrounds in substantive areas such as CPA’s, certified fraud examiners, Wall Street finance professionals, MBA’s and attorneys with business degrees in accounting and finance. We are fluent in the language of our accounting, financial and valuations, which allows us work as a team and create efficiencies, enhanced work product and value for our clients.

Legal Malpractice

Throughout its history, Diamond McCarthy has prosecuted professional liability claims against law firms arising out of complex business matters. Our trial lawyers are well-versed in the “law of lawyering” across multiple U.S. jurisdictions, including the pertinent codes of professional conduct, conflicts of interest, standards of care, fiduciary duties, causation and other issues inherent to complicated malpractice cases.

Our practice is primarily focused on investigating and prosecuting legal malpractice claims within “who and what killed the company” cases. However, we also handle high-value disputes outside of insolvency scenarios when law firms commit negligence, breach their fiduciary duties or have conflicts of interest while representing clients in distinct litigation, transactional and advisory engagements.

Professional Liability Insurance Issues

Professional services firms maintain malpractice insurance to cover various liability claims, which may also include additional layers of protection above and beyond their primary coverage. We help clients resolve insurance issues that often arise in professional liability disputes, including determining the existence and scope of coverage, negotiating with insurance carriers and pursuing litigation when they refuse to settle valid claims.

Resources

Representative Experience

International Manufacturing Group, Inc. (IMG)

  • Acting on behalf of Beverly McFarland, Trustee in the IMG Wannakuwatte matter since 2014 and as lead special litigation counsel to the joint bankruptcy trustees in connection with what has been called the largest Ponzi scheme in the history of the Eastern District of California (approximately $500mm).   In connection with our representation we have prosecuted claims against a multitude of parties including financial institutions/banks and others involving claims of money laundering and negligence and other claims.  Opposing counsel in the cases include numerous large and small law firms throughout San Francisco, San Jose and Sacramento, California. Favorable outcomes have been achieved with more claims against parties ongoing.

Direct Lending Investments LLC

  • Acting as international counsel for U.S. SEC Receiver and Cayman Islands Liquidator in connection with cross-border frauds related to Direct Lending, Inc.  Commenced litigation in California and the Cayman Islands against institutional valuation firm; ongoing investigations against international professional firms, lenders, and others. Significant recoveries have been achieved to date with other matters still in pursuit.

Platinum Partners Arbitrage Fund, LP

  • Acting as lead trial counsel to Martin Trott and Christopher Smith, Joint Official Liquidators appointed in the Cayman Islands in connection with cross-border litigation proceedings in the United States and the Cayman Islands arising out of a billion dollar investment fund fraud.

Pasquinelli Homebuilding

  • Acted on behalf of Chapter 7 trustee Alex Moglia for the Bankrupt Pasquinelli Homebuilding “PHB” Family of companies, which was a pyramid of more than two hundred privately held homebuilding entities operating in the Midwest and the South. Claims were brought against a myriad of defendants including company principals and insiders, outside directors,  as well as family-affiliated persons and entities who directly and indirectly received money and other assets flowing out of PHB, and helped orchestrate  the funneling of millions of dollars away from creditors.  Diamond McCarthy and local counsel brought claims of breach of fiduciary duty, aiding and abetting, gross negligence, civil conspiracy, alter ego, and construction and actual intent of fraudulent transfers. Significant results were achieved.

Appalachian Fuels

  • Acted as lead trial counsel for the Creditors Committee in the Appalachian Fuels LLC and related company bankruptcies in the Eastern District of Kentucky in connection with the investigation and pursuit of claims arising from this coal mining company’s losses of more than one hundred million dollars. Claims involve a multitude of companies, former officers and directors, insurers and professional firms.

MCG Capital

  • Acted on behalf of the post-confirmation litigation trust arising from the Dallas bankruptcy of MCG Capital Corp. This multi-party litigation involved claims for fraudulent transfers, violations of state securities laws, breach of contract and fraud against financial institutions, accountants and other professionals/advisors resulting in eight figure recoveries that compensated our client for virtually one hundred percent of its damages/losses. The claims against financial institutions involved some of the largest banks in Dallas, Texas. Opposing counsel in this case included many of the largest and well known law firms in Dallas.

Dreier LLP

  • Acted on behalf of the Chapter 11 bankruptcy Trustee for Dreier, LLP, in its bankruptcy proceedings in the Southern District of New York (the Trustee appointed by the U.S. Department of Justice was a Diamond McCarthy, LLP partner in its NY office). This prominent case involved the Ponzi scheme perpetrated by lawyer Marc Dreier and is one of the largest Ponzi /fraud scheme case(s) involving the legal profession in U.S. history. The fraudulent scheme involves losses to hedge fund investors and others of more than $750 million. Diamond McCarthy’s representation of the Trustee included the prosecution of many high profile lawsuits against the recipients of fraudulent transfers and preferences, often involving legal issues of first impression before the federal courts. Other litigation arising out of the Dreier matter has involved complex financial, banking, insurance and bankruptcy issues. Diamond McCarthy achieve significant results on behalf of clients. In addition, our representation in the case pioneered new roads challenging the complex issues facing the intersection of criminal and civil government forfeiture proceedings, SEC Receivership and bankruptcy proceedings. The firm’s work in the Dreier case has resulted in one of the largest coordination agreements between a bankruptcy estate trustee and the United States government involving asset seizure and forfeitures in U.S. history.

USACM Liquidating Trust

  • Acted as lead trial counsel for the post-confirmation arising out of the former USA Capital based sub-prime mortgage lending entities in connection with the Trust’s investigation and pursuit of litigation claims involving hundreds of millions of dollars in damages in the federal courts of Las Vegas, Nevada. These claims and recoveries involve major financial institutions, corporations, accounting and legal professional organizations and other third parties.

Howrey LLP

  • Howrey LLP is one of the largest law firm bankruptcies in US history with over 750 lawyers and offices throughout the world in Belgium, France, Germany, the Netherlands, Spain, Taiwan and the United Kingdom. The DOJ appointed Allan Diamond as the Chapter 11 Trustee for the Howrey LLP law firm bankruptcy estate to wind down the global operations and oversee the recovery and monetization of its assets, including litigation claims. recovered upwards of a hundred million dollars for the Howrey bankruptcy estate to date.

For more information on our representative experience please reach out to our initial contacts or email michael.evian@diamondmccarthy.com.