A Very Expensive Typo? Stroock Isn’t Sweating It
Earlier this week, we wrote about a serious drafting mistake by Stroock & Stroock & Lavan — maybe a typo, maybe not — that could cost Stroock’s client millions.
Could Stroock look to its malpractice insurer for help? Maybe not, according to the New York Post:
The gaffe exposes Stroock to the real possibility of having to pay back Extell and Carlyle out of its own pocket because sources said that if the developers sue Stroock, it’s unlikely its insurer will pick up the tab.
The basis for this prediction is not included in the Post article. If you have thoughts on the insurance issue, please do share.
Stroock didn’t comment to the New York Times, which first wrote about the error, but they did offer brief comment to the Post.
Stroock lawyers had the following to say to the Post:
Leonard Boxer, who heads Stroock’s real-estate team of 55 lawyers, said he can’t comment on the ongoing case, but added that the snafu is “unlikely” to bring down the entire law firm.Charles Moerdler, a founding partner of Stroock’s litigation practice, said that no matter what the result of this case, the law firm’s survival is not in question.
Well that’s reassuring. Perhaps the firm can weather one hit, but let’s hope that lightning doesn’t Stroock twice.
WRONG NUMBER: CONTRACT TYPO COULD COST FIRM $100M [New York Post]
Earlier: A Very Expensive Typo?
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Comments
PE should have been a stain on his parents' sheets.
Strook you!
whose got the number of the good reflexologist in west hollywood? no way am i going back to billy friedkin's guy in the valley.
yours,
nick nolte
Fourth! ... At least I am not the first loser.
by the way, i dont mean to knock friedkin. its just that his guy damn near ripped my tendons out of my ears.
yours,
nick nolte
4 - Strook you!
(Yes, typo intended!)
I don't agree that this is necessarily a "typo." A typo is an error in the typing or printing of a document which results from a mere transposition of letters or a wrong keystroke. Having the date as 2089 would obviously be a typo. This error may not have been what they intended, but the problem was that they had it in the document and I expect that it would be very hard to demonstrate that it was an obvious error or failure of meeting of the minds as would be required to interpret that provision as triggered on a different date. There is probably NY statute or case law on this.
OK, I'll do it...
The Stroock be sinkin
The more interesting aspect of the story (to me at least) is why the insurer would balk at covering the loss (as opposed to the duty to defend)? Any takers?
9 - Because they're an insurance company.
2008/2009 typo, no court will enforce, next.
Look, if the guy in charge said it will be ok, then i'm sure everything will be fine. This could be the start of things picking up in legal services, and could signal an end to lay-offs. Optimism is back!
7 - look up "scrivener's error."
7 - look up "scrivener's error."
Fire whatever associate made the mistake and offer his/her job up at OCI.
Lat, these posts are retarded. All you would need to to is to get an expert builder or two to testify that the building could not have been reasonably expected to be finished in 2008, establishing there was a typo, and therefore no meeting of the minds. Oh yeah, and the lawyers on the other side trying to invoke the 2008 provision should be sanctioned.
Wedding video of senior associate that drafted the Offering Memorandum:
http://www.youtube.com/watch?v=oHg5SJYRHA0
Is this really a surprise to anyone? Stroock is infamous for its TTT status and output.
16=Strook lawyer responsible for the fuckup. Unless you have a Delorean that can go 88, better look into installing solar panels for a livnig...
What's millions among old friends? This is nothing that a trifle accounting manuever, and a bottle of Speyside's finest, can't quash.
A thinko, not a typo.
Did anyone ever suggest that the firm was going under because of a few million dollar hit? If no one ever brought up the topic before this partner, then it is time for Michael Ray Richardson to step up to the plate and proclaim Stroock as a sinkin' ship.
Strooooooooooooooooooock!
So, the "typo" is in the offering plan and people bought units based on the disclosures therein -- seems to me like that's bad nooos for stroook.
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25
can't we just all be happy and stop fighting all the time? if the President of the United States can soothe problems with a can of beer, what do we have to worry about?! Just move on, people! and stop your silly little catfights!
16 - worked on an admiralty case in which a typo resulted in one of the lenders becoming subordinated to all the others.
Parties stipulated that it was a scrivener's error, but because the ship mortgages were filed in public records, the issue was could a scriveners error be corrected in the context of reliance on public records.
Got all the way to the 2d circuit before it was settled.
Was not a slam dunk either way.
Strook doesn't sweat the petty things, it pets the sweaty things.
This will not expose Stroock to anything.
This is an obvious clerical error that could not be reasonably relied upon.
ATL - it doesnt take a gifted legal mind to know that you probably shouldnt turn to the NY Post for legal advice.
ATL relying on the NY Post for information -- yeah...that's probably reliable.
This wouldn't happen in Florida.
- Kluger Peretz Secure
I think in a general contract situation, scriveners error would be the obvious solution. However, since this is an OM distributed to the public (even if "the public" is small group of investors), then it's not a slam dunk at all. The investors had nothing to do with drafting the OM, they just rely on it for accurate information. If the investors could argue that they relied on false information when investing, then they may get their money back. Not saying it's a good argument in this situation because I don't know the facts, but for those arguing scrivener's error, I think you're misplacing the legal theory.
9-
My thoughts exactly. What's the out in the contract?
9 -The carrier probably doesn't want to deny its duty to defend, but could be reasonably confident the claim does not fall w/in the insuring agreement or is otherwise excluded. As a result, if it's a duty to defend policy, the carrier may defend under a reservation of rights, while being simultaneously filing for declaratory relief, or doing so after the underlying litigation is resolved. (Whether the carrier would get defense fees reimbursed is another question.)
I hear that Ashley Banfield is merging with Pabst Blue Ribbon.
@9 Nice boilerplate. You will make a fine 2L.
33-
The main issue is not the duty to defend, but the reason why the claim does not fall w/in the agreement. The Stoock error is the reason why we have insurance. Who in their right mind would allow this error to be excluded? I'll bet the ins co is postering in the article.
Rising 2L needing job advice. I want to work for a firm that was once in the V10, I want to work with really hot colleagues, I want to work at a cool place, and I don't care if half of my classmates are fired a few months into our first year. Where should I bid?
Official Todd Genger comment thread:
9-
This is a dumb question. Liability insurer has duty to defend and duty to indemnify. All covered by contract terms. There must be a meaningful investigation to deny either. The duty to indemnify is only triggered where the obligation arises out of the policy terms. However, the possibility of bad faith claims are EXTREMELY high (as are damages) if the insurance company denies to even defend unless it is absolutely clear. Reservation of rights is much more reasonable and likely except for in very, very few situations.
Bottom line: bar for denying defense is much, much, much higher than the bar for denying indemnity.
I worked on a similar case during law school. Another element here is that the insurance company has leverage over the firm, because while the former isn't bothered by a malpractice trial, the firm doesn't want the bad publicity of putting its malpracticing lawyers in open court. So the insurance company plays along until it gets the firm to pony up a hefty chunk of the damages itself.
Wow, all the insurance defense douches have come out of the shadow to spout.
38,
Lat's posts are disturbing. Deal Breaker comments, seriously? The best DB has to offer are quotes from Will. F. movies. A ken far below the movies I make up in my own mind through the tedium of lawyering.
41- this discussion is not insurance defense, this is insurance coverage,
Firms with prominent insurance coverage practices include Covington, Wiley Rein, Akin Gump, WLRK, Mayer, Latham, etc.
Now go shuffle some papers in your real estate "practice."
Why wouldn't the malpractice claim be covered? Sounds like a classic E&O claim to me.
43 FTW.
13/14 & 16 are right on. If what was reduced to writing wasn't what the parties agreed on, and everyone agrees to that, then it's a scrivener's error and can even be corrected by a court!
And, didn't anyone else learn the "can't snap it up" rule in Contracts I? Unilateral mistake usually isn't enough to undo a contract, but if one party makes a unilateral mistake and the other party knows or reasonably should know that the other party is mistaken, than the party with knowledge can't "snap up" the benefit of the bargain.
RESTATEMENT (SECOND) 153!
second on genger thread! I rule!
The duty to defend is greater than the duty to indemnify. Has the carrier declined coverage? Is PE as rich and worldly as he claims?
43 giant douchery at the end.
Insurance dudes: How is a claim of this nature excluded under any sort of sane E&O policy? Nice discussion @39-40. I'd be interested find out what Strook''s deductible is here or if they have to co-pay anything.
Could someone please give me a status update on the ship? Last I checked she was sailing fast and true.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
DETRIMENTAL RELIANCE, yo.
When I received an offer from one McDermott Will & Emery to join da trial dept., the income partner in DC who recruited me said "ALL da bitches be hot, yo." He suggested that I could get some intraoffice whoopie wit da hoes. What he meant to say, he later confessed, was "NONE da bitches be hot, yo." So now I'm stuck in at a shitty office billing all my time to 009900. I'm gonna sue his sorry ass like Strook be sued.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
1.) Sounds like a mutual mistake that was not caught by Stroock or the firm that was handling the transaction for the other side. But, it was seized upon by some other lawyer not rersponsible for drafting the document. Sort of an a..hole move if you aske me and 2.) if anyone ever tried to turn this into litigation, the Error and Omission carrier would defend and indemnify so long as Stroock did not know about this problem before it renewed its policy or otherwise failed to disclose the issue to the insurer during the application process. Barring that, Stroock will be fine....
Typical legal malpractice insurance policies contain a scope of coverage clause which reads: "This policy shall cover those acts and conduct relating to the rendering or failure to rener professional legal services." Drafting a contract is a professional legal service (sometimes used an example in the policy language) and therefore the "typo" which really amounts to negligence, should be covered by any typical policy. Of course, I do not know where Stroock gets it insurance from.
46 - for uni-mistake the "knew/should have known" is measured at the time of contracting. In any case, you have a highly sophisticated developer, with a contract drafted by a huge law firm, dealing with an individual (albeit wealthy) buyer. The buyer had no clue about the term relating to the first close. If it is mutual mistake, and if it is material, with neither party bearing the risk, the whole contract goes away. That's a bad result too. I think that is what I learned in Barbri.
It is obviously a scrivener's error. That does not mean the court is just going to side with the "big boys" and blue pencil the contract with this much money at stake.
This is what happens when a firm makes associates work 80+hr weeks drafting Ks. Suits them right for treating young lawyers worse than inmates. Wachtell had a similar issue in the JPM/BS deal
The insurance company almost always initially denies commercial coverage claims based on some technicality, like they did not receive proper notice of the claim....for the obvious reason that it is cheaper not to pay. Since this issue does not involve providing counsel to a bunch of tech start-up losers wearing skinny jeans in the Village, Strook will likely have to hire another firm to advise the insurance company that case law does not recognize such denials and possibly threaten a DJ action for coverage. Things start moving at that point.
As I understand it, the "typo" wasn't in a contract. it was in the offering plan, prepared by the developer and filed with thge NY AG. nothing at that time to be 'negotiated' with potentional purchasers - those who entered into contracts and are now seeking to exercise their recission rights under the plan.
it is not clear that it is a scrivener's error. thi sis not like the US Lines case, where Dewey, representing the lender, took a pass on a financing statement that dropped a few 000s... ooops.
should Strook get the same break as Dewey?
If Stroock had a "claims-made" policy, and the claim was not made and reported to the insurer within the policy period, there will be no coverage.
Why you would have such coverage when you engage in deals spanning several years, is a mystery.
In any valid contract, you must have a meeting of the minds. Here there was no meeting of the minds. Thus no valid contract.
Sound legal advice from Hastings grad '02 (rank: 401/403) - currently a mortgage broker.
60,
this is not a "contract" but instead the publicly available offering plan. It is separate from the sale contract.
That said, courts do interpret offering plans similar to contracts. We will see . . .
1. Contracts do not require a meeting of the minds, only an outward manifestation of an intent to be bound (see first semester contracts).
2. The buyers of the property would be thrilled for a court to rule there was no contract or "meeting of the minds". They are not trying to get damages, they only want their deposits returned (which would happen if a contract was not formed).
Didn't the original article say that the one year date was determined by an NY statute? What if the erroneous sentence read, "As provided by [Relevant NY statute], if blah blah blah is not . . . by September 1, 2008, then . . .", but if you read the statute cited, you'd know that the 2008 date was an error?
I worked at stroock - for the partner that made the error. She was a nightmare to work for and a wackadoo. I contemplated suing her and the firm for harassment but decided against it as I knew our paths would cross in the future as the condo world is pretty small. Any partner who could only write with "squishy pens" needs extra help. The way she runs her operation I am not surprised in the slightest that the error was made or was not caught.