Not one, but two different Biglaw firms are facing a malpractice suit alleging that they failed to properly advise their mutual client. Perkins Coie and Bracewell were attorneys for Electron Trading LLC in the negotiations of a technology licensing agreement with Morgan Stanley. And according to Electron Trading, things didn’t go as planned.
Electron Trading wanted to license its technology for spread trading — which allows investors to simultaneously buy and sell securities in an effort to capture price difference between financial instruments — to Morgan Stanley. Electron alleges two key parts of the proposed deal were limiting Electron’s liability for third-party intellectual property claims and maintaining their right to sue Morgan Stanley in the event of a contract breach. Unfortunately, neither of those terms were in the agreement they actually signed.
As reported by Law.com, the complaint alleges Morgan Stanley lawyers added provisions to the agreement that were… the exact opposite:
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The license agreement was drafted with language that accomplished the opposite result: Electron’s potential liability to indemnify Morgan Stanley against third party claims was unlimited while Morgan Stanley’s liability to Electron for willfully breaching the license agreement was capped at the amount it had already paid Electron.
Electron says that the firms’ failure to inform them of these… incredibly relevant changes was a dereliction of their duties.
As one might imagine given these favorable terms, Morgan Stanley allegedly breached the contract soon after it was executed. And Electron struck out when they tried to take Morgan Stanley to court:
“Electron was left negotiating against one of the most sophisticated financial entities in the world without receiving the basic and necessary legal advice that any reasonable and competent lawyer would have provided,” the malpractice suit said. Electron also alleged that, in light of the shoddy contract drafting, the two law firms caused the company damages that include lost royalties under the licensing pact and the costs of unsuccessfully litigating against Morgan Stanley.
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As the suit is ongoing, neither firm has offered substantive comment, but it will be interesting to see how the case plays out.
Kathryn Rubino is an editor at Above the Law. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).