Client Demands $25M From Law Firms

CHICAGO (CN) - Bryan Cave and three other law firms cost Hilco Capital more than $25 million by negligently advising it to enter into a settlement agreement, Hilco claims in Cook County Court. Hilco says the law firms represented it in a civil matter against Payless Cashways.

Hilco says the law firms advised it to enter into a settlement agreement with AIG Insurance, which provided the first of three layers of insurance for Payless.

Hilco claims its attorneys told it that Federal Insurance, which provided the second layer of insurance, did not have to participate in the settlement and that Federal would be required to pay the balance of any proceeds above AIG's limits.

"The defendants did not advise Hilco that a risk existed that Federal could completely avoid paying Hilco under the settlement agreement if it were to successfully defend Hilco's assigned claim against it on the grounds that that [sic] Federal had reasonably withheld its consent to the settlement agreement," the complaint states.

Hilco, relying on its counsel, agreed to the settlement. But it says Federal fought the claim and the court found that it had not breached it policy.

"The court found as a matter of law that contrary to defendants' advice to Hilco, Federal had no obligation under the law applicable to the underlying case to pay any portion of the judgment because AIG had not tendered its full limits under the low portion of the high-low settlement and because Federal's consent was required before it could be bound to the terms of settlement and judgment, Federal had not consented to the settlement and that its consent was not unreasonably withheld," the complaint states.

"As Federal had not breached its policy obligations and had not consented to the settlement, contrary to the advice of the defendants that caused Hilco to agree to the settlement, Federal had no obligation to pay any portion of the judgment entered in favor of Hilco in the underlying case."

Hilco says the defendants negligently advised it to enter into a settlement agreement without the full participation of all of Payless' insurers, failed to advise it of the risk of entering into a settlement agreement without the full participation of Payless' insurers, negligently advised that Federal did not need to agree to the settlement to be bound by its terms, failed to fully research the law applicable to entering into a settlement agreement without the full participation of all insurers and failed to fully represent Hilco's interest in the underlying litigation.

A spokesperson for Bryan Cave said Wednesday that the firm had no comment on the complaint.

Hilco seeks more than $25 million in damages. It is represented by Michael Flaherty with Flaherty & Youngerman.

Named as defendants are Bryan Cave LLP, Eagel & Squire LLP, The Franklin Law Firm, Kirby McInerney LLP, Terence Thum, Mark Stingley, Bragar Wexler, Lawrence Eagel, Thomas Franklin and Jeffrey Squire.

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