Risk Update

Conflicts & Reputation Risk Management — Tale from a “Decades-long Litigation Saga”

Ex-Client Gets Trial Against Lawyers Who Helped Him Sue Ex-Wife” —

  • “A New York man who sued the attorneys representing him in litigation against his ex-wife can go to trial in federal court on claims the firm placed its interests ahead of his, but not on his claim for attorney deceit.”
  • “A trial is needed to determine whether Ames Ray fully appreciated the potential conflict posed by his law firm’s interest in protecting its reputation when he chose to proceed with Balestriere Fariello as his counsel, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York ruled Thursday.”
  • “Failla’s ruling is ‘but another chapter’ in the ‘decades-long litigation saga’ between Ray and his ex-wife, Christina. In this case, Ray sued his attorneys, John G. Balestriere and Balestriere Fariello, for failing to act in his best interests. Ray says the lawyers were more concerned with preserving their reputation before the judge that ultimately imposed frivolous litigation sanctions than they were with properly litigating his case.”

More history from 2019: “Ray v. Balestriere Fariello LLP” —

  • “In broad summary, Ray alleges that Defendants, who represented him in filing a fraudulent conveyance action in New York state court, failed to advise him of a conflict of interest that existed when the state court announced that it would hold a hearing to impose sanctions on both Ray and Defendants, and then pursued their own interests despite purporting to represent him.”
  • “At no time in considering whether to file a second fraudulent conveyance action against Ms. Ray and Guarnerius did Defendants apprise Ray of a potential conflict of interest that could exist if Justice Ramos were to determine to apportion sanctions between them.”
  • “Ray’s Complaint alleges that Defendants breached their fiduciary duties by: (i) failing to apprise him of the conflict of interest that would arise, and did in fact arise, when Justice Ramos imposed sanctions jointly on Ray and Defendants; (ii) abandoning Ray on the eve of the sanctions hearing; (iii) threatening to disclose confidential and privileged communications to Ms. Ray’s counsel; and (iv) threatening to sue Raimond.”
  • “Ray alleges that Defendants took these actions so that they could settle Ms. Ray’s sanctions claim and avoid Justice Ramos issuing a formal written decision sanctioning them, which decision would no doubt harm their reputations and professional standing. In order to prevent Justice Ramos from issuing a written decision, it is alleged, Defendants waged a campaign to prevent Ray from filing a JL § 487 action against Ms. Ray’s counsel on the theory that a new lawsuit against Ms. Ray’s counsel would hurt Defendants’ chances of settling the sanctions claim.”
  • “Defendants argue that they did not breach their fiduciary duties to Ray because they informed Ray of the potential existence of a conflict of interest as soon as it became clear to them that their interests were no longer aligned.”
  • “Defendants claim that the conflict did not arise until Ray insisted on initiating the JL § 487 action and refused to consider a settlement offer, which conduct Defendants believed to be against both Ray’s and their own interests.”
  • “All the while, however, Defendants were acting in their own interest — pursuing settlement with Ms. Ray’s attorneys to forestall Justice Ramos formally imposing sanctions against them. Not only did Defendants act in their own best interest, without advising their client of the conflict of interest, but they also took actions expressly adverse to Ray: Defendants threatened to sue the attorney representing Ray in the JL § 487 suit against Ms. Ray’s attorneys; threatened to withdraw as Ray’s counsel for the upcoming sanctions hearing; and threatened to disclose their confidential and privileged communications. These actions are enough to establish that Defendants engaged in a chronic, extreme pattern of delinquency.”