Risk Update

Costly Conflicts — Post Mortem Review of Contract Loss Conflict + $62m Arbitration Award

Posted Dan Bressler

“How To Cost Your Biglaw Firm $62 Million. Not the best way to handle conflicts of interest.” —

  • “You might suffer from imposter syndrome and feel like you have no idea what you’re doing, but at least you didn’t cost your Biglaw firm $62 million. So you’re doing better than Husch Blackwell partner Charles Renner.”
  • “According to reporting by the Kansas City Star, Husch Blackwell found itself on the losing end of an arbitration against engineering firm Burns & McDonnell. The engineering firm blames Husch Blackwell and Renner for losing out on a contract to build the new Kansas City airport, arguing that Renner used his position as outside counsel for the city council to tank Burns & McDonnell’s bid in favor of Edgemoor Infrastructure and Real Estate, a company Renner represented.”
  • “But the story gets even messier — that’s because Husch Blackwell and partner Ken Slavens have represented Burns & McDonnell since 1981. In fact, between 2007 and 2017, Husch Blackwell sought conflict of interest waivers 11 different times from Burns & McDonnell, something that weighed in the engineering firm’s favor, according to the arbitration panel.”
  • “Renner was quoted in a May 12, 2017, KSHB story on the airport proposal and was critical of it. This raised the attention of Burns & McDonnell’s in-house counsel who asked Slavens about it. However, internal documents quoted in the arbitration panel’s decision reveal Renner denied talking to the press about the airport project, writing to Slavens, ‘I never spoke to that reporter other than to decline an interview. I have made no comment about the bidding process on this deal to the media at all.'”
  • “But that’s not what the documents reveal. In fact, the panel wrote, ‘Renner intentionally misled Husch’s client about his activities,’ because he certainly seemed to have a lot of opinions on the project he was sharing with the press.”
  • “These actions were particularly noteworthy to the arbitration panel, as they wrote, ‘There is no dispute that Renner knew that Burns & McDonnell was a client of the Husch law firm. His failure to disclose comments he had made to members of the City Council is a violation of his duty of loyalty to the firm’s client.'”
  • “Renner’s work on both sides of the negotiations — as the city’s outside counsel while at the same time doing work on the airport project for Edgemoor — was in conflict with the firm’s longstanding obligations to Burns & McDonnell.”
  • “Edgemoor was awarded the airport contract with members of the city council testifying that they were told by Renner they couldn’t vote for Burns & McDonnell’s proposal since it was out of compliance with city’s master bond ordinance. That master bond ordinance was later amended when it was discovered the winning bid from Edgemoor was out of compliance with it.”
  • “Because the dispute was resolved via confidential arbitration, neither party has offered a comment on the case.”
  • “The arbitration panel awarded Burns & McDonnell $62 million, which equals the profit they expected if awarded the airport contract.”
  • “And professional responsibility law professors were gifted a wild set of facts they can pull hypos out of for years to come.”