Legal Malpractice or Free Speech? A Law Firm’s Press Release After a $6 Million Settlement
Image source: Pexels.com
Ever wonder what happens to lawyers who make mistakes? Alternatively, when they say something that could be construed as deceptive or defamatory. No, you’re not by alone. I’ll tell you about a recent case that included concerns with both legal malpractice and free expression in this blog article. This intriguing tale demonstrates the intricacy and deviousness of the legal system.
The Background of the Case: A Lawsuit Against Zest Finance and Its CEO
A group of former Zest Finance employees filed a lawsuit against the firm and its CEO, Douglas Merrill, in 2018 on a number of grounds, including fraud, breach of contract, and wrongful termination. Zest Finance, a company that offers software for online lending, was accused by the plaintiffs of engaging in unethical and illegal practices, including charging exorbitant interest rates, discriminating against borrowers based on their gender and race, and fabricating data to mislead regulators and investors.
Pierce Bainbridge Beck Price & Hecht LLP (Pierce Bainbridge) was the law firm that the plaintiffs chose to represent them. As “the fastest growing law firm in the history of the world,” Pierce Bainbridge was a relatively new and aspirational firm. John Pierce, a dynamic and contentious attorney with experience at illustrious firms like Quinn Emanuel and Latham & Watkins, was the firm’s leader.
Seeking more than $100 million in damages, Pierce Bainbridge filed a lawsuit in the Los Angeles Superior Court against Zest Finance and Merrill. The complaint was rife with dramatic claims and colorful language, referring to Merrill as “a modern-day snake oil salesman” and Zest Finance as “a house of cards built on lies, deception, and discrimination.”
The Press Release and the Counterclaim: A War of Words
Pierce Bainbridge published a press release on its website and PR Newswire, a service that disseminates news to online publications and media sources, shortly after filing the case. In addition to adding additional charges, the press release restated a few of the ones in the lawsuit, including the charge that Merrill used corporate cash to cover “drugs, alcohol, ‘adult entertainment,’ and international travel with his girlfriend.”
“Zest Finance is a perfect example of the rot that infects Silicon Valley,” John Pierce was also quoted in the press release. The core of Zest’s business strategy is evading the underprivileged and marginalized. Furthermore, the company’s CEO, Douglas Merrill, is a shining example of corporate dishonesty and avarice.
A lot of journalists and bloggers were interested in the press release, so they wrote about it and frequently linked to or cited it in their blogs and articles. The following were a few headlines:
“A former CIO at Google is accused of using company funds for drugs and sex workers.”
“Millions of dollars taken from investors and employees by a former Google executive.”
Allegations Against Zest Finance of Stealing from the Poor and Prejudicing Minorities
Merrill and Zest Finance expressed dissatisfaction with the media coverage and the press statement. They counterclaimed against Pierce Bainbridge and the plaintiffs, claiming trade libel, unfair competition, and defamation. They rejected the accusations. They accused the press release of being malicious, deceptive, and misleading, and that it was a part of a plot to demand money from them.
The Settlement and the Malpractice Claim: A Twist in the Tale
In 2019, the matter took an unexpected turn when the plaintiffs and Pierce Bainbridge reached a $6 million settlement with Zest Finance and Merrill. The fact that this was only a small portion of what they had first requested cast doubt on the veracity of their assertions.
Still, the controversy did not end with the settlement. Indeed, it gave rise to a fresh one. A malpractice claim was made against Pierce Bainbridge by David Johnson, a former chief operating officer of Zest Finance and one of the plaintiffs. Johnson claimed that the firm had forced him to accept the settlement and had hidden a conflict of interest.
Pierce Bainbridge was facing a lawsuit from a litigation funder that had financed the company millions of dollars, and Johnson alleged that this was a financial incentive for the firm to settle the case swiftly. Because Pierce and Merrill had both attended Stanford University and shared friends, Johnson further asserted that Pierce Bainbridge and Merrill were personally acquainted.
In addition to failing to disclose and get his approval for the conflict of interest, Pierce Bainbridge was accused by Johnson of violating its fiduciary duties and professional ethics by forcing him to accept a lowball settlement that did not fairly represent the value of his case. Johnson wanted to sue Pierce Bainbridge for damages and to revoke the settlement.
The Free Speech Defense: A Legal Shield
In accordance with California’s anti-SLAPP law, Pierce Bainbridge filed to dismiss the malpractice claim after rejecting it. The term “strategic lawsuit against public participation,” or “SLAPP,” describes legal actions taken with the intention of intimidating or silencing opponents by making them bear the expense and inconvenience of a protracted legal battle. If the defendants can demonstrate that the case is based on their exercise of their petition or free speech rights, they can swiftly dismiss these types of litigation under the anti-SLAPP Act.
Because Johnson’s malpractice claim was predicated on the company’s press release, which was a protected form of free expression, Pierce Bainbridge contended that the claim constituted a SLAPP. Pierce Bainbridge asserted that the press release accurately and fairly reported the complaint, which was both a court case and a matter of public record. Additionally, Pierce Bainbridge asserted that the press release was an opinion based on facts that had been made public and was therefore immune to defamation lawsuits.
The Court’s Ruling: A Victory for Pierce Bainbridge
Johnson’s malpractice suit was dismissed by the court based on the anti-SLAPP legislation, in agreement with Pierce Bainbridge. The press release was determined by the court to be a protected form of free expression, and Johnson was judged to have failed to demonstrate a reasonable chance of winning his case.
Due to its accurate summary of the claims and lack of any new or misleading material, the court determined that the press release was a fair and true representation of the complaint. The press release had terms like “alleged” and “claimed,” which suggested that it was not presenting facts. It also included a link to the lawsuit, allowing readers to make their own decisions. These factors combined led the court to conclude that the statement was an opinion based on disclosed facts.
Johnson claimed that because some details were missing or misrepresented in the press release—such as Merrill’s denial of the accusations and the fact that several of the plaintiffs had been fired for cause—the announcement was deceptive or malicious, but the court rejected this claim. The court ruled that Pierce Bainbridge was not required to defend or advance Merrill or ZestFinance, nor was it required to give all relevant details or offer both sides of the issue in the press release.
Additionally, Johnson failed to provide evidence that the purported conflict of interest affected the press release’s content or tone or that it had an impact on the settlement decision, therefore the court dismissed his claim that Pierce Bainbridge’s conflict of interest tainted the statement.
The court concluded that Johnson’s malpractice claim was an attempt to punish Pierce Bainbridge for exercising its free speech rights, and that it was not a valid basis for challenging the settlement. The court awarded Pierce Bainbridge its attorney fees and costs for bringing the anti-SLAPP motion.
The Takeaway: A Lesson for Lawyers and Clients
This case demonstrates the nuanced and contentious ways in which free speech and legal negligence can overlap. It demonstrates that although solicitors have the freedom to discuss their cases in public, they also have an obligation to skillfully and morally represent their clients. It also demonstrates how clients must respect the freedom of speech of their solicitors while maintaining the right to object to the actions of their representatives.
You should be aware of the advantages and disadvantages of making or reacting to a press release if you are a client or a lawyer involved in a legal dispute. The anti-SLAPP statute and its potential impact on your case should also be known to you. And before to making any legal decisions, you should always seek legal advice from a knowledgeable and competent attorney.
I hope you found this blog post interesting and useful. I appreciate you reading!
0