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A case winding its way through the federal and the Connecticut state supreme courts could, if decided incorrectly, make it nearly impossible for clients to hold law firms accountable for malpractice, by creating a new precedent that would enable firms to bankrupt unsatisfied clients by widening the scope of punitive damages claims. The Connecticut Supreme Court is now determining whether or not Jarrow Formulas, a former client of the firm McCarter English, will face a potential multimillion-dollar punitive damages judgment for daring to sue the well-connected firm for legal malpractice without first having paid its final $2 million bill after what Jarrow alleges were a series of self-serving decisions by the firm amounting to malpractice. McCarter & English charged Jarrow over $6 million in fees—$4.7 million of which the client has paid—and costs to defend a misappropriation of trade secrets case that was filed in Kentucky.
Among other things, Jarrow alleges McCarter failed to conduct fundamental third-party discovery on what Jarrow Formulas describes as the underlying plaintiff's vastly inflated, or fully fabricated trade secret value and ghost damages claims. According to Jarrow, the failure to call him to the stand and to conduct the basic discovery on the plaintiff’s $5 million “lost R&D” damages claim negated any possibility of early settlement for a de minimis sum while simultaneously guaranteeing the matter would go to trial. The failure to conduct discovery guaranteed McCarter being able to bill the company millions in fees. Those and other mistakes led to Jarrow Formulas losing a judgment for over $7 million that cost the founder and primary owner, Jarrow L. Rogovin, his company, and his life's work. All costs of that case and the malpractice case to date exceed $24 million in cash. McCarter and English want to take more.
Additionally, McCarter & English are using this case as an opportunity to create a new legal precedent that could open the floodgates for big law firms and plaintiff’s lawyers to take millions from clients in “punitive damages.” The precedent McCarter & English seeks will eviscerate the rights of the average citizen seeking to simply raise a claim against a law firm. McCarter & English’s arguments for a new precedent that would effectively force clients to pay for disputed bills (whatever amount a law firm sends a client) even in the case of malpractice. Practically, this means that law firms could bankrupt a client before they’re ever able to raise a claim.
McCarter & English’s unusual reasoning amounts to certifying the idea that any client who withholds payment for any reason is presumed guilty of malice, entitling them to punitive damages, which are often double the size of what the law firm billed in the first place. It’s easy to see why Connecticut plaintiff's lawyers might hope McCarter is successful in its pursuit.
McCarter & English’s suit against Jarrow is a breach of contract claim. In Connecticut and many other states, punitive damages are unavailable in breach of contract claims where no torts are involved. In its complaint, McCarter did not plead a tort. Yet somehow, the issue of punitive damages made it all the way through this multi-year case and into jury instructions, where the jury was instructed that “punitive damages can be applied to punish.” McCarter & English seeks $3.6 million to punish its former client, as well as $2 million in alleged unpaid legal bills, and millions more in interest. To bring the point home for the average Connecticut consumer of legal services, individuals and businesses, a client who was facing a $2 million dollar lawsuit from his former law firm is now facing a judgment of about $9 million. It’s a precedent every Connecticut citizen and small business owner should be worried about.
After the verdict against his company for misappropriation of trade secrets including a finding of malice, Rogovin withheld payment of McCarter's final bill of some $2 million. The verdict was despite the fact that not a single element of the claimed “compilation” of trade secrets was ever identified. Rogovin’s rationale for not paying McCarter’s final bill of $2 million – including cash flow issues stemming in part from long-standing legal battles -- was primarily his belief that McCarter English’s deliberate strategic failures and negligence at trial were the reasons for his loss. Accordingly, withholding payment fell within the realm of reasonable conduct for any client contemplating a malpractice suit.
During the trial of the breach of contract/malpractice case, McCarter denied that it was aware of Jarrow's precarious financial situation. Jarrow counters that the company and the law firm, particularly attorney Mark Giarratana, had been personally and professionally close for 23 years and that Giarratanna was absolutely informed on a regular basis of numerous intimate details of the corporation’s history and then-current financial condition. Rogovin states that Giarratana had been a friend who knew as well details of Rogovin’s personal life, that they had had dinners and parties in each other’s homes. Giarratana’s trial claim of being unaware of Jarrow’s financial straits was critical to the sinister picture of Rogovin painted by Luis Pepe, McCarter’s trial attorney. There was a large, outstanding bill at the start of the trial in Kentucky. McCarter demanded payment in full but Jarrow paid “only” half of it. With no “proof” other than Giarratana denying he had no knowledge of the company’s finances, Pepe accused Rogovin of being a conniver, that Rogovin deliberately withheld half the payment in anticipation of losing the coming trial. Pepe also claimed that after the loss, Rogovin had McCarter undertake more work with no intention of paying them; hence, malice.
Rogovin says that it was all made up. The facts indicate McCarter never asked Mr. Rogovin to pay off their final remaining half of the bill because they knew Jarrow Formulas was undergoing financial stress. McCarter & English dealt with Jarrow Formulas’ in-house lawyer—who was new to the job—and threatened to quit if they weren’t paid. Jonathan Leventhal, the new lawyer, would have also told Giarratana that Jarrow Formulas had cash flow issues. The half-payment decision was made by Jarrow Formulas’ CFO. It appears Mr. Rogovin had no direct involvement in steering what McCarter ended up getting paid during this period of time. The upshot of this is that these pictures painting Mr. Rogovin as a scheming, conniving man with malign intent made up a significant part of McCarter & English’s strategy and case against their former client. If McCarter & English appears to have assessed that if it could get the jury to believe a tale of Jarrow Rogovin, the scheming man with malign intentions, populating Mr. Rogovin’s mind, McCarter could win. Smearing its client of many years appears to have been McCarter & English’s primary focus in its case.
McCarter & English also focused heavily on another proposition: requiring the jury to believe a number of things, including that Mr. Rogovin deliberately asked McCarter & English for more work after the trial while secretly deciding and secretly knowing that he’d never pay McCarter for it. McCarter & English’s case amounted to a lot of mind reading, and efforts to imagine Mr. Rogovin’s mental state, without much or any evidence to credibly support this theory of the case. Still, McCarter focused on this smear strategy, because it assessed that if they could get the jury to believe it, then they could get the jury to decide Mr. Rogovin exhibited the type of malice that entitles McCarter & English to $4 million more from its client.
But the record reflects that Mr. Rogovin never talked to McCarter attorneys again after the botched trial. In-house counsel Leventhal did. Mr. Rogovin did not instruct his attorney, Leventhal, to take more work for McCarter. In fact, Mr. Rogovin was somewhat off the grid after the trial. That’s because for several days, he left town to be alone and collect his thoughts and decompress after the devastating trial result McCarter & English managed to deliver for Jarrow Formulas, a result which would spell doom for the company’s future. McCarter & English attorneys did not try to contact Mr. Rogovin directly during this time. Since the verdict was read, it appears McCarter attorneys awkwardly avoided Mr. Rogovin. Even in the courtroom after the verdict was announced, Mr. Rogovin stood, clearly in sight, waiting to speak to his attorneys who just badly lost the case they were paid millions for. But they avoided eye contact with Mr. Rogovin, seemingly pretending to not see him, and simply avoided him. McCarter lawyers decided instead to engage in chatting with the plaintiff’s lawyers, congratulating them. Mark Giarratana called Jarrow via telephone an hour or so after the verdict. Jarrow did not answer, texting back, “You couldn’t talk to me during the trial. Now it’s too late. Put it in writing.”
In a chance event that night, Mr. Rogovin happened to accidentally pocket-dial Giarratana, inadvertently leaving a long voicemail. In the middle of a conversation Mr. Rogovin was having in the house of a key trial witness and friend, Mr. Rogovin spoke about McCarter & English’s representation. The voicemail was audible, and McCarter could now hear Mr. Rogovin candidly speaking to his friend about Giarratana and the McCarter & English lawyers who handled his case. The voicemail that Giarratan received included Mr. Rogovin saying, “They didn’t do shit to cut off my damages,” and “It’s called malpractice.” This establishes McCarter & English fully knew Mr. Rogovin’s state of mind, refuting the tale that they were unaware that their client had a problem with their representation, and that they naively continued new work with no sense whatsoever that their client was contemplating a malpractice claim.
Connecticut cases are known for being political shows, not just fora for legal arguments. In this case, McCarter English was allowed to bring in a dubiously qualified, yet highly influential expert witness, James T. Shearin, then president-elect of the Connecticut State Bar Association, to evaluate Jarrow’s malpractice claim. Shearin is now the association’s president. Mr. Shearin, who admitted during cross-examination that he had never tried a trade secrets case, stated that he believed Mr. Rogovin did misappropriate trade secrets, a position that directly contracted the trial testimony of McCarter English as well as their position when representing Mr. Rogovin's company. After Shearin’s blatant attack on Rogovin’s character from the stand, Judge Shea refused to allow Rogovin’s attorney to re-cross. These expert opinions were irrelevant to the issue at hand, no doubt prejudicial, and virtually ignored the elephant in the room: Did McCarter and English commit malpractice? It’s clear that Shearin’s testimony was meant to provide the justification for the jury and then the court to levy punitive damages, and it certainly signaled that the state bar had an interest in the outcome of the case. This raises serious questions about impropriety. Shearin was never asked about McCarter’s ‘no third-party discovery duty’ claim by McCarter’s attorney Luis Pepe, or Jarrow’s attorney. Judge Shea’s face was blank during the legally absurd presentations.
Jarrow Formulas’ post-verdict motions put Judge Shea on his heels, exposing several errors, including the error that punitive damages and the alleged accompanying malice standard had a place in this trial. Connecticut case law is clear: No punitive damages in breach of contract cases where no torts are involved. Judge Shea saw trouble, and in a CYA move certified the legal question to the Connecticut Supreme Court, a bench populated with, inter alia, plaintiffs lawyers. In his certification to the state Supreme Court, Judge Shea curiously included a litany of content prejudicial to Mr. Rogovin, continuing the tradition of cases painting Rogovin as a conniving, scheming, bad man. The curious part of this, however, is why Judge Shea included this type of content in the certification of a legal question. The legal question certified, in sum, is whether law firms can obtain punitive damages from clients in breach of contract cases, e.g., unpaid bills. No comprehensible explanation can be made as to why Judge Shea loaded up his papers to the Connecticut Supreme Court bench with a ton of prejudicing content that smears Mr. Rogovin and has no bearing whatsoever on the issue Shea asked the state court to review.
Judge Shea’s decision to seek certification on this matter raises questions about his motives, given that his decision acknowledges that the case law is clear that punitive damages are not available in breach of contract claims absent an independent tort. In fact, in his certification, Judge Shea more or less admits he does not have a law to rely on to support punitive damages in this case. Why then not just rule? Citizens of Connecticut may want to “read the room.” If Rogovin loses, then no matter how errant a law firm’s services, no matter how clear the malpractice, any client will have to pay the bill no matter what amount the law firm asks for, even without proper notice for things like fee increases, and then face a malice claim in a pro-attorney milieu.
Jarrow Formulas filed a Petition for Writ of Mandamus, seeking to rescind the certification to the Supreme Court and for an order that the trial court should rule in accordance with existing state law. In their Petition for Writ of Mandamus, Jarrow and its attorneys also claim that Judge Shea’s certification to the state supreme court is unconstitutional because it would subvert Jarrow’s due process by cutting off its appellate rights, and that it would be ex post facto, constituting a Bill of Attainder on several premises.
The stakes in this case couldn’t be higher. The deck is already stacked against individual clients who choose to take on a law firm, much less a high-powered law firm, when it has committed malpractice. If the Connecticut Supreme Court allows for the certification of punitive damages in this case, it would undermine existing standards of accountability, which, while imperfect, are a valuable check that provides some recourse for any client looking to be made whole after failures in representation. It would create a scenario where big law firms are allowed to put their extensive professional networks to dictate the outcome of cases and pressure the bench into crushing anyone who might hold them accountable. In rejecting this malicious and opportunistic attempt to crush the little guy, the Connecticut Supreme Court would strike a blow for justice.
It should be noted that recently, the influential Connecticut Trial Lawyers Association (CTLA) applied to file an amicus brief in this case. Why would the CTLA have such an interest in this case? Because it could provide a potential windfall to plaintiffs lawyers who could rake in millions more from the average Connecticut citizen. The lawyer named on the application is a sitting Connecticut legislator, Matt Blumenthal, son of Connecticut Senator Richard Blumenthal. Other attorneys named on the amicus application include those from firms who two sitting justices reviewing this case came from. The political influence machine and economic interests alliances are in full swing.
Why should Judge Shea be rushing to the rescue of McCarter's deficient retainer agreement that did not have a loser pays provision? If a law firm, of all businesses, can't draw up a retainer agreement to its satisfaction, why, twenty-three years later, should that court be coming to its rescue to rewrite a contract? This ruling, if granted, will severely chill the right of petition to the courts of clients who have been disserved by their lawyer.
SEE: McCARTER & ENGLISH, LLP, Plaintiff, v. JARROW FORMULAS, INC, Defendant.
