BDO Seidman, LLP v. Morgan, Lewis & Bockius, LLP
2014 D.C. App. LEXIS 106
| D.C. | 2014Background
- In 1999 BDO created TSG, a limited-liability entity managed by three BDO senior partners (the Individuals).
- The Individuals retained MLB to negotiate compensation/indemnification for themselves in connection with TSG and MLB already represented BDO on other matters.
- BDO signed a conflict waiver; MLB later analyzed risks for the Individuals without informing the rest of BDO.
- MLB identified risks (IRS scrutiny, civil/criminal liability, conflicts) and kept details from other BDO partners; bills for risk analysis were paid without standard review.
- In 2000 IRS notices and later summonses involved TSG; MLB helped defend but did not disclose the risks to BDO; a memorandum about criminal penalties circulated only among a few.
- BDO settled a related class action in 2005 for over $21 million; in 2009 BDO sued MLB for legal malpractice, fiduciary breach, and fraud; the trial court granted MLB summary judgment on statute of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether partner knowledge imputes to BDO | BDO | MLB | Yes; knowledge of non-Individuals imputed to BDO under § 29-601.03(f). |
| Whether BDO was on inquiry notice before 12/30/2005 | BDO | MLB | BDO on inquiry notice by 2005; suit time-barred. |
Key Cases Cited
- Diamond v. Davis, 680 A.2d 364 (D.C. 1996) (inquiry notice focus on plaintiff’s diligence, not defendant’s misconduct)
- BCCI Holdings (Luxembourg), S.A. v. Clifford, 964 F. Supp. 468 (D.D.C. 1997) (imputation and conflicts concerns in corporate contexts)
- Allegheny Health Educ. & Research Found. v. PriceWaterhouseCoopers, LLP, 989 A.2d 313 (Pa. 2010) (imputation/limitations in professional-liability context)