Anthony Lin of the NYLJ writes:

"The former partners of defunct New York law firm Hall Dickler are facing a legal malpractice suit for failing to advise a company to file for bankruptcy earlier than it did.

The creditors’ committee of VWE Group, a Yonkers-based distributor of corporate greeting cards and human resources forms that filed for Chapter 11 protection in 2004, claims the lawyers advised the company to undertake a series of transactions in 2002 and 2003 that deprived the bankruptcy estate of $4.2 million.

John R. Sachs of Epstein, Becker & Green, who represents the Hall Dickler defendants, said the case could allow a federal court to consider the question of whether lawyers can be held liable for advising on transactions that worsen a bankruptcy situation. The Delaware Chancery Court last year ruled there was no cause of action for "deepening insolvency."

Southern District Judge Colleen McMahon last week withdrew the case from bankruptcy court on the grounds that the malpractice claims were not "core" to the Chapter 11 proceeding. The creditors had sought to keep the matter before Southern District Bankruptcy Judge Adlai S. Hardin"