Appellate Law & Practice of California reports this legal malpractice case:
"CA1: Legal malpractice claims by 3d-party based on defrauded ponzi scheme fail
International Strategies v. Greenberg Traurig, 06-1790. This case involves a lot of people and firms that I really don’t want to smear. Not because I don’t like smearing, but because I think that most of the defendants here were trying to represent their clients in a good way, but their clients did a lot of bad things. If any of the people involve want to chime in, send me an email and I will prominently post your version of events or the law, or correct anything I got wrong (based on the published opinion.)
The underlying transactions are quite complex. But they ended in their ex-client suing their lawyers. ISG “invested” money with Corporation of the BankHouse ("COB"), who seemed to promise the impossible, and, of course, was a ponzi scheme. COB claimed that it was the victim of another scheme, and its CEO declared that "I have chosen to move to prepare litigation against the parties utilizing the law firm of Greenberg & Traurig [sic]. I have utilized the law firm of Seamin Cherin & Melott [sic] for the criminal assistance against the parties." Specifically, A. John Pappalardo began representing COB, and somehow COB convinced ISG to not independently sue the people that “defrauded” COB, because they would take care of it. Therefore, “ ISG alleges that these representations, and other events that we detail below, led it to believe that Pappalardo was ISG’s legal representative and that an attorney-client relationship had been formed.”
Pappalardo kept telling everyone that he would recover the funds, but he never sued anyone. Eventually, “ISG finally retained outside counsel on November 7, 2001. Through counsel, ISG filed suit against COB and Pomeroy in March 2002. ISG obtained a $10 million judgment in that suit, but the award has proven uncollectible.” Then, ISG sued everyone.