Here is a post from NY Lawyer:
In April 2003, Steven Garfinkel, the chief financial officer of DVI Inc., wrote a memo to chief executive officer Michael O’Hanlon about the crushing liquidity crisis facing the health-care finance company and its implications for a pending stock float. The CFO urged his boss to talk as soon as possible to the company’s main outside lawyer, John Healy, a partner in the New York office of Clifford Chance.
As for Clifford Chance, it is now facing two lawsuits in federal court in Philadelphia charging that it participated in the fraud at the company. One is the familiar shareholder class action, which is also targeting Merrill Lynch and Deloitte & Touche. The other suit, however, is by DVI itself, or, rather, the bankruptcy trustee overseeing the fallen company’s estate. Trustee Dennis J. Buckley requested $2 billion in damages from the London-based law firm in a complaint filed in March 2006.
Though they garner fewer headlines, such bankruptcy trustee suits have largely replaced shareholder class actions in the nightmares of law firm managing partners. These suits are often better-funded, better-lawyered and, with the U.S. Supreme Court likely to further limit third-party liability in securities fraud cases, they may soon have a distinct legal edge as well.
"These are the lawsuits firms are most worried about now," said Michael Carlinsky, a partner at Quinn Emanuel Urquhart Oliver & Hedges who is representing Marc S. Kirschner, the bankruptcy trustee of failed commodities brokerage Refco Inc. in a $2 billion suit against the company’s former lawyers at Mayer, Brown, Rowe & Maw, among others.
Indeed, the journey of Enron Corp. law firm Vinson & Elkins illustrates the shifting landscape of law firm liability. The Houston-based firm vigorously fought the high-profile securities fraud suit brought against it by former class action king William S. Lerach, getting off scot-free with a voluntary dismissal in January 2007. But last year Vinson & Elkins quietly paid $30 million to Enron’s bankruptcy trustee, who never formally filed suit against the firm.
Law Firms as Targets
While securities class actions are brought on behalf of shareholders, bankruptcy trustee suits are brought for the benefit of creditors, the biggest of which are usually banks and investment funds. These creditors have grown more aggressive about recouping losses, lawyers say, with trustees acting accordingly. "