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Dismissal of Legal Malpractice Case

Won dismissal of our lawyer-clients in a legal malpractice lawsuit arising from improper advice given in underlying bankruptcy proceedings. Our clients represented the plaintiffs, an individual and her limited liability company, in connection with the filing of two bankruptcy petitions. The plaintiffs were incorrectly advised by our lawyer-clients that, in spite of the filing of a Chapter 7 bankruptcy petition on behalf of the business, the plaintiff could continue to operate her business as usual. As a result of the continuation of the business in violation of the Bankruptcy Code and against the instructions of the appointed bankruptcy trustee, the plaintiff was denied individual discharge, despite her defense that she had relied upon the advice of her counsel. We successfully argued in a case of first impression in Pennsylvania federal courts that, although no Pennsylvania case had yet addressed the effect of a bankruptcy court's rejection of an "advice of counsel" defense upon a subsequent legal malpractice action, the plaintiffs were collaterally estopped from arguing that it was the conduct of their attorneys (our lawyer-clients) that proximately caused both the plaintiff’s denial of discharge as well as ancillary economic harm to herself and her business. The federal district court agreed and granted our motion to dismiss, adopting our analysis in full. No appeal was taken by the former clients or the bankruptcy trustee.

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