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Former client sues Ropes & Gray for professional negligence

Marketing services company blames its bankruptcy on the law firm

One of Ropes & Gray’s former corporate clients says the law firm acted negligently and ushered it into bankruptcy.

Three years ago, EMAK Worldwide Inc., a marketing services company that represents several advertising agencies, was seeking to prevent its CEO from regaining control of its board of directors. The company turned to the Boston law firm Ropes & Gray for legal counsel on a stock transaction that would grant its preferred shareholders the right to vote in a proxy contest that would give them about 28 percent of the voting power in electing board directors.

But once EMAK implemented the new voting rights, the CEO and his supportive shareholders filed a motion in Delaware Chancery Court challenging the legality of new rules. Under Delaware law, a company’s board of directors can’t make a decision for “the sole or primary purpose of thwarting a shareholder vote” without compelling justification, the motion said.

EMAK agreed to cancel the new voting rules, and a judge ordered the company to pay a $2.5 million fee, which EMAK says forced it into bankruptcy.

In its Aug. 30 lawsuit, EMAK claims Ropes & Gray “breached its duty to exercise reasonable care, skill and diligence to act competently” when it was advising the company. EMAK says the firm’s negligence helped push the company into bankruptcy, which it emerged from last June.

Read Thomson Reuters for more about the lawsuit.

For more InsideCounsel stories about lawsuits against law firms, read:

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Ashley Post

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