By Jerry Crimmins
Law Bulletin Staff Writer

The alleged victim in a legal-malpractice claim against Seyfarth, Shaw LLP fabricated key documents and gave false testimony, U.S. District Court Judge Mark R. Filip said this week.

As a result, Filip intends to grant a motion to dismiss the malpractice claims filed by businessman Michael W. Lynch against Seyfarth and award the law firm its fees and costs from the litigation, he said.

This is one of the least three related cases currently in the courts in which Lynch and his business associates are pitted against Seyfarth.

“Mr. Lynch did repeatedly, intentionally and knowingly give false testimony in this proceeding” in an attempt “to cover up the fact that he had fabricated these documents,” Filip said Tuesday from the bench, according to a transcript of the proceedings.

Filip said he would issue a written opinion within two weeks.

Attorneys Donald A. Tarkington and Stephen Novack of the firm of Novack and Macey LLP represented Seyfarth and Seyfarth partner Edward J. Karlin, in the lawsuit before Filip.

Tarkington also provided the transcript.

In the lawsuit, a realty company is seeking to collect on a $30 million loan to an Illinois company, McCook Properties LLC, for which Lynch gave a guaranty.

Lynch has accused Seyfarth and Karlin of negligently allowing him to sign the personal guaranty on the loan in December 1998, when Karlin and the firm were representing him in the loan transaction.

“Lynch’s position was that he was advised by his counsel that he was signing as a corporate representative and that there was no personal liability for the $30 million loan,” said Eugene E. Murphy Jr., one of Lynch’s attorneys in the case before Filip.

Lynch contended he thought he was signing only as an officer of McCook Properties.

The loan was originally made by Morgan Guaranty Trust Co. of New York, and has since been sold to another firm.

McCook Properties defaulted on the loan and filed for voluntary bankruptcy.

“Lynch said Seyfarth should have to pay the [$30 million] guaranty because they committed malpractice by allowing him to sign a personal guaranty when he thought he was signing a corporate guaranty,” Tarkington said.

Three key documents in the case included a draft of the loan guaranty that purported to support Lynch’s view.

The other two documents were letters describing purported telephone conversations about the guaranty.

“There is overwhelming evidence that the Lynch version of the draft guaranty” and the letters of Dec. 1 and Dec. 28, 1998, “are in fact fraudulent and are forgeries,” Filip stated Tuesday.

The judge had conducted a two-day evidentiary hearing held last week.

Filip also stated, “The court concludes that Mr. Lynch is responsible for the documents’ fabrications.”

Filip said he intends to grant the motion seeking dismissal of Lynch’s claims and the awarding of attorney fees and costs to Seyfarth.

The judge praised the conduct of the attorneys representing Lynch – Murphy of Bryan Cave LLP and John N. Hourihane Jr. of Horwood, Marcus & Berk Chtd. – and said that “[t]he court makes no finding of impropriety on the part of any of Mr. Lynch’s attorneys.”

“This is just the beginning,” Murphy said Thursday.

“This is one piece within one case, and there are two significantly larger cases of malpractice looming out there” in which Lynch and other plaintiffs accused Seyfarth, Shaw of legal malpractice, Murphy said.

All of the disputes stem from the bankruptcy of the McCook firm.

The other two cases are Lynch, et al. v. Shaw, No. 02A1006, before U.S. Bankruptcy Judge Eugene R. Wedoff, with a decision expected on Feb. 15; and a $200 million legal-malpractice lawsuit, Great Lakes Processing v. Seyfarth, Shaw, No. 02 CH 9478, in Cook County Circuit Court.

Reprinted with permission from the Law Bulletin Publishing Company