Law firm DLA Piper has persuaded a U.S. judge to levy sanctions against a shareholder of one of the firm's former clients that brought a failed $180 million malpractice lawsuit against the firm.
U.S. District Judge Victor Marrero in Manhattan on Wednesday upheld a magistrate judge's July recommendation that China AI Capital Limited and its counsel be sanctioned for the lawsuit against DLA Piper, which stemmed from the law firm's work for the Chinese software company Link Motion.
China AI and its counsel at Felicello Law will have to pay the "reasonable costs and attorney fees" DLA Piper incurred in this lawsuit, Marrero ruled.
"We are very pleased that the district court has confirmed what the magistrate judge found as well -- this entire case was and is frivolous, and the plaintiff and their counsel must be held accountable for that," Kevin Rosen, a Gibson Dunn partner who represented DLA Piper and Schechtman, said in an email.
Rosanne Felicello of New York-based Felicello Law said they do not believe the decision is correct and plan to appeal.
For months, DLA Piper has fought allegations that it failed to defend Link Motion from a 2018 lawsuit brought by shareholder Wayne Baliga that forced the company into receivership. DLA Piper withdrew as Link Motion's counsel in the shareholder case four months after it was filed.
China AI, a shareholder of Link Motion, sued DLA Piper in December 2021, asserted that DLA Piper committed malpractice by not arguing that Baliga lacked standing to sue. But by September 2022, China AI voluntarily dismissed its lawsuit against DLA Piper.
DLA Piper's withdrawal from the 2018 shareholder case is also the subject of another legal malpractice lawsuit that was filed by Link Motion, which Marrero dismissed in DLA Piper's favor in May. That case is now being considered by the 2nd Circuit U.S. Court of Appeals, which held oral arguments on Feb. 1.
Both China AI and Link Motion are represented by Felicello Law.
In the China AI case, the company said it should not face monetary penalties because it was not found to have sued DLA Piper in bad faith.
The magistrate judge was not required to make a bad-faith finding, Marrero said in his 47-page ruling.
U.S. Magistrate Judge Valerie Figueredo had found that the "only plausible conclusion to be drawn from pursuit of this litigation is that it was done to harass" DLA Piper.
The case is China AI Capital Limited v. DLA Piper LLP (US), et al., U.S. District Court for the Southern District of New York
For China AI Capital Limited: Michael Maloney and Rosanne Felicello of Felicello Law PC
For DLA Piper: Kevin Rosen, Nancy Hart and Peter Wade of Gibson, Dunn & Crutcher
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