Mayer Brown Off the Hook for $1.5 Billion Clerical Error
Unbeknownst to the parties to a General Motors loan payoff, a security interest held by a consortium of lenders in a $1.5 billion loan was canceled due to an error by a its law firm’s paralegal at Mayer Brown. JP Morgan bank, represented by another firm, acted as an agent for two different groups of lenders. The astronomical error was finally discovered when GM filed for bankruptcy and the parties scrambled to determine the legally responsible party. The lenders sued Mayer Brown, not JP Morgan or its law firm, claiming legal malpractice and negligent misrepresentation. The Seventh Circuit found Mayer Brown had no duty to the plaintiffs, rejecting their theories that, (1) JP Morgan was a client of Mayer Brown in unrelated matters and thus not a “third-party nonclient,” (2) even if JP Morgan was a “third-party non-client,” Mayer Brown assumed a duty to JP Morgan by drafting the closing documents, and (3) the primary purpose of the GM-Mayer Brown relationship was to influence JP Morgan. Such theories promote an impossible and unwaivable conflict of interest according to the court.