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Attorney Conflict of Interest, Divorce Example

When attorneys put their own interests ahead of their clients, that can be seen as an attorney conflict of interest and can be also be judged as malpractice. A divorcee in NYC claims that's exactly what happened to her.

Blank Rome sued for malpractice in ex-Morgan Stanley executive's divorce case


5/29/2013 - By Casey Sullivan - Thompson Reuters News and Insights

NEW YORK - The former wife of a senior financial services executive at Morgan Stanley has sued the Philadelphia law firm Blank Rome and two of its attorneys, claiming they gave her bad advice during divorce proceedings in order to benefit a client relationship with Morgan Stanley, according to court documents.

The plaintiff, Kristina Armstrong, claimed in a lawsuit filed on May 24 in Supreme Court for the State of New York that Blank Rome partners Norman Heller and Dylan Mitchell committed legal malpractice when they failed to disclose that their firm represented Morgan Stanley in a $400 million transaction.

The plaintiff, a resident of Rye, New York, hired Heller and Mitchell in 2009 to represent her in her divorce from Michael Armstrong, who at the time was head of capital markets and international and domestic private wealth management at Morgan Stanley, her lawsuit states.

A Blank Rome representative said in a statement that the firm "considers the suit to be without any merit" and "intends to defend itself, and the individual lawyers named as defendants, vigorously."

The two Blank Rome lawyers named in the lawsuit did not respond to requests for comment. A Morgan Stanley spokeswoman said on Tuesday that the financial services firm would not comment and that Michael Armstrong is no longer employed with the firm.

Reached for comment on Tuesday, Michael Armstrong said he was "stunned" by his former wife's allegations and that he had no knowledge that Blank Rome had a business relationship with Morgan Stanley. He said he wanted to confer with a lawyer before answering questions about the matter.

'PUPPET MASTER'

The lawsuit also claims that Blank Rome lawyers did not represent Kristina Armstrong's best interests throughout the course of the divorce proceedings. Instead, the lawsuit claims, Blank Rome protected her now former husband and the firm's relationship with Morgan Stanley.

"Mr. Armstrong sat at the controls of Morgan Stanley, which employed and paid Blank Rome millions of dollars in fees, thus allowing Blank Rome to be the ultimate 'puppet master,' as Blank Rome could control Ms. Armstrong's divorce litigation in a manner designed to protect Morgan Stanley," said the 21-page complaint, filed by Jonathan Sack of New York's Sack & Sack.

For example, the lawsuit claims, the Blank Rome lawyers, without consulting Kristina Armstrong, agreed with the defense to not seek possession of Michael Armstrong's securities licenses, which the lawsuit describes as the "single most important economic asset at play" in the divorce, with an estimated value of $12 million to $16 million.

The lawsuit also alleges that the Blank Rome attorneys protected Michael Armstrong after he had been verbally abusive to Kristina Armstrong around March 2010, even threatening to kill her. At that point the Blank Rome lawyers advised her not to call the police because, according to the suit, "it would not reflect well with Mr. Armstrong's superiors at Morgan Stanley."

When asked about the way he was characterized in the lawsuit, Armstrong said in a statement: "These mis-characterizations of me are not only hurtful, but also utterly baseless and untrue."

Kristina Armstrong's lawyer, Sack, said in a statement: "I fully intend to demonstrate that Blank Rome's behavior in this instance transcends conflict of interest rules by putting their own interests ahead of the client."

Kristina Armstrong is seeking $8.3 million in compensatory damages, $25 million in punitive damages and a refund of $240,000 in legal fees.

The case is: Kristina M. Armstrong v. Blank Rome LLP, Supreme Court for the State of New York, County of New York, Case. No. 651881/2013.

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