Suit-for-fees leads to a counter-suit over a highly publicized matter

WestPark Capital Inc. – an investment banking firm – has been in the news recently for their underwriting of five Chinese companies.  These Chinese companies went public on an American stock exchanges and were subsequently the object of a lawsuit claiming accounting fraud.  Adding to the complexity of the case, Wilk Auslander – the law firm performing securities work for these companies on behalf of WestPark – was not being paid for their work.  Wilk Auslander sued for $250,000 in unpaid fees.  It  has recently emerged that Westpark is counter-suing, alleging that Wilk Auslander performed unnecessary services during the engagement.

Calculated Risk Advisors would like to remind clients of two important risk management points this matter brings up:

First – have a clear engagement letter that outlines the work to be done and the fees associated with the work – especially when the work is non-standard or high risk.

Second – be cautious when suing for fees as many suits for fees lead to counter suits.  It is important to make sure that such counter suits are covered by a firm’s insurance policy since many policies exclude such activity.

Contact a licensed broker today at ProtectLawyers.com if you have questions regarding engagement letter usage or whether your policy covers counter suits.