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Appellate Court Undoes $34M Verdict in Holland & Knight Fraud Case

In 2010, Holland & Knight LLP was sued by a real estate investor who claimed the law firm acted fraudulently during a number of real estate transactions that involved Shi Shailendra, an Atlanta-area developer. The original case result was a $34.5 million jury award to be paid by the firm to the plaintiff, Rahim Sabadia. However, in a legal turn of events, a California Court of Appeals recently reversed the decision, citing a lack of evidence of any wrongdoing on part of the defendant.

Is Failure to Warn of Risk the Same as Fraud?

According to the appellate court’s ruling statement, Sabadia did not adequately show that Holland & Knight would have known of Shailendra’s own misconduct. The claim stated Shailendra “skimmed”, “siphoned”, “misappropriated”, and otherwise misused funds, costing the plaintiff considerably. As the appellate court panel of three judges was not convinced of a link between Holland & Knight and Shailendra’s apparently wrongdoing, it undid the previous decision and recommended a new trial.

The original complaint filed by Sabadia and two others argued Holland & Knight did not warn them of the “risks of investing” with Shailendra and of certain pieces of real estate investments. It also said the firm hid information that could have revealed unsavory or dishonest business practices on behalf of Shailendra. All of the accusations amounted to legal malpractice, constructive fraud, breach of fiduciary duty, and more.

Errors Argued in Appeal

Holland & Knight had its first attempt to reverse the unfavorable jury verdict rejected by a trial court judge. It pressed the issue with an appeal to higher courts. The firm argued the decision was erroneous due to jury instructions regarding the actual damages in the case. It also found error in some of the jury’s reasoning. In particular, the verdict seemed to hinge upon the only supposed evidence of the firm’s apparent knowledge of Shailendra’s wrongdoing, which amounted to little more than a single $51 legal service fee between the two parties.

Holland & Knight has commented it anticipates the upcoming trials, if any are actually approved. Sabadia has not yet given an official response to the public.

The case (Sabadia et al. v. Holland & Knight LLP, case number B242773, in the Court of Appeal of the State of California, Second Appellate District) is noteworthy in that it includes both real estate law concerns and general litigation issues. Furthermore, it has upheld evidentiary standards that must be met in order to satisfy legal requirements in legal malpractice and fraudulent representation cases.

(More information about this recent story can be found on Law360 by clicking here. Login or membership may be required.)

Interested in the services of a real estate attorney or commercial litigation lawyer for a case of your own? Zambrano Law Firm in McAllen, Texas can be of assistance. Call (956) 627-0908 to request a free consultation with our highly-experienced and acclaimed legal team.

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