Breach of Contract

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7^th Circuit Court of Appeals

Case Name: Oakland Police & Fire Retirement System, et al., v. Mayer Brown, LLP

Case No.: 16-2983

Officials: POSNER, MANION, and HAMILTON, Circuit Judges

Focus: Breach of Contract

This appeal began with a $1.5 billion (with a “b”) mistake in documenting a commercial trans‐ action. The central question is who might be held legally responsible for that mistake. General Motors, represented by the Mayer Brown law firm, entered into two separate secured transactions in which the JP Morgan bank acted as agent for two different groups of lenders. The first loan (structured as a secured lease) was made in 2001 and the second in 2006. In

2008, the 2001 secured lease was maturing and needed to be paid off. The closing for the 2001 payoff required the lenders to release their security interests in the collateral securing the transaction. The big mistake was that the closing papers for the 2001 deal accidentally also terminated the lenders’ security interests in the collateral securing the 2006 loan. No one noticed—not Mayer Brown and not JP Morgan’s counsel.

The district court dismissed for failure to state a claim, holding that Mayer Brown did not owe a duty to plaintiffs, who are third‐party non‐clients. Oakland Police & Fire Retirement System v. Mayer Brown, LLP, No. 15 C 6742, 2016 WL 3459714, at *6 (N.D. Ill. June 22, 2016). Plaintiffs appealed, arguing that Mayer Brown owed them a duty of due care. Plain‐ tiffs offer three theories: (a) JP Morgan was a client of Mayer Brown in unrelated matters and thus not a third‐party non‐ client; (b) even if JP Morgan was a third‐party non‐client, Mayer Brown assumed a duty to JP Morgan by drafting the closing documents; and (c) the primary purpose of the General Motors‐Mayer Brown relationship was to influence JP Morgan. We agree with Judge Gettleman that Mayer Brown did not owe a duty to plaintiffs under any of these theories. We affirm the judgment dismissing the case.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.