Playboy Enterprises Inc. claims Sheppard Mullin Richter & Hampton LLP committed malpractice by not advising it to settle a retaliatory-firing lawsuit.
The case is anything but salacious.
Catherine Zulfer initially sued Playboy in 2012, alleging she was fired for refusing to accrue executive bonuses without board approval. After reporting her suspicions to the general counsel and outside counsel, Zulfer was terminated. She sued, and included claims under the Sarbanes-Oxley Act, which generally prohibits firings that retaliate for reporting suspected wrongdoing. Her case went to trial and a jury last year awarded her $6 million in damages as well as attorneys fees.
Now, according to a complaint filed April 17 in Los Angeles state court that was reported earlier by the ABA Journal, Playboy alleges Sheppard Mullin was negligent for failing to recommend that the adult entertainment company settle. The jury award exceeded Playboy’s employment liability insurance, which was capped at $5 million.
The malpractice suit alleges that Sheppard Mullin had underestimated Playboy’s exposure at about $1.5 to $3.2 million.
Sheppard should have known more was at stake, according to the complaint. The company faults the law firm because it “relied on Playboy to determine the appropriate settlement range for the case to communicate to the carrier instead of recommending an appropriate range to be communicated.”
“In the end, we expect vindication and collection of our unpaid fees,” Sheppard Mullin spokesman Ralph Richardson said in an e-mail.
The case is Playboy Enterprises Inc. v. Sheppard Mullin Richter & Hamilton, BC 579105, Superior Court for the State of California (Los Angeles). The whistle-blower case is Zulfer v Playboy Enterprises Inc., 2:12-cv-08263, U.S. District Court, Central District of California (Los Angeles).
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