In 2003, John Whittier started up a hedge fund called Wood River Partners LP. As its sole principal and general partner, Whittier hired Seward & Kissel (S&K) as the fund's legal counsel and the latter prepared the initial offering memorandum and its updates.
On September 30, 2005, S&K resigned as Wood River's counsel -- just a month before the Securities and Exchange Commission pursued civil penalties against Whittier and his hedge fund for purported violations of securities laws.
A group of investors, who had relied upon representations contained in those offering documents and purchased interests in the fund, alleged S&K had breached a fiduciary duty and violated a relationship of trust by continuing to update the offering memorandum when counsel supposedly knew of the company's misconduct.
After the New York County Supreme Court refused to grant S&K's dismissal request, the firm appealed to the Appellate Division, First Department, which found the investors' claims "too conclusory and without a factual basis."
Our State's highest court agreed that the investors failed to provide support for their belief that the lawyers aided or abetted the underlying "fraud." Moreover, without a direct relationship with the group, S&K didn't owe a duty to them.
Who who, who who?
To view a copy of the Court of Appeal's decision, please use this link: Eurycelia Partners, LP v. Seward & Kissel, LLP