Adlerstein Returns!
posted by Dave Hoffman
Many corporate law professors teach Adlerstein v. Wertheimer as a introduction to Board governance, oppression, and DGCL statutory analysis. The case concerns investors’ attempts to eject founder and CEO Joseph Adlerstein from the Board of SpectruMedix. Because of procedural irregularities in the investors’ plan, and “the fact that Adlerstein was both a director and a controlling shareholder”, Adlerstein won his case in the Chancery Court, and the investors eventually offered him a $1.8 million settlement. That was all back in 2001. Now, Adlerstein is back:
In opening statements on Tuesday in Adlerstein v. Duane Morris, physicist Joseph K. Adlerstein’s attorney, Clifford E. Haines, said Duane Morris was responsible for his client only receiving $200,000 of a $1.8 million settlement with SpectruMedix, the company he founded. And that $200,000, he said, ultimately went toward rising legal bills from Duane Morris. Haines is the name partner with Clifford E. Haines & Associates.
The jury did not hear in opening statements about the fee case that was brought by Duane Morris against Adlerstein when he did not pay all of the nearly $480,000 in legal fees generated by the firm’s representation of him during trial against SpectruMedix and in subsequent settlement talks. That case, Duane Morris v. Adlerstein, was brought in 2003, about a year before Adlerstein filed his legal malpractice claim.
After a bench trial, then-Judge Gene D. Cohen had awarded Duane Morris $315,700 in legal fees to be paid by Adlerstein, according to an opinion in that case. That included the $280,000 that was remaining of the bill plus interest, Cohen said.
The really wild part of the case, however, is the allegation that Chancellor Lamb pressured Adlerstein after he issued his decision to give up a controlling interest in the biotech firm:
[Adlerstein's lawyer] said Adlerstein wanted nothing more than to keep his company, but he was getting pressure from Lamb and his attorneys to sign some sort of settlement agreement . . . In February 2002, a handwritten agreement was created that said SpectruMedix would give Adlerstein $800,000 and a limited stake in the company . . . but Adlerstein decided after he signed that he wanted to be able to independently sue the other two board members . . . [he later agreed to a settlement, but the payments went right to Duane Morris to satisfy his legal bills, and he was told that he couldn't sue "SpectruMedix over the contract because the company would have filed for bankruptcy and [investor] Reich would have taken all of the remaining proceeds.”]
Since the original case was sparked by a fight between Reich and Adlerstein, it doesn’t seem all that surprising that this bitter fruit of the litigation tree also revolves around that relationship. In any event, interesting reading. Thanks to reader J.D., a former student, for the tip.
February 8, 2008 at 3:58 pm
Posted in: Corporate Law
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Responses (2)
Lilu - February 8, 2008 at 4:03 pm
Good blog
Larry Hamermesh - February 25, 2008 at 8:25 am
Talk about biting the hand that feeds you! There are plenty of rational lawyers who think Vice Chancellor Lamb should never have given Adlerstein a reprieve in the first place.
Thanks for the update, Dave –
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