A Massachusetts appellate court ruled Friday that Wilmer Cutler Pickering Hale and Dorr must face allegations that it improperly helped the majority owners of a biotechnology company client freeze out the company's minority shareholders.
With the Massachusetts Appeals Court decision, a three-judge panel revived claims that Wilmer and another law firm, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, breached their fiduciary duties to minority owners of Applied Tissue Technologies, a closely held Massachusetts-based company that develops wound care technologies.
The suit, filed in 2015, also targets Wilmer partner Gary Schall and Gunderson Dettmer associate Emma Eriksson Broomhead, lawyers tapped to allegedly help Applied Tissue's majority owner wrest control of the company from minority shareholders. Broomhead, the daughter of Applied Tissue's majority owner Elof Eriksson, used to work with Schall at Gunderson Dettmer and brought Schall into the representation shortly before he decamped for Wilmer in 2012, according to the appeals court ruling.
Dana Curhan, a solo practitioner in Boston who argued for the minority shareholders, said in an email on Friday that the lower court had dismissed the case based on "an extremely narrow view" of the Wilmer and Gunderson Dettmer lawyers' obligations toward his clients.
"It was and is our contention that lawyers cannot willfully blind themselves to their ethical obligations when participating in and in fact orchestrating this type of takeover of a closely held company," said Curhan. "The appeals court agreed, ruling that their conduct could support a finding of a breach of their fiduciary duties, aiding and abetting the wrongful conduct of their clients, and unfair or deceptive practices."
Richard Zielinski of Goulston & Storrs argued the appeal for Wilmer and Schall. He said Friday that Wilmer has no comment on the ruling. Erin Higgins, of Conn Kavanaugh Rosenthal Peisch & Ford, argued the appeal for Gunderson and Broomhead. She didn't immediately respond to a request for comment.
The suit against Wilmer and Gunderson Dettmer traces its roots to a dispute between Eriksson, and the cofounder of the company, W. Robert Allison. After starting the company, both men transferred their ownership stakes to separate family trusts by the time the dispute arose, Eriksson's family owned 75.5 percent of Applied Tissue while the Allison trust owned 22.5 percent. Another 2 percent stake was held by Charles Baker, described in Friday's ruling as a former "key employee" of the company.