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Morgan, Lewis & Bockius Faces Revived $12 Million Legal Malpractice Claim
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Reinstated Lawsuit Challenges U.S.-Based Global Law Firm’s Liability

In a significant legal development, the global law firm Morgan, Lewis & Bockius is facing the revival of a $12 million legal malpractice claim filed by investment company Prospect Capital. The lawsuit, initially dismissed earlier this year, has been reinstated by a New York judge, Justice Margaret Chan. The lawsuit alleges negligence in transactional legal services provided by the law firm.

A Second Chance for Prospect Capital


Justice Margaret Chan, in a ruling made public on Thursday, granted Prospect Capital’s request to reevaluate its complaint, stating that the law firm was liable for negligence in the transactional legal services they provided. The initial dismissal in May had cited a failure to adequately allege that Morgan Lewis’s actions in a loan agreement had damaged Prospect Capital. The judge’s new order acknowledged that she had “overlooked” part of Prospect’s complaint.

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It is important to note that Justice Chan’s new opinion does not delve into the merits of the dispute, as Morgan Lewis has consistently denied any wrongdoing. The burden now rests on Prospect Capital to establish the requisite elements of legal malpractice, including causation and damages. Whether Prospect Capital can successfully demonstrate these elements remains to be seen. Justice Chan’s latest decision, dated October 25, emphasized this uncertainty.

No Immediate Response from Either Side

Representatives from Morgan Lewis and the attorneys defending the firm in the litigation did not immediately respond to requests for comment on Thursday. Similarly, an attorney representing Prospect Capital did not respond to a similar request.

Prospect Capital’s Financial Standing

As of March, Prospect Capital reported having assets of $11.5 billion under management. The investment company filed the lawsuit against Morgan Lewis in October 2022. In the lawsuit, Prospect Capital alleges that Morgan Lewis, a firm with over 2,200 lawyers, mishandled its work concerning a $17 million loan issued in 2014 to a company specializing in recovering unclaimed property. Prospect Capital contends that Morgan Lewis failed to identify a critical change in the loan subordination agreement and made other errors restricting the company’s ability to address an alleged breach in its loan to non-party Venio LLC.

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Morgan Lewis’s Defense

Morgan Lewis’s legal team had previously urged Justice Chan not to reinstate Prospect’s case, asserting that Prospect had already been given a “full and fair opportunity to present all of its arguments.” They also argued that Prospect was unfairly attempting to introduce new allegations at a late stage.

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