Superior Court overturns ruling on LeNature's malpractice lawsuit
A state appeals court has overturned a decision by an Allegheny County judge dismissing a 2010 malpractice suit against one of Pittsburgh's leading law firms in connection with the 2006 demise of LeNature's Inc. in Latrobe.
The Superior Court ruled that lawsuit against attorney Sanford Ferguson of K & L Gates and the Pittsburgh accounting firm of Pascarella & Wiker be returned to Allegheny County, where it was filed. Ferguson was hired in 2003 by minority investors who were on LeNature's board of directors.
When the company's chief financial officer and two other finance officials resigned because CEO Gregory Podlucky refused them access to key financial records, the directors hired Ferguson to conduct an internal investigation into allegations of possible fraud and whether Podlucky was siphoning money from LeNature's for his own benefit.
LeNature's produced a line of flavored water, tea and fruit juices until it was forced into bankruptcy, triggering a federal investigation that eventually led to the conviction of Podlucky for stealing $856 million from banks and other lending institutions. He is serving 20 years in a federal prison.
Podlucky's wife, son, brother and other company officials also were convicted of offenses related to the fraud. All are serving prison sentences.
The lawsuit was filed in 2009 by New York attorney Marc Kirschner, the liquidating bankruptcy court trustee charged with recovering money that Podlucky looted from the company, according to court records.
In the lawsuit, Kirschner accused Ferguson of professional negligence, breach of contract, breach of fiduciary duty and negligent misrepresentation for his role in conducting an internal investigation that Kirschner alleges failed to uncover Podlucky's alleged fraud. He said early signs of widespread duplicity at the company were largely ignored by Ferguson, according to records.
When K & L Gates was hired, Ferguson hired Pascarella & Wiker to help with the probe, which resulted in no findings of wrongdoing.
Kirschner claimed that Ferguson had a lawyer-client relationship with Podlucky, but Wettick ruled there was no legal relationship between the two. Instead, the judge said, the contract was between Ferguson and the minority members of the board of directors, who had hired Ferguson to investigate Podlucky.
Kirschner argued that because Ferguson failed to uncover the fraud, Podlucky was able to continue stealing from the company.
"...We conclude that trial court erred in sustaining preliminary objections of defendants as to all causes of action..." wrote Justice John Musmanno. "On this basis, we reverse the order of the trial court and remand for further proceedings."
A spokesman for the law firm did not immediately respond to a request for comment.