Peterson v. Katten Muchin Rosenman LLP
United States Court of Appeals for the Seventh Circuit
792 F.3d 789 (2015)
Gregory Bell's mutual funds invested heavily through Thomas Petters's operation -- in reality a Ponzi scheme -- while representing to investors that Costco made direct payments to legitimate institutions, even though Petters actually prohibited the funds from contacting Costco directly. Katten Muchin Rosenman LLP (defendant) represented the funds in structuring these arrangements. After the funds collapsed, their bankruptcy trustee, Peterson (plaintiff), sued Katten for malpractice, alleging the firm failed to advise on the risks of the Petters arrangement; the district court dismissed for failure to state a claim.
Whether a transactional lawyer has a duty to advise the client on the different legal forms available to the client and the relative risks that correspond to each arrangement.