Jury Renders Malpractice Verdict in Landmark Woodley Road Case

The malpractice case stemmed from what Starwood alleged was the law firm's mishandling of the 2660 Woodley Rd. Joint Venture et.al. v. ITT Sheraton Corp. case. In 1999 a jury awarded the former owners of the Sheraton Washington Hotel more than $50 million in damages. The damage award against ITT Sheraton was later reduced to $39 million. Starwood Hotels is the parent company of the Sheraton hotel chain.

In the 1999 Woodley Road decision, the owners of the Sheraton Washington Hotel claimed that Sheraton, as managing agent, was improperly operating a purchasing program at the hotel and had breached its fiduciary duties and management contract.

The jury verdict handed down on Sept. 19 found that the LeBoeuf law firm was negligent in a number of ways in its defense of the Woodley Road case and that the firm's negligence was the cause of the Woodley Road jury's award of punitive damages, Starwood officials say. The verdict requires that the LeBoeuf law firm pay the punitive damages award.

At present, the punitive damages award has not been set since Starwood is appealing the 1999 verdict. That case is now before the Federal Court of Appeals for the Third Circuit. At present, the effective amount awarded by the recent New York State Supreme Court jury verdict to Starwood is approximately $21 million, company officials say.

"We have long maintained that the Woodley Road ruling was the result of bad lawyering, not bad behavior on the part of Sheraton," said Kenneth Siegel, Starwood's executive vice president and general counsel. "The fact that the case was precedent setting in the industry, and may have led to other similar lawsuits, made our case against LeBoeuf all that much more important. We are pleased with the jury's decision and feel vindicated."

The law firm of LeBoeuf, Lamb, Greene & MacRae LLP released a statement that says that it was "disappointed by the jury's verdict in the ITT Sheraton (now Starwood) case and intends to seek to overturn this verdict as legally erroneous."

The statement goes on to say, "The jury rendered its adverse verdict on just one claim, which LeBoeuf adamantly denies. On this claim, Sheraton had alleged that LeBoeuf should have argued an advice of counsel defense to protect Sheraton from a punitive damage award in the underlying case, and the jury apparently agreed with this position. The jury's verdict, however, does not include any monetary award as damages because of the pendency of an appeal of the underlying case, the results of which could vitiate or eliminate the verdict against the firm."

The law firm continued that it believed its lawyers "performed well above professional standards and that the adverse jury verdict in the underlying case resulted from the merits of the client's case and not the performance of the LeBoeuf lawyers."