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Vindication for (H)all

The powers that be at Choate, Hall & Stewart maintained from the start that a $5 million malpractice suit filed against the Boston mega-firm would quickly and decisively be tossed out of court.

A recent ruling from Superior Court Judge Janet L. Sanders shows that Choate’s prediction was on the money.

Sanders, sitting in Suffolk County’s Business Litigation Session, granted the 161-lawyer firm’s motion to dismiss, finding that plaintiff A. Todd McMahon had no standing to file in the first place.

McMahon accused the firm and a former partner of failing to inform him that a candidate they had recommended for a business partnership had been accused of misconduct in U.S. Bankruptcy Court.

Sanders agreed with Choate’s contention that McMahon, as a former shareholder and guarantor of a holding company, lacked the authority to bring the case to court.

Although several legal claims were presented to Sanders in support of dismissal, Choate’s counsel — George A. Berman of Peabody & Arnold — says Sanders’ ruling on standing made the other issues moot.

The Boston malpractice lawyer says shareholders in close corporations can’t have it both ways: They can’t use the corporation as a shield when it comes to liability for debts, but then seek to assert claims on behalf of the corporation.

“Those who choose to do business in the corporate form must accept both its limitations as well as its benefits,” he says. “[They] cannot choose when to assert the corporation is a separate entity and when to assert it is an alter ego to suit momentary strategic advantage.”

Berman notes that Sanders rejected McMahon’s “ploy” and “essentially ordered [him] to get back into the line of corporate creditors.”

The former chairman of the Board of Bar Overseers says the dismissal shows how unfair it is for media outlets to publicize what he called “completely unsubstantiated allegations of a complaint” as if they were facts.

“Although it was alleged in the malpractice suit that the lawyers had purposefully recommended an executive without disclosing a prior history of fraud, in fact what had not been disclosed was the filing of a two-year-old adversary complaint in an out-of-state proceeding in which the attorneys had no appearance and which was voluntarily dismissed shortly after filing,” Berman says. “Also not reported was the fact that the plaintiffs had successfully negotiated the sale of all of their stock back to the corporation for a substantial profit shortly prior to the corporation’s filing for bankruptcy and that the stock purchase agreement included a release of the corporation and its attorneys.”

McMahon’s Framingham attorney, Christopher Mingace, could not be reached for comment prior to deadline.

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