05 February 2015

The $1.5 Billion Clerical Error

Lawyers for JP Chase Morgan in a deal that loaned $1.5 billion to General Motors, which later went bankrupt, made a huge clerical error, failing to properly document that it had collateral for its loan.  Contrary to their lawyer's assertions on appeal of the ruling in which this mistake came home to roost, this is the normal result under the law and not a seismic shift.

This goof could become one of the biggest attorney malpractice cases in history and could easily wipe out the entire law firm and greatly exceed its malpractice policy limits.  One of my colleagues in my office litigated and won a similar malpractice case, where the right documentation was drafted but never filed, for stakes about 1/1000th as great, which were still hardly chump change.

In these stratospheric deals, where some very simple steps can make an immense difference, failing to be anally attentive to details can be catastrophic for creditors, as it was for JP Chase Morgan.

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