A Richmond Circuit Court judge has thrown out a $603 million lawsuit against the LeClairRyan law firm alleging that the firm gave bad legal advice that contributed to the collapse of the Richmond-based blood-testing company Health Diagnostic Laboratory Inc.
On Thursday, Richmond Circuit Judge C.N. Jenkins Jr. dismissed the malpractice case brought by Health Diagnostic Laboratory’s founder and former chief executive officer, Tonya Mallory.
The ruling was made a day after the LeClairRyan law firm announced plans to shut down all of its operations.
Mallory’s lawsuit, filed in December 2017, alleged that LeClairRyan provided poor legal advice from 2008 to 2013 that “led to catastrophic results” for HDL and left Mallory personally liable for hundreds of millions of dollars in damages.
Two months ago, LeClairRyan moved for a dismissal of Mallory’s lawsuit, arguing that Mallory lacked legal standing to bring the lawsuit. The judge had taken the matter under advisement.
LeClairRyan argued that Mallory could not bring a malpractice lawsuit because a jury in a separate federal case in South Carolina already found her personally liable for violations of federal anti-kickback statutes.
In his ruling dismissing the lawsuit, Jenkins agreed, writing that a federal district court had already found that “the plaintiff [Mallory] knowingly engaged in the conduct complained of. Consequently, plaintiff is at least partially responsible for the injuries she sustained. Therefore, plaintiff’s claim for recovery is barred.”
Mallory said she disagrees with the judge’s ruling.
“I’m really confused by the judge’s ruling and don’t understand it,” she said in an email. “Judge Jenkins stated his rationale was because the jury in South Carolina already determined that I did not rely on the attorneys. However, the jury in South Carolina were never instructed to make that decision.”
Lori D. Thompson, general counsel for LeClairRyan, said in a statement: “We are very pleased with the court’s decision and we wish to acknowledge our appreciation for the dedication and skill of our counsel, Craig Merritt and David Lacy of Christian & Barton LLP, who worked tirelessly to represent us.”
HDL, which once employed hundreds of people at a downtown Richmond laboratory, was investigated by the federal government for alleged violations of anti-kickback laws by paying fees to doctors as an inducement to order the company’s blood tests.
HDL eventually settled the federal case for $48 million in April 2015, then filed for bankruptcy, laid off hundreds of employees and ultimately sold its assets.
In 2016, LeClairRyan agreed to pay a $20.37 million settlement to the bankruptcy estate of Health Diagnostic Laboratory.
In shutting down operations, LeClairRyan becomes one of the larger law firms to close in recent years in Virginia and nationally.
The law firm’s decision to close comes as it has faced a decline in revenue and an exodus of lawyers to other firms in recent years, including the departure of its co-founder and former longtime CEO, Gary LeClair, who joined crosstown rival law firm Williams Mullen early last week.
The uncertainty surrounding Mallory’s lawsuit also was a factor in the firm’s demise, legal experts say, but LeClairRyan also is facing other lawsuits, including a pending gender discrimination lawsuit by a former employee.
The firm said its partners had voted to start an orderly wind down of its business, saying it “was in the best interest of our clients, colleagues and creditors.”