LeClairRyan is seeking dismissal of a multimillion-dollar lawsuit brought against the law firm by the former top executive of the bankrupt Richmond-based blood-testing firm Health Diagnostic Laboratory.
LeClairRyan, a national firm with its largest office in Richmond, argues in court filings that Tonya Mallory, the founder and former CEO of HDL, lacks legal standing to bring a malpractice lawsuit against the law firm.
The firm also argues that state and federal laws preclude Mallory from obtaining damages from LeClairRyan to pay for her own multimillion-dollar legal liabilities.
On Friday, Richmond Circuit Judge C.N. Jenkins Jr. heard arguments from Christian & Barton LLP, the Richmond-based law firm representing LeClair Ryan in this case, and from Hall & Sethi, the Reston law firm representing Mallory, on the motion to dismiss the lawsuit.
The judge took the matter under advisement but did not say when he might rule.
In its motion to dismiss Mallory’s lawsuit, LeClairRyan argues it never gave Mallory personal legal advice on federal regulatory matters. Her lawsuit “freely conflates Mallory’s personal interests with the corporate interests of HDL,” LeClairRyan says in its motion.
In response to the motion to dismiss, Mallory’s lawyers say she was a longtime personal client of LeClairRyan and “neither LeClairRyan nor Ms. Mallory ever made a distinction between who was the client and who was not the client with respect to the multitude of advice provided by LeClairRyan.”
Mallory’s lawsuit against LeClairRyan was filed in Richmond Circuit Court in December 2017.
It claims that LeClairRyan gave bad legal advice on HDL’s use of “process and handling” fees to reimburse doctors for taking blood tests. The practice led to a federal investigation of HDL for alleged violations of anti-kickback laws.
Health Diagnostic Laboratory, which had grown to employ hundreds of people in Richmond, settled a federal lawsuit for $48.5 million in 2015, then filed for bankruptcy and sold its assets.
Mallory, who resigned as HDL’s CEO in 2014, also was hit with a $111 million judgment along with other individual defendants in a federal lawsuit. She separately agreed to pay $10 million to settle claims by the HDL bankruptcy estate.
In 2016, LeClairRyan agreed to pay a $20.37 million settlement to the bankruptcy estate of Health Diagnostic Laboratory.