Hamilton Herald Masthead


Front Page - Friday, February 6, 2015

Give that stupid, incompetent paralegal a raise

Under Analysis

“It was a mistake, and I’m sorry. That’s my story, and I’m sticking to it.”

Mistake, or devious and successful attempt to hoodwink some of the most highly paid attorneys in the world? Only the paralegal involved knows for sure (or perhaps her boss or her boss’ boss). For now, however, the official story was that it was a mistake, albeit one that saved a client over a BILLION dollars. Yes, that’s a BILLION, with a “B.”

The incompetent, or genius, paralegal who is the star of this story worked (and presumably still works) at the mega-law firm, Mayer Brown, and was assigned to work with one of the firm’s commercial transactions associates. That associate was, in turn, assigned by a partner in charge to draft documents to release a security interest held by JPMorgan Chase Bank in virtually every tangible and intangible asset of General Motors, due to the refinancing of a loan with which it was connected. Mayer Brown represented General Motors, not the bank, and thus had an incentive to make sure the entire security interest was properly released. The associate on the file thus instructed our hero paralegal to search the state financing records to find all financing statements that documented the security interest so that they could be referenced in the release documents, thus ensuring the release of the entire security interest.

The paralegal located the two necessary documents, but also “accidentally” included a third document in the resulting report. That third financing statement granted a security interest in GM assets in connection with a different, separate, $1.5 billion dollar loan held by a lending syndicate of which JPMorgan Chase Bank was the notice party of record. That separate interest was unrelated to the transaction or loan on the table, but the paralegal “inadvertently” included the statements pertaining to it in the package she sent to the associate, which caused the associate to then “erroneously’ include those statements, and the related security interest, in the release documents. When the partner in charge reviewed the documents, he didn’t notice the error. Although drafted by GM’s counsel, the documents were to be executed by the bank, since it was the bank which was releasing the security interest. They were thus sent over to JPMorgan Chase Bank’s counsel for review. The bank’s lawyers also did not notice the error. In fact, over several rounds of revisions, review, and comment, nobody ever spotted the supposed accidental inclusion. The documents were ultimately signed and filed, still with no one the wiser.

It wasn’t until years later, in 2009, that the issue arose in connection with the now infamous GM bankruptcy. The lending syndicate claimed it was a secured creditor, but the creditors committee said they were merely unsecured, noting the release document. Litigation ensued, and it was just last week that the effect of the “oversight” was confirmed by the Second Circuit Court of Appeals. Mistake or not, the Court ruled (relying on an advisory opinion from the Delaware Supreme Court), once the release was intentionally filed, it was effective, and the security interest was extinguished.

Since the paralegal worked for the firm that represented General Motors, which benefitted from the gaff, there was no legal malpractice. In fact, I can just imagine the “reprimand’ the paralegal received when the ruling came down.

Associate: “Paralegal X, we now know for sure that that you made a one-and-a-half BILLION dollar error a couple years back when doing work for me. There is no longer any question about it. What do you have to say for yourself?”

Paralegal X: “There really was no excuse, sir. I made a mistake. I take full responsibility.”

Associate: “No, no, no. We’re a team here. I cannot let you do that. You were working under my direction, and I should have spotted it. I will take responsibility. In fact, I will call the partner right now and say it was all my doing. I’ll keep your name out of it.”

Paralegal: “No, it’s okay, really. I insist. I’ll say it was me.”

Associate: “No, I cannot let you do that. I’ll say it was all me.”

Partner, walking in: “Oh, I’m glad you’re both here together. You know, it was just confirmed by the Court of Appeals that we did, in fact, make a $1.5 billion error on that GM deal.”

Associate and paralegal, in unison: “I’m sorry, it was all my responsibility. You can tell everyone it was me.”

Partner, gesturing for them to stop: “Don’t be ridiculous. We’re a team here. You were working under my direction, it was my responsibility. I’ll step forward. You don’t have to worry about a thing. I’ll keep both of your names out of it. I’ll say it was all me. Happy to do it.”

Chairman of Firm Managing Committee, hearing the ruckus, sticks his head in the door: “Ah, glad you’re all here. I just heard about the court ruling on the mistake in the GM case. But don’t worry, I’ll take responsibility for the error. I’ll let Bill, our client contact, know that it was all me, and that I’ll talk to the client and personally take full responsibility. I’ll leave your names out of it.”

Just then, the associate’s computer, and the paralegal and other attorneys’ cell phones all “ding” with the sound of an incoming email. It was from Bill, the firm’s lawyer, who was the General Motors Contact, notifying all 30 offices of the law firm, nationwide, of the Court decision, and taking full responsibility for the “error.” His was the only name mentioned.

Can you imagine it happening any other way?

© 2015 under analysis LLC. Under analysis is a syndicated column of the Levison Group. Charles S Kramer is a principal of the St. Louis based law firm, Riezman Berger, PC. Comments or criticisms about this column may be sent directly to the Levison group at comments@levisongroup.com, or to this newspaper.