Keeping Your Opinion to Yourself

Remember the last time someone told you should keep your opinion to yourself? Or that you shouldn't vouch for potential mobsters who turn out to be FBI agents? It looks like Andrews Kurth LLP could have used similar advice:

Writing an opinion letter could cost Andrews Kurth more than $90 million.

Four stock purchasers allege that Andrews Kurth assured them that a stock sale by Motient Corp., a wireless service provider, did not violate the corporation's governing documents, when in fact the certificate of incorporation prohibited the sale.

Dallas-based investment manager Highland Capital Management and three entities it manages (the Highland entities) sued Houston-based Andrews Kurth on Aug. 22 in Dallas' 101st District Court. In their original petition in Highland Crusader Offshore Partners, et al. v. Andrews Kurth, the plaintiffs allege they relied on an April 15 opinion letter provided by Andrews Kurth when they bought about $90 million worth of stock from Motient in April.

According to the opinion letter, Andrews Kurth acted as special counsel to Motient, a Delaware corporation, in connection with the issuance and sale of 408,500 shares of the company's stock.

"That opinion letter indicated, among other things, that the company had the power to issue the stock and that the stock was properly issued. However, since that time plaintiffs discovered that the stock was void because it was issued in violation of Motient's certificate of incorporation," the plaintiffs allege in the petition.

Well, their motto is "Straight Talk is Good Business," since after all "Straight talk leads to smart choices, fast action and successful results." Except maybe this one time. A cautionary tale for law firms and general counsels everywhere, even if this suit, like so many others alleging professional liability, is without much merit.