U.S. Magistrate Judge Valerie Figueredo recommended imposing sanctions on China AI Capital Limited, a shareholder of a Chinese software company, for their unsuccessful $180 million Legal Malpractice Lawsuit against Dla Piper and attorney Caryn Schechtman. The case, which spanned 32 pages, was dismissed as lacking merit and was perceived as an attempt to harass the renowned global law firm.

China AI Capital alleged that as a shareholder in Chinese software company Link Motion, it suffered harm due to DLA Piper’s purported failure to adequately defend Link Motion against a shareholder lawsuit in 2018, leading the company into receivership. DLA Piper withdrew from representing Link Motion in the case merely four months after it was initiated.

However, the tide turned during the proceedings when DLA Piper’s lawyers from Gibson, Dunn & Crutcher presented crucial evidence through text messages. The messages showed that before and immediately after filing the shareholder lawsuit, Caryn Schechtman, the attorney representing Link Motion, diligently sought guidance from the company’s officers on how to proceed. Additionally, she inquired about payment for past services rendered. Unfortunately, Schechtman’s efforts were met with silence, underscoring the fact that DLA Piper was not responsible for any alleged negligence in the matter.

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Judge Figueredo thoroughly examined the deficiencies in China AI Capital’s claim and concluded that the sole plausible purpose of pursuing the lawsuit was to harass DLA Piper. As a result, she recommended sanctions against China AI Capital, signaling a significant setback for their case.

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DLA Piper’s defense was swift and strong from the onset, with Kevin Rosen, a partner at Gibson Dunn who represented DLA Piper and Schechtman, dismissing the claims against the firm as frivolous. Rosen expressed gratitude for the court’s thoughtful and comprehensive opinion, affirming the firm’s position that they acted responsibly and diligently in their representation of Link Motion.

Conversely, Rosanne Felicello of Felicello Law, representing China AI Capital, expressed discontent with Judge Figueredo’s recommendation and stated their intention to object to it. Felicello argued that the recommendation deviated from Second Circuit law and lacked support from the case’s record.

This recommendation by Judge Figueredo follows closely on the heels of U.S. District Judge Victor Marrero’s dismissal of Link Motion’s own legal malpractice lawsuit against DLA Piper. The court ruled that Link Motion filed the lawsuit too late, effectively ending their pursuit of the claim. Despite this, China AI Capital, represented by Felicello Law, voluntarily dismissed their own legal malpractice lawsuit in September only to revive it shortly after Judge Marrero’s ruling in Link Motion’s case.

Judge Figueredo emphasized that China AI Capital’s decision to revive the lawsuit was “patently meritless” considering that Link Motion had already lost on its claims. The revival was effectively baseless, as no derivative claim remained for China AI Capital to pursue.

As the legal battle unfolded, it became apparent that DLA Piper had diligently represented Link Motion’s interests and acted responsibly in their legal defense. The sanctions recommended by Judge Figueredo signify a decisive victory for the global law firm, further strengthening their reputation as a respected legal powerhouse.

It remains to be seen how U.S. District Judge Victor Marrero will rule on the recommendation for sanctions against China AI Capital Limited. As the legal landscape continues to evolve, the outcome of this case could have far-reaching implications for shareholder lawsuits and legal malpractice claims in the future.

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