Atty's Defeat Of Patent Portfolio Malpractice Claims Upheld

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Practices

By Lauraann Wood

An Illinois federal judge on Wednesday confirmed an arbitrator's finding for a Chicago lawyer and his firm over a former client's claim that the lawyer was one of several who mishandled an underlying business dispute concerning a patent portfolio.

U.S. District Judge Steven Seeger granted lawyer Joseph Siprut and his firm Siprut PC's request to confirm an arbitrator's finding that former client Charles Short III waited too long to bring malpractice claims over Siprut's handling of a lawsuit against Short's former business partner. Judge Seeger said that he granted Siprut's February motion for confirmation because Short didn't object to the request, even though Short "acknowledges that he 'believes that there were errors in the arbitrator's interpretation of the law and findings of fact.'"

Siprut's attorney, Nicholas Gowen of Burke Warren MacKay & Serritella PC, told Law360 on Thursday that he and his client are "happy that Judge Seeger confirmed our arbitral victory ending this four-year-old case and vindicating that Mr. Siprut did not commit malpractice against his former client."

"Mr. Siprut was the second lawyer out of now six who represented the pin a partnership dispute involving a patent portfolio that was originally filed in state court in 2010 based on facts that arose in 2005," Gowen said. "Its unfortunate that the wheels of justice ground so slowly in a case that had no merit, but we received the proper and just outcome."

Representatives for Short didn't immediately respond Thursday to a request for comment.

Short's malpractice suit claims that several different attorneys he hired to litigate his underlying case failed to bring the right claims against the officers and directors of Sidewinder Holdings Ltd. after former business partner Ian Pye defrauded him in the selling of Sidewinder's patent portfolio.

Judge Seeger sent Short's claims against Siprut, his firm and a former associate to arbitration in 2016, finding he couldn't escape an arbitration clause arbitration clause in his representation agreement simply because the firm hadn't informed him of the provision. Short had argued against arbitration, claiming Siprut's failure to tell him about the arbitration clause violated Illinois public policy.

Short's claims remain pending against his former counsel at Chicago firm Strauss & Malk LLP, its attorney Brad Grayson and another of his former attorneys, Ted Donner of Donner & Company Law Offices LLC, all of whom have urged Judge Seeger to similarly find that their former client's claims against them are time-barred.

In separate motions, the firm and attorney argued in May that Short's 2016 claims against them are blocked by Illinois' two-year statute of limitations, which began ticking when a judge permanently axed his underlying contract suit against Pye in October 2013. They also argued that Short should be blocked from arguing his claims are timely in light of the Siprut arbitrator finding differently.

But Short blasted those arguments earlier this month, claiming he didn't know at the time his underlying suit was tossed that Grayson had wrongfully caused the dismissal. He also argued that the arbitrator's ruling shouldn't collaterally stop him from arguing over the timeliness of his remaining claims because the arbitrator's ruling was based on timing, and the merits of the action were never examined.

According to Short's suit, he founded Mobile Information Systems Inc. in 1994. One of the company's principal assets was a series of patents that Short helped develop for displaying vehicle information on a map and that he said are worth millions.

The company eventually went bankrupt, and Short, Pye and two other investors created Sidewinder to buy the patent portfolio in 2001. Pye subsequently engaged in a scheme to gain control of Sidewinder and refused to follow Short's advice to hire a law firm to sue companies infringing on the patents, Short alleged.

By 2004, Short's involvement in the company was limited to that of a minority shareholder and contract consultant. Short said Pye eventually told him that the patent portfolio had been sold and convinced Short to sell his remaining 12% stake in Sidewinder.

But Short later found out the patent portfolio had not been sold at the time he gave up his remaining stake in the company and sued Pye and several others for breach of fiduciary duty and unjust enrichment, among other claims.

The original complaint was dismissed, and his previous firm, Donner & Company Law Offices LLC, filed an amended complaint but withdrew from the suit in 2012. Short then engaged Siprut PC to file a third amended complaint.

Siprut withdrew from representing Short in 2013, leading Short to sign an agreement with Strauss & Malk LLP to file a fourth amended complaint. Strauss & Malk withdrew from the case in 2014.

Based on the performance of the firms in the underlying suit, Short asserted malpractice counts against each of the attorneys, accusing them of failing to bring a derivative action against Pye and officers and board members of Sidewinder for breach of fiduciary duty and other violations before the expiration of the statute of limitations.

Short is represented by Edward Joyce and Rowena Parma of Edward T. Joyce and Associates PC.

Siprut and his firm are represented by Nicholas Gowen and Joshua Cauhorn of Burke Warren Mackay & Serritella PC.

The case is Short v. Grayson et al., case number 1:16-cv-02150, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Celeste Bott. Editing by Amy Rowe.

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