© 2013 The Texas Lawbook.
By Natalie Posgate
Staff Writer for The Texas Lawbook
(November 12) – Houston-based Looper Reed & McGraw has been sued on claims that it failed to return a Dallas investment firm’s stolen confidential and privileged information that it received from a disgruntled former company executive and is now using those documents in an attempt to extort the company.
The law firm, which represents Highland Capital Management, LP’s former general counsel in litigation against his former employer, contends the lawsuit is factually baseless and is nothing more than a litigation tactic in a related case.
Court documents state that Looper Reed obtained insider information from its client Patrick Daugherty, Highland’s former GC and private equity investment chief, who has been in a legal feud with his former employer since April 2012.
Daugherty resigned from Highland in September 2011 after conflicts with upper management about his “unmanageable, erratic, insubordinate and belligerent” behavior toward co-workers, according to the lawsuit, filed in Dallas County District Court.
Daugherty hired Looper Reed to advise him in a separation agreement with the company, including his efforts to recover more than $2 million in deferred compensation.
Unknown to Highland at the time, Daugherty stole more than 60,000 internal documents containing more than 100,000 pages of confidential and privileged information upon his departure so he could start a competing investment business at Highland’s expense, according to the complaint.
The company also found out that Daugherty and his Looper Reed attorneys disclosed proprietary information to potential investors and the media in an attempt to damage Highland’s reputation, according to the lawsuit and previous media reports.
Highland claims Daugherty signed confidentiality agreements while at the company stating he could not use or disclose proprietary information during and after his employment and he had to return all confidential information when he left Highland.
Highland sued Daugherty on April 11, 2012, asking state Judge Martin Hoffman to order an injunction on Daugherty that would force him to return the internal documents and stop using the information to slander the company. Daugherty countersued weeks later, claiming Highland cheated him out of millions of dollars of promised compensation. The case is set to go to trial in January 2014.
In February 2012, Andrews Kurth, which is representing Highland in its litigation against Daugherty, asked Looper Reed in a February 2012 letter to return all confidential or proprietary documents obtained by Daugherty.
After receiving the letter, Looper Reed and Daugherty “again threatened to disclose Highland’s proprietary information and otherwise make statements intended to paint Highland in a negative light” if Highland did not give Daugherty his $2 million in deferred compensation, the lawsuit says.
Andrews Kurth wrote again in March 2012, asking the law firm to hand over proprietary and confidential information. Looper Reed and Daugherty again refused to do so.
Highland and its attorneys say that they are now bringing legal action against Looper Reed for disregarding its duty under the Texas Disciplinary Rules of Professional Conduct to return the documents to the company.
“As we alleged in the lawsuit, we believe Looper Reed’s actions went well beyond the bounds of legitimate advocacy,” Highland spokeswoman Shannon Wherry said Monday. “Highland was compelled to seek redress for these wrongful acts.”
Jamie Welton, one of Highland’s attorneys, emphasized that the lawsuit is nothing personal against Looper Reed, which he described as “a very good law firm,” that has simply crossed the line.
“Highland has no problem with an aggressive law firm on the other side but they expect lawyers to play by the rules,” said Welton, a partner at the Dallas firm Lackey Hershman.
Looper Reed shareholder Ruth Ann Daniels said in a written statement Monday that the new lawsuit is a trial tactic of Highland to further delay and complicate the underlying litigation that is set for trial in January.
“This new lawsuit is baseless and contains allegations and arguments which have already been advanced and rejected in the case styled Highland Capital Management et al v Pat Daugherty,” wrote Daniels, the lead attorney for Daugherty. “We will not be distracted from vigorously advocating Mr. Daugherty in that litigation.”
Looper Reed has hired Randy Johnston of Dallas professional malpractice firm Johnston-Tobey as its legal counsel.
Besides Welton, the other Lackey Hershman attorneys representing Highland include Roger Mandel, Paul Lackey and Michael Aigen.
Welton said although the set amount Highland seeks for damages against Looper Reed is to be determined, it will most likely exceed more than $1 million.
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