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San Francisco law firm negligent over failure to properly conduct due diligence for client selling his company.

This legal malpractice action was against a major San Francisco law firm arising out of the failure of the firm to properly represent the seller of a company in a complex reverse triangular stock swap merger. The basis of the claim was the law firms’ failure to properly conduct due diligence on behalf of its client, the seller of a medical staffing company who took stock for his company. Shortly after the sale of the company, during the requisite holding period, disclosures about the malfeasance of the acquiring company's CEO caused the company's share price to plummet. We demonstrated that if the law firm had done a due diligence inquiry before the close of the sale, it would have revealed that the acquiring company was in the early stages of an SEC investigation that foretold the public problems several months later. The law firm defended on the basis that it was not hired to do the due diligence, that the client had said he would do his own, and that the inquiry would not have revealed the problems in any event.