A lawsuit was filed against Edward Lehman and others by TAGC Management LLC, firm, claiming fraud and breach of fiduciary duty. The case can be cited as TAGC Management, LLC et al v. Lehman, Lee & Xu Limited et al (Case No. CV 10-5447 PSG (JEMx)).
The lawsuit, alleges that in June 2010 the Defendants fraudulently induced the Plaintiffs and their investors to deposit approximately $1.2 million into an escrow account with the defendant on the pretext that Lehman, Lee & Xu would provide the Plaintiffs with legal, financial, and accounting services, including services related to investment projects in the Hong Kong Special Administrative Region, China. The Plaintiffs allege that, after depositing the money in the escrow account, they began to lose confidence that the Defendants were in fact performing the services agreed to. Then the Plaintiffs requested that their money be returned to them.
Anyone may sue anyone at any time, for any reason. In this case, TAGC Management LLC and Total Access Global LLC were never clients of Lehman, Lee & Xu. These companies appear to have been formed after the fact for the purpose of bringing this frivolous law suit.
While Edward Lehman is named in the complaint, he was duly dismissed from the action by the judge after filing a motion for dismissal. The Plaintiff’s naming him as a defendant was not supported by law or facts.
As for Lehman, Lee & Xu, the law firm is not even named as a defendant.
This particular case highlights the risks of being a lawyer in today’s ever increasingly globalised world. Someone providing services in China can have a court action raised against them in California. However, there are rules regarding jurisdiction, which are applicable globally. The essence of these rules is:
•That legal actions should take place in a location that is agreed upon by the parties; or
•That legal actions should take place in the home jurisdiction of the defendant; or
•That legal actions should take place in the jurisdiction with the most relevance to the dispute in question.
So should a Chinese law firm be sued in California? Generally speaking, no. In this particular case not only were the Defendants from a jurisdiction outside California, but so were the Plaintiffs. Additionally, the parties had not agreed to transact any business in California, nor had they agreed to the California courts having jurisdiction.
So why did the dispute arise? Apparently, the Defendants were of the opinion that the Plaintiffs were trying to launder money. In such circumstances, they would usually be under an obligation not to return such money on the Plaintiff’s request. Rather, they would be obliged to investigate matters further or provide a report to the local law enforcement authorities.
This situation reflects what can happen to lawyers when communications with their clients break down. However, keeping an open line of communication may not always be possible as that can be an offence in itself if money laundering is involved.