K&L Gates Must Face Lawsuit Over Le-Nature’s Demise

K&L Gates LLP must face a lawsuit over drink maker Le-Nature’s Inc.’s collapse, a Pennsylvania appeals court ruled in reinstating a $500 million case against the law firm.

Bankruptcy trustee Marc Kirschner sued K&L Gates in September 2009 in Pennsylvania state court, alleging the firm’s failure to detect fraud at the company resulted in losses of more than $500 million. K&L Gates was hired by Le-Nature’s to investigate allegations of improper conduct in 2003, according to court documents. The trial court’s December 2010 dismissal of the complaint was an error, the appeals court said yesterday.

“We conclude that the amended complaint avers a legally sufficient basis for concluding that K&L Gates owed a duty to Le-Nature’s and that K&L Gates’s breach of that duty proximately caused harm to Le-Nature’s,” the appellate court ruled yesterday in a 54-page opinion.

The court also concluded that Le-Nature’s had asserted a “viable cause of action” for holding the law firm “vicariously liable” for the negligence of Pascarella & Wiker LLP, a financial accounting firm.

Michael Rick, a spokesman for K&L Gates, and Carl Wiker, a partner with Pascarella & Wiker, didn’t immediately return phone calls seeking comment on the ruling.

Le-Nature’s, based in Latrobe, Pennsylvania, produced bottled water, tea and other flavored drinks in Latrobe and a plant in Phoenix. Creditors pushed the company into bankruptcy in 2006 demanding that its assets be sold to pay $1.4 million in debts, about two years before company officials were indicted in a $800 million fraud.

Le-Nature’s co-founder Gregory Podlucky was sentenced in October to 20 years in prison for fraud, tax evasion and money-laundering related to the company’s collapse.

The case is Kirschner v. K&L Gates LLP, No. 154 WDA 2011, Superior Court of Pennsylvania

To contact the reporter on this story: Sophia Pearson in Philadelphia at spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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