You Think You Have Had a Bad Day?

The lawyers at Kirkland & Ellis, a major law firm with its home office in Chicago, had a real bad day recently after its client got hammered with sanctions.

Financier Ron Perelman has sued Morgan Stanley for fraud, alleging that it helped appliance maker Sunbeam Corp. conceal accounting woes tht reduced the value of Perelman’s investment in Sunbeam. The trial is scheduled to begin shortly.

The trial judge is Elizabeth Maass. She ruled that Morgan Stanley hid emails and hit failings in its search for emails. “Many of these failings were done knowingly, deliberately and in bad faith,” Judge Maass wrote in her order.

As a sanction, Judge Maass has shifted the burden of proof to Morgan Stanley; it must now prove that it did not commit fraud. She also is going to allow Perelman’s lawyers to argue that the conduct is relevant on the issue of punitive damages.

Perelman’s lawyers want a greater sanction: they want a default judgment entered against Morgan Stanley. The judge is considering that request.

Here is a copy of the Order which we found via The Litigation Support Guy. Read this and live in fear.