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Families sue lawyers over $36M verdict

Two Montgomery County families are suing law firm Hogan Lovells for giving them bad legal advice during their dealings with a property developer, which ultimately ended in a $36 million verdict against them.

The Camalier and Davis families filed a legal malpractice suit in D.C. Superior Court on Monday, alleging that the Washington, D.C., law firm gave them faulty legal advice after the families leased their property to a development company constructing apartment buildings on it.

The families allege that Hogan Lovells attorneys told Camalier and Davis not to provide estoppel certificates to the development company as it sought financing for the project. The complaint also says the law firm failed to execute proper retainer agreements with the families.

David J. Hensler, the Hogan Lovells attorney named in the complaint, did not return calls for comment; nor did the families’ attorney, J. Michael Hannon of Hannon Law Group in Washington, D.C.

Camalier Limited Partnership and Davis Brothers Montgomery Farm Limited Partnership leased property to two entities owned by Penrose Development Co. in 2004, according to the lawsuit.

Soon after, Penrose began to build apartments on the site, but in 2005 came up with a plan to add condominiums, a health spa and hotel in conjunction with a hospitality group, Canyon Ranch.

The ground leases were then revised to sell the property to the development company instead of lease it, but Canyon Ranch withdrew from the project, the lawsuit said.

The property was not sold and the plan reverted to the construction of apartments, according to the original ground lease.

As Penrose finalized its financing for the project, it requested the estoppel certificates — documents that would provide information to the lender about the ground lease on a property.

Charles A. Camalier III met with attorneys, including Hensler, at the firm then known as Hogan & Hartson. The law firm advised the Camaliers and Davises not to execute the estoppel certificates because Penrose was in breach of the ground leases.

Attorneys told the families that there would be no negative consequences for refusing to provide the certificates if they acted in good faith, according to the lawsuit.

Penrose filed suit in Montgomery County Circuit Court seeking an injunction that would force the families to execute the certificates.

Hogan Lovells appeared on behalf of the Davis and Camalier families in court, even though the law firm did not execute a new retainer agreement with the Camalier family and had never entered into a retainer agreement with the Davis family, the complaint says.

The circuit court ruled in favor of Penrose and the case went before the Court of Special Appeals, which affirmed the circuit court’s judgment in 2008 and criticized the advice given by Hogan Lovells to the families.

The Camalier and Davis family then retained different lawyers, and Penrose pursued its claim for damages.

A Montgomery County Circuit Court jury awarded about $36.4 million to Penrose plus $3.6 million in attorneys’ fees. The verdict was affirmed by the Court of Special Appeals and, last year, by the Court of Appeals.

In the suit filed this week, the Camalier and Davis families allege that Hogan Lovells violated its ethical duty by advising them not to execute the certificates, and gave them incompetent advice by telling them not to ask the Court of Appeals to review the 2008 decision.

They also accuse the law firm of never advising them of a conflict of interest by representing them both and failing to advise them to obtain independent counsel.

The lawsuit alleges one count of professional negligence and one count of breach of fiduciary duty.

The Camalier and Davis families are seeking compensatory and consequential damages in an unspecified amount, as well as compensation for all fees paid to Hogan Lovells and the attorneys they retained later and attorneys’ fees for the malpractice lawsuit.