Filed in D.C. Superior Court, the suit alleges that Sheppard Mullin, which represented two of the airline's subsidiaries in the past, breached a fiduciary duty by agreeing to represent Pan Am's general counsel, John Nadolny, without the company's knowledge.
According to the complaint, Nadolny
had forged a $320,000 bond meant to secure a settlement Pan Am had reached with the Air Line Pilots Association
.When inspectors from the bond company came calling, Nadolny turned to attorneys at Sheppard Mullin, including John Fornaciari, a partner and white-collar defense attorney at the firm, for advice on how to best handle the insurance company's investigation.
had worked with Fornaciari in the past on Pan Am-related litigation in New England and in Florida.
agreed to take Nadolny
on as a client, but here's the interesting part: For several months it allegedly didn't inform Pan Am
that it had done so, nor did it alert Pan Am
to the problem with the pending bond.Pan Am alleges that this clandestine relationship resulted in damage to the company's reputation and a snarled Transportation Department proceeding that has remained stalled for two years.
And the bond, which Nadolny
conjured out of thin air complete with a forged signature, wasn't the only misdeed involved.
According to the complaint, the firm dealt with Nadolny
on a regular basis in connection with both cases.
According to the complaint, when Nadolny
realized in early May 2005 that the insurance company had discovered the errant bond, he
approached Sheppard Mullin
about taking his
case.The firm wrote up a retainer agreement stating that Nadolny
could wait to inform Pan Am
about the bond until three days after the insurance company decided on its course of action.Pan Am alleges that this was an attempt "to protect Nadolny
from exposure to a criminal investigation."
, the third plaintiff and the only one Sheppard, Mullin did not represent, was in the middle of a DOT review on whether or not it could purchase and operate more large aircraft.The Air Line Pilots Association
opposed Boston-Maine's application to own and operate more planes, citing financial fitness problems and a lack of compliance with federal and state statutes as well as federal aviation standards.
On June 1, 2005, the pilots union submitted findings to the Transportation Department that Nadolny
had forged the bond that was meant to secure the union's settlement.
was fired a few days after the union's filing with the department.
The company then discovered that Nadolny
had also falsified bank statements and financial records, which in turn led to a DOT inspector general's investigation.Pan Am's attorney would not comment on how Nadolny falsified the documents without someone in the company's financial department noticing, and the company's president, David Fink, did not return calls for comment.
In a letter to the Transportation Department, however, the company says that Nadolny
, who had worked for the company and its affiliates for 18 years, was "afforded considerable autonomy with minimal direct supervision."
In the July 26, 2005, letter, the counsel for Boston-Maine
describes the "stunning revelation" as happening during a conference call in which Nadolny
admitted to altering the figures, to the "shock and astonishment" of all present."He
offered no explanation for those alterations, and the telephone call with him was brief."
Pan Am alleges that if Sheppard Mullin
had made the company aware of its general counsel's fabrication, the company would have fixed the problems privately, its reputation would not have been tarnished, and Boston-Maine
, a Pan Am subsidiary, would now have authorization to purchase the Boeing
727s it wants to use in expanding its operations instead of still being stuck in a department review.
Hence, the suit against Sheppard Mullin
.Pan Am alleges that the firm violated D.C. Bar rules concerning conflicts of interest by not disclosing its representation of Nadolny
...Nadolny, through his counsel Bjorn Lange, a public defender in New Hampshire, had declined to cooperate with Sheppard, Mullin or Pan Am during his criminal investigation, citing his Fifth Amendment rights and attorney-client privilege.
One remaining mystery is why Nadolny
did the things he