DMAI Sues Former Lawyers for Bad Advice on Firing Former CEO Michael Gehrisch
Destination Marketing Association International has filed suit against law firm McDermott Will & Emery LLP for legal malpractice. The suit, which was filed in New York Supreme Court, alleges the firm and two of its lawyers gave the association bad advice about how to fire its former CEO Michael Gehrisch and failed to fully disclose its prior relationships with him. According to the suit, the firm and two partners, Banks Brown and Kristin E. Michaels, allegedly advised DMAI to characterize termination payments to Gehrisch as "salary," thus exposing the group to an ongoing suit by Gehrisch under Washington, D.C.'s Wage Payment and Collection Law.
"The drafting of the separation agreement was so flawed as to constitute legal malpractice," claimed DMAI in the suit. "The defendants also advised DMAI to make substantial payments to Gehrisch, even though they knew or should have known that Gehrisch was in breach of his underlying employment agreement with DMAI, and that in fact Gehrisch should have been forced to return money he improperly took from DMAI." The association also alleges that the lawyers failed to disclose the full extent of their prior personal and professional relationships with Gehrisch.
The suit further states, "If defendants had fully disclosed these past relationships, DMAI would never have engaged defendants to represent it in separating from Gehrisch." Brown and the McDermott Will law firm represented the American Hotel & Lodging Association while Gehrisch was its executive vice president between 1988 and 1999 (Gehrisch joined DMAI as CEO in 2001 and held the post until 2015). Although McDermott Will disclosed to the group that it had worked with the AHLA while Gehrisch was there, "it did not disclose the volume of work that Brown did for the AHLA and how closely he worked with Gehrisch," the suit said.
In August 2015, DMAI's board decided to terminate Gehrisch's employment, and Brown and Michaels presented the board with a draft agreement that the parties signed on Sept. 8, 2015, the suit said.
Following the separation agreement, DMAI conducted an audit of its 2015 financials that revealed "material weakness," according to the suit. As a result, the group engaged an outside firm to conduct a forensic audit, which was completed in August 2016; the audit revealed "significant financial mismanagement" while Gehrisch was CEO, including improper or missing documentation for expenses and alleged misuse of DMAI credit cards by Gehrisch, resulting in significant losses to DMAI estimated to be at least $350,000.
According to DMAI's suit, Gehrisch filed a suit against the association on Sept. 26, 2016, in the Superior Court for the District of Columbia, asserting a breach-of-contract claim and a claim for the group's failure to pay wages in violation of the D.C. Wage Payment and Collection Law. Gehrisch's suit is still pending.
The association is seeking compensatory damages including but not limited to attorneys' fees incurred in defending the action brought by Gehrisch and reimbursement of any judgement won by Gehrisch or settlement amount paid to Gehrisch, as well as punitive damages.
DMAI responded to M&C's request for a comment with the following statement: "DMAI's recent annual audit noted significant accounting issues with the association's financial operations going back at least a few years. Once DMAI's senior leadership became aware of these issues, it launched a forensic audit to provide more clarity. DMAI will vigorously defend itself against these baseless claims, and intends to pursue any and all legal remedies available to it to recover any funds that may be due to the association."
In a statement on behalf of McDermott Will, a spokesperson for the firm told Law360 on Monday that the firm "fully and properly" advised DMAI. "The case against our firm is baseless," the statement said. "We will defend vigorously, and we expect to prevail."