Peterson v. Winston & Strawn Llp

729 F.3d 750 (7th Cir. 2013)

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Nature of the Case

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Facts

P has been seeking assets from solvent third parties who did business with Lancelot. Lancelot claimed to be operating as a commercial factor fund. Offering circulars told their investors that the Funds would verify the inventory's existence and ensure that repayments were made to a 'lockbox'-that is, made directly to financial institutions that would ensure the money's proper application. The fund was a Ponzi scheme. The Funds hired D in 2005 to revise their offering circular. According to P's complaint Bell, a manager of the fund, told D that Petters, the founder, and manager, refused to allow the Funds to verify the existence of inventory and that repayments did not come through lockboxes. The new 2006 circular, like the 2003 version, represents that the Funds will verify the existence of inventory and ensure that factors use lock-boxes. P contends that the law firm committed malpractice, but the district court, invoking the doctrine of in pari delicto, dismissed the suit after concluding that Bell's knowledge was at least as great as D's. Everything went south and P was appointed as the Trustee and has been seeking monies from everyone. P sued D for malpractice and the court held D was not liable. P appealed.