Keywell Corporation v. Piper & Marbury, LLP

Keywell Corporation (plaintiff) hired the law firm Piper & Marbury, LLP (Piper) (defendant) to represent it in the purchase of a steel-recycling facility. Piper retained an environmental-consulting firm to perform an environmental audit of the property. Relying on false representations from the seller that there had been no on-site waste disposal, the consulting firm limited its investigation, and the environmental audit failed to uncover significant hazardous-waste contamination. Piper’s audit report to Keywell underestimated the potential environmental liabilities, which were largely assumed by Keywell in the purchase agreement. After the sale, a grand jury investigation uncovered significant groundwater contamination that had not been discovered in the audit, subjecting Keywell to $6 million in cleanup-cost liability. Keywell sued Piper for legal malpractice and breach of fiduciary duty in federal district court. Piper moved for summary judgment on the ground that Keywell could not adduce evidence to prove causation and damages. Specifically, Piper asserted that Keywell could not demonstrate that but for Piper’s alleged misconduct, Keywell would have either walked away or negotiated a better deal. Piper argued that Keywell could not prove (1) that the seller would have agreed to renegotiate; (2) that Keywell would have discovered the contamination with a more extensive investigation; or (3) that Keywell would have found an alternative site to purchase. Keywell responded with (1) an affidavit stating that the seller would have been willing to renegotiate the purchase agreement had the contamination been timely discovered; (2) evidence that the seller had serious cash-flow problems at the time of the purchase negotiation; and (3) evidence that the contamination would have been discovered with due diligence.