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Peterson v. Katten Muchin Rosenman LLP

United States Court of Appeals for the Seventh Circuit
792 F.3d 789 (2015)


Gregory Bell’s mutual funds (the funds) invested most of the funds’ money with organizations run by Thomas Petters. Part of Petters’s operation purportedly financed Costco’s inventory. However, Petters’s operation was a Ponzi scheme. The funds told investors that Costco made direct payments to legitimate financial institutions. In fact, the payments to the funds came from a Petters organization as part of the Ponzi scheme. Further, Petters prohibited the funds from contacting Costco. Katten Muchin Rosenman LLP (defendant) represented the funds in structuring these transactions. After the collapse of the funds, Peterson (plaintiff), the funds’ trustee in bankruptcy, brought a legal malpractice suit against Katten, seeking damages for the law firm’s failure to advise on the risks of the arrangement with Costco. The district court dismissed the complaint for failure to state a claim upon which relief could be granted. Peterson appealed.

Rule of Law


Holding and Reasoning (Easterbrook, C.J.)

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