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Report skewers law firm over conflicts

James Gilbert

James Gilbert

A venerable Twin Cities law firm has come under sharp criticism for allegedly failing to address the conflicts of interests that arose in the course of its decades-long representation of a successful family-owned business that is now engulfed by multiple lawsuits involving warring family members.

In a report commissioned by the board of directors of Twin City Fan Companies, former Minnesota Supreme Court Justice James Gilbert faults past and current attorneys at Lindquist & Vennum for the firm’s simultaneous representation of TCF, TCF’s former CEO Charles Barry, and other members of the Barry clan, including Charles Barry’s now ex-wife Melanie Barry and their son Michael Barry, TCF’s president.

“Here Lindquist & Vennum failed to appreciate the risks presented by the many roles it undertook for TCF and the Barry family and as a consequence the clients were not make aware of those risks while many complicated intercompany and shareholder transactions were taking place,” wrote Gilbert, the principal at the Gilbert Mediation Center. “As the events unfolded, those risks materialized into reality.”

In Gilbert’s view, after Michael Barry first “shared his concerns” with Lindquist lawyers about his father’s extramarital affair and the potential repercussions for TCF more than a decade ago, those lawyers owed a simultaneous duty of loyalty to TCF, Charles Barry, Melanie Barry and Michael Barry. At that point, Gilbert wrote, the firm “should have recognized that a conflict was developing or had actually developed and taken steps to address it or withdrawn from further representation.”

Although Lindquist’s billings for both personal and corporate legal services were typically paid by TCF, Thomas Carlson, a Lindquist lawyer who handled estate planning services for Barry family members, said “he deemed TCF as a third party beneficiary of any combined personal legal services,” according to the report.

Carlson did not respond to an email or phone call seeking comment. Dennis O’Malley, Lindquist’s managing partner, said by way of email that the firm does not comment on matters involving clients or former clients.

The TCF board hired Gilbert last October to protect the company’s interests amid a brewing internecine fight for control of the company, which manufactures industrial fans and heavy duty air moving equipment. The Plymouth-based company, with approximately 1,300 employees in four states, has annual sales approaching $300 million.

On the same day Gilbert was tapped to lead the one-man “Special Litigation Committee,” Charles Barry filed a minority shareholder lawsuit in Hennepin County District Court, alleging that Melanie Barry, with whom he was embroiled in a contentious divorce proceedings in Florida, and Michael Barry were conspiring to squeeze him out of the company.

Since then, Charles Barry has bankrolled four other lawsuits targeting family members, TCF or TCF-related entities. One of those suits has since been dismissed, while three others were recently companioned before Hennepin County District Court Bruce Peterson.

Melanie Barry, meanwhile, sued her ex-husband’s new wife, Kathleen Bryan, in federal court after her husband of 55 years admitted under oath that he had gifted or transferred more than $11 million to Bryan over the course of their long-running affair. In court documents, Melanie Barry says she has reason to believe the actual figure is much larger, perhaps between $20 and $30 million.

For her part, Bryan is pursuing defamation and invasion of privacy claims against Michael Barry, on the basis of a 2016 report from the Robins Kaplan law firm into Charles Barry’s alleged excessive compensation and abuse of company resources. The Robins report, which Michael Barry commissioned, found that the elder Barry had misappropriated “millions of dollars’ worth of TCF assets for his personal benefit and the benefit of his mistress.”

After a six-month investigation – conducted with the assistance of former federal prosecutor Lee Stein, a forensic accountant formerly with the IRS, and involving the review of more than 100,000 documents — Justice Gilbert arrived at a similar conclusion.

His bottom line recommendation: TCF should go after Charles Barry for over $21 million in excess compensation and “secretly misappropriated funds,” unpaid loans, and improperly reimbursed expenses. The report also faulted Michael Barry for improperly expensing political contribution to TCF and misusing the company jet but he subsequently resolved those issues by writing TCF a $97,000 check.

Following the issuance of Gilbert’s report, the board of directors voted to fire Charles Barry from his position as CEO.

Toward the end of the 116-page document, Gilbert outlined Lindquist’s long history with TCF, which began in the 1980s when the firm was retained as its corporate and litigation counsel. Lindquist lawyers later provided estate planning services for Charles and Melanie Barry, as well as their children and spouses. Additionally, two former Lindquist partners, following their retirements, went on to serve as TCF’s general counsel.

Between 2003 and 2005, according to Gilbert, “various” lawyers at the firm were made aware of Charles Barry’s extramarital affair. When Michael Barry inquired about the possible impact of his father’s conduct on the company, “he was told by Lindquist & Vennum that while this behavior may not be moral, it was not illegal, and, in any event Charles would be retiring soon.”

At that point, Gilbert wrote, the firm should have executed separate representation agreements with family members and TCF to acknowledge the potential for conflicts of interest or, barring such action, withdrawn from representation.

While Gilbert was unsparing in his assessment of Lindquist’s intermingled representation of TCF and the Barry family members, he nonetheless advised TCF against bringing a legal malpractice claim.

Why?

“Conflicting versions of events and intervening factors have to be taken into consideration,” Gilbert opined. “TCF received legal advice from its in-house general counsel on some of these same issues. Michael also consulted with another law firm about the affair and its impact on TCF. A few of the Barry family members also knew of the affair and took no action.”

In addition to the inherent challenges in proving harm to TCF caused by the firm’s actions, Gilbert pointed to the “considerable expense” and “substantial risk and uncertainty” in litigating a legal malpractice actions.

The report suggests that Melanie Barry may have a stronger claim because Lindquist continued to represent her after they became aware of the “possible legal, estate, financial and insurance implications” of Charles Barry’s conduct but never shared that information.

But, Gilbert concluded, pursuit of such a claim “is beyond the scope” of his investigation.

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