## Facts

- Keywell Corporation hired Piper & Marbury, LLP to represent it in the purchase of a steel-recycling facility.
- Piper retained an environmental-consulting firm to conduct an environmental audit as part of due diligence.
- The consulting firm relied on the seller’s false assurances that there had been no on-site waste disposal and, based on those assurances, limited the scope of its investigation.
- The resulting audit did not identify significant hazardous-waste contamination.
- Piper communicated the audit results to Keywell in a manner Keywell claimed minimized the site’s potential environmental liabilities.
- The purchase agreement largely placed responsibility for environmental liabilities on Keywell.
- After the transaction closed, a grand jury investigation revealed substantial groundwater contamination that had not been identified during due diligence.
- Keywell faced roughly $6 million in potential cleanup costs and sued Piper in federal court for legal malpractice and breach of fiduciary duty arising from Piper’s handling of environmental due diligence and the transaction’s risk allocation.
- Piper moved for summary judgment, arguing that Keywell could not prove causation or damages because Keywell could not show that, absent Piper’s alleged wrongdoing, Keywell would have walked away from the transaction or obtained materially better terms.
- Piper contended Keywell lacked evidence that (1) a more thorough investigation would have discovered the contamination before closing, (2) the seller would have renegotiated if contamination had been discovered, or (3) Keywell would have purchased an alternative site.
- Keywell opposed the motion with evidence including (1) an affidavit indicating the seller would have been willing to renegotiate if contamination had been discovered pre-closing, (2) evidence the seller had serious cash-flow problems during negotiations, and (3) evidence that reasonable due diligence would have uncovered the contamination.

## Issues

1. Whether Keywell produced sufficient evidence to raise a triable issue that Piper’s alleged malpractice and fiduciary breach were a proximate (“but for”) cause of Keywell’s claimed cleanup-cost losses in a transactional setting.
2. Whether Keywell’s showing on discoverability of contamination and the likelihood of a different deal outcome (renegotiation or termination) was too speculative to support causation and damages as a matter of law on summary judgment.

## Decision

- The court denied Piper’s motion for summary judgment.
- The court held that Keywell’s evidentiary showing created genuine disputes of material fact on whether competent environmental due diligence would have discovered the contamination in time to affect the transaction.
- The court further held that Keywell presented enough nonconclusory evidence for a factfinder to consider whether, with accurate information and proper advice, Keywell would have refused to proceed or would have negotiated a different allocation of environmental risk, thereby avoiding or reducing the alleged losses.

## Legal Principles

- Under New York law, a legal-malpractice plaintiff must prove (1) attorney negligence, (2) proximate causation (often framed as a “but for” link), and (3) actual, ascertainable damages.
- In transactional-malpractice cases, causation may be shown by proof supporting a reasonable inference that competent representation would have led the client to avoid the transaction or secure materially better terms.
- Summary judgment is inappropriate where the record presents genuine disputes of material fact; the court must view the evidence in the light most favorable to the nonmoving party and refrain from weighing credibility.
- A plaintiff opposing summary judgment must present more than speculation, but may rely on concrete circumstantial evidence (such as negotiation dynamics and counterparty financial pressure) to show that a different bargaining result was reasonably likely.
- Cleanup costs and related environmental liabilities may constitute recoverable damages if the plaintiff can show they were caused by entering (or entering on unfavorable terms) a transaction due to deficient due diligence, advice, or disclosure.

## Conclusion

The court refused to grant summary judgment to Piper because Keywell presented evidence from which a reasonable factfinder could conclude that proper environmental due diligence would have discovered the contamination before closing and that, armed with that information, Keywell could have renegotiated the deal or declined the purchase, avoiding or reducing the claimed cleanup-cost damages.


Keywell Corporation v. Piper & Marbury, LLP, 1999 WL 66700 (1999)