Law Firm Gives Bad Advice on Cuba

By Fahad Saghir

Plaintiffs Stephan Brodie, Donald Brodie and the Purolite Corporation sued Morgan Lewis & Bockius for legal malpractice, breach of fiduciary duties and breach of contract.

Morgan Lewis counseled Stephan and Donald Brodie, co-owners of the Purolite Company, to continue trade between their foreign entities and Cuba. The brothers also owned one-third of the shares of Bro-Tech Limited, a company incorporated in the United Kingdom. Bro-Tech Limited controlled Purolite International Limited, also incorporated in the United Kingdom. The products were shipped to Cuba through the UK entities. However, this constituted a violation of U.S. trade law, which prohibits entities “owned or controlled by American citizens from trading with Cuba.” 31 C.F.R §§ 515.201(b), 515.329 (a), (c). http://www.ca3.uscourts.gov/opinarch/022662p.pdf

Morgan Lewis advised the plaintiffs that they could continue trade with Cuba because the UK had blocking statutes that prohibited subsidiaries based in those countries from severing trade with Cuba due to another country’s embargo. There is an obvious conflict in laws as U.S. law prohibits trade with Cuba by a foreign entity controlled by U.S. citizens, while the laws of other countries such as the UK and Canada prohibit their own entities from severing trade with Cuba due to the U.S. embargo.

Morgan Lewis advised the plaintiffs that the Foreign Sovereign Compulsion Doctrine would be a valid defense. The Foreign Sovereign Compulsion Doctrine holds conduct immune from liability if it was compelled by a foreign country. It turns out that was incorrect counsel and the plaintiffs were criminally prosecuted for trading with Cuba under the Trading with the Enemy Act of 1917, and the Cuban Assets Control Regulations.

Judge Albert W. Sheppard dismissed the tort claims of legal malpractice and breach of fiduciary duties due to the two year statute of limitations. He, however, permitted the breach of contract claim, which has a four-year statute of limitations.

For more information on international trade law, please contact Conan Grames at cgrames@kmclaw.com