Lewis Brisbois, Foulston Firms Disqualified in Derivative Suit

A family-owned corporation that makes road-building sweepers needs independent counsel in a derivative suit by one shareholder sibling alleging fraud and self-dealing by the others and their spouses, who are the directors, a federal court in Kansas ruled.

Lewis Brisbois Bisgaard & Smith LLP and Wichita, Kan.-based Foulston Siefkin LLP are disqualified from representing Broce Manufacturing Co. in the suit, the U.S. District Court for the District of Kansas said Tuesday.

The company is entitled to choose its new counsel, but that attorney must certify that he or she “has no prior ties to either Broce or any party to this case, and will look solely to the interests of Broce,” Magistrate Judge Gwynne E. Birzer said.

Stephen Vance sued his siblings Alan Vance and Teri Hubbeling and their spouses over their conduct as directors and officers of Broce, according to the court. He alleged Alan, alone, purchased a distressed Oklahoma heavy equipment maker, Waldon Equipment LLC.

Alan allegedly traded on Broce’s good name by falsely representing an association with Broce. Waldon allegedly gained access to Broce’s trade secrets and created a competing road sweeper and received a $460,000 payment from Broce, demanded by Alan.

Stephen sued in the spring of 2019, naming the individual directors, Waldon, and Broce as defendants. Broce is a nominal defendant. Foulston and Lewis Brisbois appeared for the directors and Broce.

Subsequently, attorneys from the firms were allegedly present for a vote by the directors to buy Waldon’s assets; helped rework the agreement to include Waldon’s liabilities; and were present for a contentious meeting in which Stephen sought an investigation.

Stephen asked to have the firms disqualified from representing Broce.

He didn’t waive his objection, the court said. He knew of the dual representation at the start of the suit but not that it was disqualifying in nature, the court said.

The attorneys’ interactions involving the Waldon transaction “show Foulston and Lewis Brisbois are too entangled in the Waldon transaction to give independent legal advice about any wrongdoing associated with that transaction,” it said.

Shook, Hardy & Bacon LLP represents Stephen Vance. The Hinkle Law Firm LLC represents Waldon.

The case is Vance v. Vance, 2020 BL 351283, D. Kan., No. 19-1136-EFM-GEB, 9/15/20.