As of Thursday, July 7, 2016
Retailer Fraser Ross filed a lawsuit for legal malpractice and breach of fiduciary duty against Los Angeles law firm Jeffer Mangels Butler & Mitchell LLP in Los Angeles County Superior Court on July 1.
Ross is the founder of the Kitson chain of stores, which suddenly shuttered last year shortly after the retailer received an investment from BHK Investments LLC, an affiliate of Spencer Spirit Holdings Inc., the owner of Spencer Gifts and Spirit Halloween Superstores. Ross said he was not with Kitson at the time of the deal with BHK.
The lawsuit tells a story of turbulent years leading up to Kitson’s closure, during which time Ross “sustained a life-threatening injury which required a lengthy hospitalization and recovery.”
During that time, Jeffer Mangels Butler & Mitchell, along with JMBM attorney Jeffrey Sultan and Christopher Lee (who was hired by Ross “to help operate the business affairs of Kitson”), represented the retailer in securing a $15 million loan from Salus Partners LLC without consulting Ross, the suit says. Two years later, Kitson was again looking for financing and, according to the lawsuit, Lee asked Ross to loan the retail store $2 million “to attract potential investors or buyers.” The suit further states that in April 2015 Lee and Sultan arranged for Ross to resign as officer and director of Kitson and to transfer his full interest in the retail chain to Lee in exchange for $300.
According to the suit, during this “rushed transaction,” the law firm “failed to communicate to [Ross], orally or in writing, the legal ramifications that this transaction would have on [him],” continuing, “at the time, [Ross] was not in a position to make such significant decisions without proper counsel.”
Ross was later brought back on board as a consultant, the suit says, “in order to complete the Spencer transaction, [as] Spencer Spirit Holdings Inc. required [Ross’] involvement and affiliation with Kitson.”
The suit charges that Sultan and the law firm failed in its obligation “to protect [Ross’] legal interest and provide [Ross] with competent, independent and non-conflicted legal advice and expertise.”
Ross, who requested a jury trial, is seeking punitive and exemplary damage. According to the suit, Ross lost his interest in the company, his employment and benefits, his ability to control the business’ affairs, and his right to reimbursement of his $2 million loan “as a direct and proximate result of [JMBM’s] conduct.”
Ross recently returned to retail, opening a new store, Kitross, in the same spot as the original Kitson location on Robertson Boulevard in Los Angeles.
As of press time, JMBM had not responded to requests for comment.