Inquirer parent company sues law firm over role in ownership fight

The Inquirer's parent company on Monday sued the Center City law firm Morgan Lewis & Bockius L.L.P., seeking to recover more than $880,000 in legal expenses paid during the bitter ownership dispute that led to the media company's sale in May.

Lawyers for Interstate General Media contend that Morgan Lewis - retained to represent its interests in the ownership fight between former co-owners Lewis Katz and George E. Norcross III - engaged in fraud, breach of contract, and breach of fiduciary duty.

Rather than act as an independent advocate for the company's interests, the lawsuit alleges, Morgan Lewis lawyers aided Norcross' side in the dispute and then had the company pay for an expert witness who eventually testified on his behalf.

Representatives from Morgan Lewis declined to comment Tuesday.

The suit comes six months after Katz and businessman and philanthropist H.F. "Gerry" Lenfest emerged as winning bidders at a May auction of IGM, which also owns the Philadelphia Daily News and Philly.com.

Katz died soon thereafter in a plane crash, leaving Lenfest as the company's owner. Lenfest declined to comment for this article.

"Inexcusably, Morgan Lewis permitted the precious resources of IGM to be wasted and misused," IGM attorney Richard A. Sprague wrote in the suit, filed in Common Pleas Court.

The allegations mainly center on Morgan Lewis' dealings with an expert witness called to testify during proceedings in April in Delaware Chancery Court.

At the time, both Norcross, through his firm General American Holdings, and Katz, through his limited partnership Intertrust GCN, had agreed to dissolve their partnership, but sought a court ruling on how the company should be sold.

Norcross sought a closed auction among the five members of IGM's ownership group. Katz and Lenfest wanted an auction open to outside bidders. All three agreed that their legal expenses should not come from company coffers.

"IGM was essentially a 'Switzerland' or a neutral bystander in the litigation between its owners," and hired Morgan Lewis to look out for its interests, Sprague wrote Monday.

According to the company resolution authorizing the firm's hiring, its lawyers were to take their direction from two of IGM's then-directors who were publicly allied with Norcross' position but were not named as parties in the Delaware legal proceedings: insurance executive Joseph E. Buckelew and developer William P. Hankowsky.

But instead of providing neutral advocacy, "Morgan Lewis and the Norcross group regularly communicated regarding strategy and tactics that were adverse to the interests of the Katz and Lenfest group," the suit alleges.

In a March 9 e-mail, a copy of which was included in court filings, a lawyer for General American floated the idea of IGM's picking up the cost of John G. Chachas, a financial adviser whom Norcross' legal team had flagged as a potential expert witness.

Marc J. Sonnenfeld, the Morgan Lewis attorney representing IGM, agreed, though the witness himself questioned the arrangement at the time.

"I don't really like the idea so much of being a professional witness sought [by General American] and supporting something [General American] is seeking but being paid by IGM," Chachas wrote in a March 11 e-mail to Sonnenfeld. "If Lenfest and Katz are paying their own costs and Norcross is having his paid by IGM, isn't this something that should be specified differently in our engagement letter?"

Ultimately, the chancellor presiding over the case did not allow IGM to call Chachas to testify - but General American's lawyers did call him to the stand. IGM paid his total fee of more than $326,000.

In its lawsuit, IGM seeks reimbursement for the $883,000 it paid Morgan Lewis in legal fees and for Chachas' services.

A hearing date has not been set in the case.