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Ropes & Gray Litigation Team Secures Major Win for Goldman Sachs in $580M Dragon Systems Negligence Suit

January 24, 2013 Practices: Corporate & Securities Litigation, Investment Management Litigation

A Ropes & Gray litigation team secured a complete defense verdict for Goldman Sachs in a jury trial in the U.S. District Court for the District of Massachusetts on Jan. 23. In Baker v. Goldman Sachs & Co., the founders and “principal shareholders” (Jim and Janet Baker, Bob Roth and Paul Bamberg) of speech-recognition company Dragon Systems, Inc. (“Dragon”) claimed negligence, negligent misrepresentation, fraud and breach of fiduciary duty by Goldman Sachs in its role as financial adviser to Dragon in the company’s June 2000 merger with Lernout & Hauspie Speech Products NV. Fraud at Lernout & Hauspie was exposed soon after the merger, and the combined company filed for bankruptcy.

In a major victory for Goldman Sachs, the jury agreed with Ropes & Gray attorneys that Jim and Janet Baker had mishandled their role in the negotiations, ignored Goldman’s advice to conduct comprehensive accounting due diligence on Lernout & Hauspie, breached their fiduciary duty to the other two Dragon co-founders and “principal shareholders” Bob Roth and Paul Bamberg, and made negligent representations about the deal to Dragon’s board of directors.

The Ropes & Gray litigation team was led by business & securities litigation partner John Donovan and included business & securities litigation associates Dan McCaughey and Matt McGinnis. Wachtell Lipton Rosen & Katz was co-counsel for Goldman Sachs.