The $60 million lawsuit filed by the former chairman and CEO of Red Hat against his family's former financial advisers has been referred to mediation.
The referral by the federal court in Raleigh means that the next stage in the lawsuit filed by Matthew Szulik and members of his family, which accuses an investment management firm of losing $60 million of their money through improper investments and fraud, will be conducted behind closed doors.
"That is one of the benefits to commercial parties of the mediation process," said Lee Whitman, a litigator with the Raleigh law firm of Wyrick Robbins Yates & Ponton who is not involved in the case. "It allows you to control the outcome and keeps it confidential."
The federal court in Raleigh selected the case for mediation just six days after the lawsuit was filed. In mediation, a neutral third party acceptable to both sides tries to facilitate an out-of-court settlement. If the two sides fail to reach a settlement, the litigation would resume in federal court.
"Early mediation can be beneficial" to both sides because it gives them an opportunity to settle their differences before they rack up significant legal fees, Whitman said. Any settlement through mediation would likely be kept confidential.
Mismanagement alleged
The lawsuit accuses investment management firm TAG Virgin Islands of losing more than half the Szulik family's investment portfolio in investments, including some tied to horse racing and pornography. TAG is run by James Tagliaferri, a family friend who was named in the lawsuit along with another principal in the firm, Patricia Cornell, and a New York lawyer, Barry B. Feiner.
Tagliaferri is a longtime friend of Szulik, whose children called him "Uncle Jim," the lawsuit says.
Last week Tagliaferri said he wasn't aware of the lawsuit and therefore had nothing to say about it. Tagliaferri couldn't be reached for comment Monday.
An attorney who represents Feiner, John Phelan, said Monday that his client "denies all wrongdoing or liability. No comment as to anything else at this time."
One of the lawyers representing the Szuliks, Burley Mitchell Jr. of the Raleigh firm Womble, Carlyle, Sandridge and Rice, declined to comment on the move to mediation.
Referring a case to mediation "is not atypical in a large case," Whitman said.
Although the defendants in the case are required to file a response to the lawsuit within 21 days of being notified of the lawsuit, Whitman said that in light of the mediation, the defendants most likely would seek an extension.
