By Joseph Ax 

NEW YORK, Jan 24 (Reuters) - A New York appeals court on Thursday reinstated claims brought by Reed Smith against three other law firms in connection with a longstanding legal malpractice case.

The Appellate Division, First Department, gave Reed Smith the green light to pursue lawsuits against the other firms for the allegedly poor advice given to a high-end liquor maker.

The company, Millennium Import, a client of Reed Smith, sued the law firm for malpractice, claiming it was forced to pay $83 million to settle a breach of contract lawsuit because of bad legal advice. Reed Smith then brought third-party claims against three law firms -- Berry & Perkins, Barack Ferrazzano Kirschbaum & Nagelberg and Fross Zelnick Lehrman & Zissu -- it asserted had contributed to the alleged malpractice.

"Where several law firms allegedly participated in giving the advice that led to the plaintiff's damages, the sole law firm named as a defendant must be entitled to bring the other law firms in as parties to the action to ensure that it has the ability to fully protect its rights," wrote Justice David Saxe for a unanimous five-judge panel.

The decision reversed a 2011 ruling from Manhattan Supreme Court Justice Milton Tingling dismissing Reed Smith's third-party claims.

The case stems from a dispute between Millennium Import, a liquor manufacturer owned by LVMH, the parent company of luxury brands like Louis Vuitton, Moet and Hennessey, and a California winery.

Millennium created a vodka called Belvedere and was subsequently sued by the Belvedere winery for trade-name infringement, according to the decision. To settle the lawsuit, Millennium agreed to pay the winery $30,000 for a license to sell the vodka; the licensing deal did not cover the use of the name Belvedere for any distilled spirits.

The vodka was highly successful, making the licensing fee "nominal," according to the court. The winery wrote a letter in 2004 to Millennium indicating its plans to license the Belvedere name to a gin distributor, the court wrote.

$83 MILLION SETTLEMENT

As Millennium's counsel, Reed Smith drafted a response to the letter after conferring with Barack Ferrazzano, which represented LVMH, Millennium's parent company. The response claimed that Millennium had acquired certain rights in the Belvedere mark and that the gin distributor might infringe on those rights.

The winery wrote back in 2005, claiming the response was a breach of the licensing deal. This time Millennium had a California law firm, Berry & Perkins, prepare a response, which was shared with Reed Smith and Barack. The response, which again asserted that the gin distributor's use of the name might be an infringement, included analysis by Fross Zelnick, yet another firm advising LVMH.

The winery then sued Millennium for breach of contract and was eventually granted summary judgment. Millennium agreed to pay the winery $83 million to settle the case rather than appeal and then sued Reed Smith for malpractice, claiming the firm's responses to the winery were responsible for the lawsuit and judgment.

In contesting the malpractice lawsuit, Reed Smith asserted an affirmative defense of comparative negligence, claiming Millennium and its agents contributed to the damages. Reed Smith then brought third-party claims against the Berry, Barack and Fross firms, arguing that their negligence contributed to Millennium's loss.

The motion judge, Tingling, dismissed Reed Smith's claims against the firms, ruling that they were duplicative of Reed Smith's comparative negligence defense.

The First Department disagreed.

"It is well settled that an attorney sued for malpractice may assert a third-party claim against another lawyer who advised a plaintiff on the same matter," Saxe wrote.

A spokeswoman for Reed Smith declined to comment. Lawyers for the other firms involved in the case did not immediately return requests for comment on Thursday afternoon.

The panel included Justices Rolando Acosta, Richard Andrias, Peter Tom and Karla Moskowitz.

The case is Reed Smith v. James Berry, Appellate Division, First Department, Nos. 7816, 7816A, 7817, 7817A, 7818 and 7818A.

For Reed Smith: Robert Abrahams of Schulte Roth & Zabel and Anthony Sylvester of Riker Danzig Scherer Hyland & Perretti.

For Berry & Perkins: Andrew Jones, Michael Furman and Bain Loucks of Furman Kornfeld & Brennan.

For Barack Ferrazzano Kirschbaum & Nagelberg: Daniel Markham of Coughlin Duffy and James Figliulo of Figliulo & Silverman.

For Fross Zelnick Lehrman & Zissu: Robert Churchill, Bonnie Kim and Katherine Churchill of Eaton & Van Winkle.

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