Willkie Farr & Gallagher has been thrust into the legal spotlight, facing a $735 million fraud lawsuit that reads less like a routine civil claim and more like a flare fired across the bow of Big Law.

The case arrives as the firm is still reckoning with reputational tremors from last year’s high-profile talent departures tied to its controversial work for the Trump administration. Now, critics say, the stakes are far higher — testing how far elite law firms can go in dealmaking before conflicts turn combustible.

A Deal That Unraveled

BRC Group Holdings — the renamed B. Riley — and related entities filed suit in New York over the 2023 take-private of Franchise Group, the retail operator behind Pet Supplies Plus and other chains.

The complaint alleges that former Franchise Group CEO Brian Kahn engineered what it calls a “sophisticated fraud” to unlock more than $735 million in financing for the $2.8 billion buyout. According to the filing, the maneuver helped Kahn ease crushing personal debt at a time when he was already under scrutiny in an unrelated hedge fund investigation.

The lawsuit paints the transaction like a house built on sand: impressive from afar, unstable beneath the surface.

Claims Against Willkie and Kahn

Against Willkie Farr, plaintiffs allege aiding and abetting fraud, civil conspiracy and breach of fiduciary duty. They are seeking more than $735 million in compensatory and punitive damages, along with disgorgement of all fees tied to the deal.

Kahn and his wife are named separately, accused of fraud, fraudulent inducement and breach of contract.

The firm has not admitted wrongdoing. But the allegations position Willkie not as a distant legal scrivener, the suit suggests, but as a deeply embedded participant in a transaction that later imploded.

Conflict Backdrop: A Prior Red Flag

The civil case lands in the shadow of an earlier judicial rebuke.

Less than a year ago, a Delaware bankruptcy judge barred Franchise Group from retaining Willkie as Chapter 11 counsel because of the firm’s earlier work for Kahn and B. Riley on the same take-private.

Judge Laurie Selber Silverstein ruled that potential claims against Kahn — and even against Willkie — were so “central” to the bankruptcy that conflict waivers and ethical screens could not cure the problem. Franchise Group was forced to switch lawyers midstream.

For in-house counsel watching closely, that disqualification is now Exhibit A: evidence, plaintiffs argue, that Willkie’s proximity to the deal’s power brokers blurred the line between adviser and insider once the transaction began to collapse.

Why the Case Resonates Beyond One Firm

Conflicts as Litigation Fuel

What once sat quietly in internal conflict memos is now driving nine-figure lawsuits. When deals fail, overlapping representations of executives, sponsors and corporate entities can become kindling for fraud claims.

Gatekeeper Expectations Rise

Plaintiffs increasingly argue that top-tier deal lawyers must act as sentries, not just stenographers — expected to detect and push back against client misconduct, especially in leveraged, private-equity-style buyouts.

Reputation and Client Selection

Kahn has since pleaded guilty in a separate hedge fund fraud case involving roughly $300 million to $360 million in investor losses. That conviction casts every earlier judgment call in harsher light, magnifying perceived lapses in risk assessment.

A Cautionary Tale for Big Law

The Willkie Farr $735m Fraud Suit underscores how marquee sponsor work can morph into brand-threatening litigation. Like a fault line revealed by an earthquake, it suggests that routine conflict waivers and ethical walls may no longer suffice when courts and counterparties demand visible, provable independence from law firms on the largest, riskiest deals.

For Big Law, the message is stark: in today’s climate, proximity can be perilous.