If you are company counsel advising an early-stage startup, the recent judgment in Gregg v. Cooley LLP should give you pause. On July 27, 2026, the Superior Court of New Jersey entered a judgment of over $25 million against Cooley LLP after a jury found that an attorney-client relationship existed between Cooley and the founder of Cooley’s client Symbiomix Therapeutics, and that Cooley breached the applicable standard of care owed to the founder. The case is a cautionary tale about the real-world consequences when a law firm’s duties to a company and its founder blur, especially in venture financings.

Backstory: A Founder, His IP, and a Law Firm in the Middle

John Gregg developed proprietary intellectual property for secnidazole, a treatment for gynecological infections. Gregg founded LifeQual Pharmaceuticals, Inc. (“LPI”) and a subsidiary which later changed its name to Symbiomix Therapeutics, LLC. In 2009, LPI retained Cooley to provide legal services under an engagement letter which provided that Cooley would represent the company and not any individual:

“We are pleased that we have been engaged to assist [the Company] in connection with general corporate and licensing matters. As we discussed, we are going to represent only the Company and will not be able to represent any founder’s or other owner’s interest (including your own interest as a founder of the Company) separately.

But beginning in 2011, according to Gregg’s complaint, Cooley began advising Gregg on matters directly impacting his personal interests such as his IP, his equity and his employment terms, while simultaneously representing the company in negotiations with venture investors OrbiMed Advisors and Fidelity Biosciences. Gregg alleged that Cooley advised him to assign his IP to the company without compensation or clawback rights, and drafted an employment agreement allowing Gregg to be fired without cause and without equity-vesting protection. Moreover, per the complaint, the firm had a billing conflict: Cooley’s fees would not be paid unless the VC funding closed, and under Symbiomix’s operating agreement the VCs’ consent was required for any payment above $50,000.

The VCs later orchestrated the termination of Gregg and the repurchase of 28% of his equity at $0.01 per share. Symbiomix was eventually acquired for at least $150 million.

Seven Signed Documents Weren’t Enough: The Motion to Dismiss

Cooley moved to dismiss the case in late 2017, and on paper appeared to have a strong argument. It pointed to seven separate documents, including the engagement letter, restricted stock agreement, proprietary information & inventions assignment agreement and a separation agreement, each expressly stating that Cooley represented the company and not Gregg individually. Several of the documents also included releases and acknowledgments that Gregg had been given the opportunity to consult independent counsel.

Harsh Verdict, Unclear Reasoning

After a six-week trial, the jury found that an attorney-client relationship existed between Gregg and Cooley, that Cooley breached both its standard of care and its fiduciary duty, and that those breaches caused Gregg $15,653,282 in damages. The final judgment, entered July 27, 2026, totaled $25,422,019.08 after fees, expenses, and prejudgment interest.

The verdict is significant, but a caveat is in order: this was a jury verdict followed by an Order of Judgment, not a written judicial opinion. New Jersey trial courts sitting with a jury do not issue an opinion explaining the reasoning behind a verdict, so there is no judicial analysis in the record setting out exactly how the jury weighed the seven signed disclaimers against the parties’ course of dealing, or which specific facts tipped the balance toward finding an implied attorney-client relationship. What we know is the result: the jury found that a relationship existed, that Cooley breached its duties, and what it cost. The reasoning underlying that finding is not publicly documented the way it would be in an appellate opinion.

Why This Matters for Company Counsel and Founders

Venture financings routinely create situations where a company’s interests and its founder’s personal interests diverge, in this case with respect to IP assignment, equity dilution, vesting acceleration and employment termination protections. The outside law firm typically represents the entity. But in early-stage companies, the founder is the company in every practical sense.  When I’m representing a startup, I take calls from the founder, give him advice that bears on both the company’s and his interests, and draft documents that directly affect the founder’s personal wealth.  Based on this case, if the lawyer doesn’t draw and maintain a bright line, a jury can later conclude that the founder was a client too.

Delaware Company, New Jersey Court

Here’s a wrinkle that should catch the attention of anyone used to the standard playbook for venture-backed companies: Symbiomix, like the overwhelming majority of growth-stage startups, was organized in Delaware. According to the complaint, Cooley drafted the Symbiomix operating agreement so that Delaware law controlled, and Gregg’s updated employment agreement required any dispute to be litigated in Delaware. Yet this case was tried, and judgment entered, in the Superior Court of New Jersey, not Delaware.

The explanation lies in the difference between claims arising under a company’s governing documents and claims against the lawyers who drafted them. A forum-selection or choice-of-law clause in an operating agreement or employment agreement binds the parties to that agreement – the company and the founder – not the law firm which was never a signatory. Gregg’s claims here were legal malpractice and breach of fiduciary duty, direct tort and professional-responsibility claims against Cooley personally, not claims to enforce the Symbiomix operating agreement or employment agreement. Courts generally look to where the attorney-client relationship was centered and where the lawyer’s conduct occurred to decide what law governs a malpractice claim, not to a corporate document’s separate choice-of-law clause. Gregg alleged, and the court accepted for jurisdictional purposes, that he resided in New Jersey, that Cooley’s advice was directed to him there by phone, email and mail, and that the attorney-client relationship was centered in New Jersey. That gave New Jersey, not Delaware, the relevant connection to the malpractice and fiduciary-duty claims.

That distinction also carried real substantive consequences, in addition to the procedural ones. Gregg’s complaint specifically alleged that Cooley never told him that Delaware law affords less protection to minority members of an LLC than New Jersey law does, meaning the very choice of Delaware governing law in the operating agreement was, in Gregg’s telling, itself part of the harm.

For company counsel drafting Delaware charters and operating agreements for founders who live and work elsewhere, this case is a reminder that a Delaware choice-of-law clause governs the corporate relationship, but it will not necessarily dictate the standards a court applies in assessing whether the lawyers themselves owed duties to the founder personally.

Practical Checklist: Best Practices for Founders and Counsel

It’s worth being candid about the practical advice I’m about to suggest here: much of what follows cuts against how deal counsel and founders actually operate day to day. Founders rarely opt for separate counsel for equity and employment arrangements, and “the company’s lawyer will look out for me too” remains the default assumption among founders. None of that is unique to this case; it is simply how startup practice has long worked, often without incident. But a $25 million verdict is exactly the kind of event that should force a rethink of a status quo that has persisted mostly because it has gone unchecked, not because it was ever sound practice. Admittedly, the following suggestions will feel like friction, extra cost and slower deals to many in the venture ecosystem.

  1. Update your engagement letters, and keep updating them. Identify the company as the client in the initial engagement letter. It would also be prudent to revisit who is (and who is not) the client every time the scope of work expands. If you’re advising a company on a funding round that will restructure the founder’s equity, confirm in writing again that you do not represent the founder personally.
  2. Recommend independent counsel explicitly and in writing. Telling a founder “you may want to get your own lawyer” in passing is not the same as formally recommending, in a letter or email, that the founder engage separate counsel on matters where their personal interests may diverge from the company’s. Document that you did so.  In practice, early-stage founders often skip this because a second law firm means a second bill they can’t afford; that budget reality doesn’t change the professional-responsibility analysis, and counsel should not let it.
  3. Scrutinize fee arrangements for third-party leverage. If an investor controls whether your fees get paid, or when they get paid, acknowledge that conflict, disclose it and consider whether a formal waiver is warranted under applicable rules of professional conduct.
  4. Consider existence of conflicts checks at every juncture. A financing, a change of control, and certainly a founder termination all warrant a fresh conflicts analysis, not a rote reliance on the engagement letter signed years earlier.
  5. Founders: don’t assume the company’s lawyer is your lawyer. If outside counsel is advising you on your personal equity, your employment agreement or your IP assignment, ask bluntly whether they represent you individually. If the answer is anything other than an unequivocal yes backed by an engagement letter, best to retain your own lawyer.
  6. Document waivers under the conflict rules. If concurrent representation is knowingly undertaken (as sometimes happens in small startups), comply with applicable rules of professional conduct: informed consent, confirmed in writing, from each affected client. Vague acknowledgments in ancillary documents are no substitute.
  7. Treat releases with appropriate skepticism. A signed release may still be challenged if the releasor was never told about the very conflict giving rise to the claim. Releases are a defense, not a guarantee, especially when fiduciary duties are at issue.  Yes, this is awkward to ask, and yes, most founders never do. Gregg v. Cooley is the reason to ask anyway.

Bottom Line

Gregg v. Cooley LLP is a $25 million reminder that in the venture ecosystem, where founders and companies are often represented at the same closing table, clarity about who your client is, and isn’t, is not a formality. It’s a fiduciary obligation. And when that line blurs, no stack of signed disclaimers will reliably keep you out of a courtroom. One further caveat: the judgment was entered on July 27, 2026, and Cooley retains the right to appeal to the New Jersey Appellate Division within the applicable time limits. Nothing in the record as of this writing indicates whether an appeal has been or will be filed. If Cooley does appeal, an appellate opinion could reverse, or could clarify or narrow the legal reasoning behind the implied attorney-client relationship finding, and the final, binding precedential weight of this case should be assessed accordingly.

Case Reference: Gregg v. Cooley LLP, et al., Superior Court of New Jersey, Law Division, Mercer County, Docket No. MER-L-2332-17. Judgment entered July 27, 2026.