Yes, that is the entire problem in a nutshell. They hired a lawyer and then completely failed to use him in a legal capacity.
On that note...they could potentially have a malpractice suit against him for his failure to advise them on something as basic as an employment agreement. We'd really need to know a lot more to know if this is the case.
He filed their incorporation papers for them. Assuming he continued to do various legal things for them (they presumably didn't get an actual lawyer later) wouldn't he be effectively their counsel?
There are a lot of unknowns here, but I'm curious if you hire an employee who has passed the bar in your state, and they perform legal work, does that make them effectively your lawyer?
On that note...they could potentially have a malpractice suit against him for his failure to advise them on something as basic as an employment agreement. We'd really need to know a lot more to know if this is the case.