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HOLLAND & KNIGHT REJECTS RTC DEMAND TO SETTLE SUIT

 MIAMI, Nov. 25 ~PRNewswire~ -- Holland & Knight, Florida's largest law firm, has rejected a demand from the Resolution Trust Corp. to settle a threatened civil suit. The suit involves work the firm did in 1989 for a special committee of independent directors of the board of directors of now-defunct CenTrust Bank.
 The RTC is expected to file a suit today.
 Holland & Knight's managing partner, Bill McBride of Tampa, said the firm is adamant in its refusal to pay the RTC. "Although the RTC demand is but a small fraction of our applicable insurance coverage, we can find no merit in the RTC position and, therefore, will not settle."
 The RTC is the federal agency responsible for resolving the tangled affairs of hundreds of failed thrift agencies. One tactic has been to attempt to recover any money possible from former directors, lawyers, or others who were associated with the failed thrifts. This tactic includes suits against insured professionals, such as law firms, for millions of dollars in damages, alleging that the institutions would not have failed or would have retained more assets if the firms had given different advice.
 During the months that the RTC has been pursuing its case against Holland & Knight, the agency has continued to use the firm as its own representative. In fact, the RTC engaged Holland & Knight to handle matters relating to CenTrust even after the firm filed a statement that it had earlier worked for the special committee of CenTrust's board of directors. The firm's work for that special committee is the subject of the threatened civil action by RTC.
 The RTC is one of Holland & Knight's largest current clients, according to McBride.
 Holland & Knight was not the principal attorney for CenTrust or its chairman, David Paul. Rather, the firm was retained by a special committee of CenTrust's outside directors in 1989, a few months before the RTC seized the institution in February of 1990.
 The committee wanted independent legal advice about a guaranty agreement that David Paul had used as part of his takeover of CenTrust in 1983. The issue was whether the assets Paul pledged were actually worth $32 million at the time as claimed. The special committee determined that the assets met the requisite valuation.
 According to Holland & Knight, the issue of the guaranty became moot a few weeks later when the RTC seized CenTrust and later froze the assets of Paul and Paul's private companies.
 Holland & Knight is a Florida-based law firm currently with 294 lawyers located in offices in Fort Lauderdale, Jacksonville, Lakeland, Miami, Orlando, Tallahassee, Tampa and Washington, D.C. The firm has announced that it will open an office in West Palm Beach on January 4, 1993, and has under current consideration the establishment of an office in St. Petersburg.
 A complete statement from Holland & Knight follows.
 STATEMENT OF
 BILL MCBRIDE, MANAGING PARTNER
 HOLLAND & KNIGHT LAW FIRM
 Holland & Knight has rejected a Resolution Trust Corporation ("RTC") offer to settle a civil dispute over legal work that the law firm performed in 1989. We have done so because (1) the RTC claim is legally wrong and (2) we refuse to accede for economic reasons to a demand involving challenges to our professionalism and integrity. Although the RTC demand is but a small fraction of our applicable insurance coverage, we can find no merit in the RTC position and, therefore, will not settle.
 Outside lawyers for the RTC have told us that they will file suit against the firm.
 In August of 1989, the firm was asked to serve as special outside counsel for a special committee of independent directors of the board of directors of CenTrust Bank, a state savings bank. The representation was accepted by us only after carefully delineating that (1) our client would be the special committee (not CenTrust, David Paul, or any David Paul-controlled entity), (2) the scope of our engagement would be limited to a discrete issue relating to a guaranty given by David Paul Properties, Inc., and (3) we would represent and report only to the committee and its members.
 Our assignment was to advise the special committee concerning a 1983 guaranty that David Paul Properties, Inc. had given in connection with the acquisition of Dade Savings and Loan (which later became CenTrust) by the Westport Company, which company was controlled by David Paul. Our senior and most respected partner, Chesterfield Smith, with the assistance of a team of our finest lawyers, assumed responsibility for supervising our work on the matter.
 During the course of our assignment, the state and federal regulatory agencies responsible for CenTrust were involved in the process by which our firm advised the special committee. Those government officials attended meetings we had with the special committee and were fully apprised of the scope and nature of our work as well as the decisions of the special committee. (In sharp contrast to the current RTC claim, those regulators never questioned or raised any objections concerning the competence of our lawyers, or our firm's loyalty or commitment to our client.)
 The legal issues that we were asked to address dealt with whether certain assets of the Westport Company had a minimum market value of $32 million at the closing of 1983, or alternatively, six years after the date of closing.
 The special committee in January of 1990 determined that, pursuant to its analysis and evaluation, the Westport Company assets had a market value in excess of the $32 million on the closing date in 1983 and that that value also existed six years after the closing. The special committee, therefore, recommended to the board of directors of CenTrust that no legal action be then taken by CenTrust to enforce the guaranty of David Paul Properties, Inc. The board subsequently took no action.
 Just a few weeks after the special committee gave its report to the board, the government on February 2, 1990, seized CenTrust and all of its assets. Within a few months of the government, further, froze all of the private assets of David Paul and the assets of David Paul
Properties, Inc. After the seizure and freeze, the government, through the RTC, thus had possession or control of all of the assets that could have been obtained from David Paul or David Paul Properties, Inc., even if the board of directors had pursued a claim on the guaranty.
 As we now understand it, the RTC's position is that our firm committed malpractice in advising the special committee that certain tax losses (that were transferred by Westport to CenTrust) could be counted as assets in determining whether the obligations of the guaranty had been satisfied. We have tried to understand the RTC's reasoning in this regard -- but cannot. We have retained legal scholars and experts to examine the facts and the law -- and they cannot understand the RTC's position. We have suggested that we would have those experts meet with the RTC to see if the RTC could give a better explanation of its position. The RTC rejected our offer. We have given the RTC all relevant information in our possession and have cooperated fully and forthrightly. We can find no merit whatsoever in the RTC's position.
 There were no damages. As mentioned above, the assets of David Paul and David Paul Properties, Inc. were frozen within a few months after the special committee acted. Those assets, thus, remain available if the RTC chooses to pursue the 1983 guaranty on the belief that the recommendation of the special committee was legally wrong. If the RTC is sure of its position, the RTC should pursue, it seems to us, the guaranty rather than to pressure this firm to pay money on a spurious claim.
 Our firm currently represents the RTC (or RTC-related entitled) on hundreds of matters. For several years, the RTC has been one of our most significant clients both in number of matters handled and in aggregate fees. In fact, we represented the RTC in numerous transactions involving CenTrust prior to, and during, the several months that we have debated this claim with the RTC.
 A threatened economic consequence of our refusal to settle is that the RTC will discharge us and will not refer new cases or other matters to us in the future. Upon our refusal to settle, we have been told that the RTC published internally a "no new hires" memorandum which prohibits the firm from getting new work from the RTC (or from related entities such as the FDIC). The RTC will require our firm to turn over all existing work to other law firms once the suit is filed unless we receive special case-by-case waivers from a Washington-based RTC committee. The potential value of the lost business to our firm exceeds the RTC settlement demand. We have, nevertheless, decided that economic considerations will not guide our decision in the regard.
 We do not, of course, claim that we could never make a mistake or give poor advice. If ever we do, we will be the first to admit it and to make restitution. As previously stated, the amount of the RTC settlement demand is but a small fraction of our applicable insurance coverage. We have told the RTC that we would quickly settle if the RTC's position were legally or ethically correct. However, a stated above, we can find no merit whatsoever in the RTC's position. Therefore, we will not settle.
 Our firm is build on principle. We will not take the easy course when our lawyers have conducted themselves properly and competently at all times.
 Accordingly, the firm will defend against the RTC's allegations. We believe that we will prevail.
 Holland & Knight is a Florida-based law firm currently with 294 lawyers located in offices in Fort Lauderdale, Jacksonville, Lakeland, Miami, Orlando, Tallahassee, Tampa and Washington, D.C. The firm has announced that it will open an office in West Palm Beach on January 4, 1993, and has under current consideration the establishment of an office in St. Petersburg.
 -0- 11~25~92
 ~CONTACT: Bill McBride of Holland & Knight, 809-359-6096 (Nov. 25 or Nov. 27) or 813-227-6439 (after Nov. 29)


CO: Holland & Knight; Resolution Trust Corp. ST: Florida IN: FIN SU:

JJ-JB-AW -- FL010 -- 1664 11~25~92 17:00 EST
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Date:Nov 25, 1992
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