A federal judge has cleared the way for a lending dispute between the nation's top plaintiffs lawyers group and Wachovia Bank to go to trial.
In a redacted opinion issued April 8, Chief Judge Royce Lamberth of the U.S. District Court for the District of Columbia ruled there were valid questions as to whether Wachovia acted legally when it terminated an $89 million real estate loan it had negotiated with the American Association for Justice. The sealed version of the opinion was issued in December.
The AAJ sued Wachovia in 2008, claiming the bank had wrongfully reneged on a deal to finance the group's purchase of a new headquarters in downtown Washington. Wachovia had intended to sell the original loan to investors by packaging it into a commercial mortgage backed security. But as demand for such securities dried up along with the larger mortgage market in 2007, Wachovia invoked the "material adverse change" clause in the deal's contract, which allowed the bank to back out if new circumstances "impaired" the sale of the loan.
According to Lamberth's opinion, Wachovia had assured the AAJ that it would only invoke the adverse change clause in the case of an unforeseeable "9/11 type event." Lamberth wrote that, among other questions to consider, there are genuine issues of material fact as to whether the changes in the securities markets Wachovia used to justify killing the deal qualified as unforeseeable.
The AAJ was ultimately able to find new financing to purchase the building, but on more expensive terms with a less beneficial structure. The AAJ, represented by a team from Shulman, Rogers, Gandal, Pordy & Ecker, is seeking to recoup the difference between the cost of the Wachovia loan and the financing it eventually obtained, as well as the value of other rights it lost in the new deal, such as the ability to sell the building's naming rights.
Lamberth issued an additional opinion refusing to exclude a damages report submitted by an expert for the AAJ. Sections of the report dealing with specific dollar figures were redacted.
Wachovia is represented by lawyers from Mayer Brown including partners Mark Ryan, Reginald Goeke and Joseph Baker. Goeke did not return a call for comment. Shulman, Rogers, Gandal, Pordy & Ecker also declined to comment.