Just days before its January 3 trial start date, Morgan, Lewis & Bockius was successful in getting a legal malpractice case against it over an allegedly-botched real estate finance deal tossed on summary judgment.
In TCA Girard v. Morgan, Lewis & Bockius, Morgan Lewis and partners Eric Stern and Michael Pedrick renewed late last year its previously failed motion for summary judgment after Philadelphia Court of Common Pleas Judge Albert J. Snite Jr. barred plaintiff TCA Girard from using portions of expert witness Lawrence M. Goodman's report at trial.
While TCA opposed Morgan Lewis' summary judgment motion, the plaintiff conceded that, without Goodman's report, it could not prove a prima facie case as to proximate cause and damages on its sole theory of liability, Snite said in his order, docketed December 24.
In a separate order, Snite noted his ruling was dispositive, and as part of it Morgan Lewis agreed to the dismissal of its counterclaims against TCA for $378,000 in unpaid legal fees. Snite noted Morgan Lewis retained the right to refile those claims if TCA appeals his rulings.
TCA was a company set up under Conshohocken, Pa.-based Trinity Capital Advisors to enter into a long-term lease agreement with the city for an area of land in Center City known as Girard Square. The land, owned in fee by the city as trustee of Stephen Girard's will, was bounded by Chestnut, Market, 11th and 12th streets and contained 805,000 rentable square feet, according to TCA's complaint.
In 2006, TCA entered into a long-term ground lease agreement with the city for $90 million for an initial term of 75 years. Under the agreement, TCA had the ability to improve or raze the property, make improvements, enter into subleases with subtenants and receive all rental revenue. TCA would be responsible for all expenses of the property, according to the complaint.
TCA hired Morgan Lewis and partners Stern and Pedrick to counsel the company on the negotiation and drafting of the lease agreement as well as the documentation for the financing of the deal.
In early 2007, after looking at financial projections, TCA determined it would need $118 million to finance the deal, including $5.5 million in equity and $112.5 million in debt. With the projected revenue TCA expected to come in, the company required any financing deal to allow for TCA to defer paying back a portion of the interest-only monthly payments that would be due on the $112.5 million debt financing or have access to an "interest shortfall reserve," TCA said in its complaint.
A preliminary loan agreement contemplated allowing TCA to defer payments on $7.5 million of the debt through obtaining that portion of the debt as a separate mezzanine loan. But after some delays in signing the deals and some redrafting of the loan agreements, TCA ultimately signed a loan agreement with UBS Real Estate Securities for the entire $112.5 million in June 2007, according to the complaint.
TCA said it soon learned that the loan agreement required the monthly debt payments be paid in full every month regardless of that month's operating revenue. TCA attempted through a separate bank to get a $7.5 million mezzanine loan to cover those costs, but UBS blocked that deal, TCA said in its complaint.
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