A former longtime client of Proskauer Rose has re-filed a malpractice suit claiming the firm’s advice cost it hundreds of millions of dollars in tax liability.
In a statement, Proskauer said the new complaint by Overseas Shipholding Group (OSG) “is nothing but a rehash” of a prior suit and “we will contest these false allegations with extraordinary vigor.”
“We are confident the New York court will see OSG’s baseless claims for what they are—a desperate attempt by a bankrupt entity to shift blame for self-inflicted wounds that resulted from more than a decade of imprudent decisions,” the firm said.
In its new suit, filed in Manhattan Supreme Court, OSG said Proskauer helped to draft and negotiate a credit agreement that imposed joint and several liability on OSG’s overseas subsidiary for all of the company’s borrowings. OSG said all of its credit agreements were modeled on the 2000 agreement, resulting in “significant negative tax consequences.”
The suit said Proskauer compounded the problem by advising OSG that the “joint and several” language in credit agreements did not result in tax consequences and advised OSG’s management that no disclosure of the issue to OSG’s board of directors, the SEC or others was required.
OSG filed for Chapter 11 relief in 2012 and brought a malpractice suit against the firm in Delaware bankruptcy court. But a judge in February granted Proskauer’s abstention motion, effectively halting the case there. Proskauer then sued OSG general counsel James Edelson and former chief financial officer Myles Itkin for allegedly making “materially false and misleading representations” (Feb. 28, 2014).
Paul Spagnoletti, a Davis Polk & Wardwell partner, is representing the firm and four partners in the New York proceedings.
Steven Hoard, of Mullin Hoard & Brown in Amarillo, Texas, is representing OSG and declined to comment.