While Greenberg joins the ranks of parties Heller’s creditors want to blame for the firm’s bankruptcy, Mayer Brown is getting a little dose of malpractice allegations in Texas over the same stuff.
Mayer Brown has been advising a German aviation company in bankruptcy. The firm allegedly failed to file a regular financing statement with the Texas Secretary of State for a secured loan owned by the company, which now wants $10 million in damages for gross negligence, among other things.
How Mayer Brown's predicament is, and isn't, like Greenberg's, after the jump.
Now, that’s a little different from what happened in Heller, whose bank filed a termination statement when no financing statement was needed that year. But the case shows us that failing to pay attention to routine financing statements under the Uniform Commercial Code can get both lawyers and clients in trouble.
Greenberg is being investigated by the Heller estate and its creditors for failing to discover Bank of America’s $51 million “clerical error.” Apparently, Heller’s San Francisco landlord, 333 Bush Associates, discovered it only weeks before the bankruptcy and Greenberg first learned about it from the landlord’s lawyers.
Firms get sued occasionally over mistaken UCC filings, but these suits usually target the lawyers who were doing the filing, or as in the Texas case, supposed to do them.
UCC law is fairly complex, but malpractice claims often arise more from the simpler, routine matters under the law than the complex matters, said Kevin Rosen, chairman of Gibson Dunn’s malpractice defense group.
Courts have taken different stances on malpractice claims for UCC mistakes like failing to renew, Rosen said.
“Having handled the initial UCC filing does not necessarily give rise to a duty with respect to any subsequent renewals,” Rosen said.
Still, claims like the potential case against Greenberg are “unusual,” Rosen said.
“It’s one of those things that’s very fact specific, is it something that a lawyer looking at this reasonably should have discovered,” he said.
Side note: Way back in December, Greenberg was quick to blame 333 Bush for the bankruptcy. The landlord had obtained a writ of attachment from San Francisco Superior Court guaranteeing it $48 million of Heller’s assets. Bankruptcy lawyers predicted that the move would throw Heller into bankruptcy, which it did. But at the time, many of those same lawyers wondered why the landlord would get so aggressive. Now we know that the landlord had learned BofA was not secured around the same time it asked for the writ of attachment. Greenberg had told us it had arrived on a settlement with the landlord in the days before the bankruptcy, but the banks wouldn’t unfreeze the cash to pay the settlement.
— Amanda Royal
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