|By Dan Margolies, The Kansas City Star,
Knight Ridder/Tribune Business News
Jun. 14, 2006 - -
"My expectations of the
development of the entire block were removed from me."
Even as it holds merger talks with Bryan Cave, a Cleveland-based law firm faces allegations in Kansas City that it defrauded the developer of the Hilton President Kansas City.
Jury selection in the case got under way Tuesday in Jackson County Circuit Court. The trial is expected to last from four to six weeks.
At issue is whether Squire Sanders & Dempsey, one of the biggest law firms in the country with 800 attorneys, fraudulently led the hotel redeveloper to believe that it would receive a $14 million loan from an Ohio mortgage investment banker called H&A Capital to renovate the downtown landmark.
President Hotel LC, the redeveloper, is seeking more than $100 million in damages.
The lawsuit is one of several spawned by early financing difficulties encountered by the hotel redevelopment group, which was led by local developer Ron Jury.
The group eventually got financing and the long-closed structure since has reopened amid downtown's construction boom.
In its lawsuit, President Hotel contends that Donald Longwell Jr., a now-former Squire Sanders attorney who represented H&A Capital, knew H&A was incapable of making the loan but negotiated the deal to pocket a $10,000 fee. According to President Hotel's complaint, H&A was not a lender and had no intention of fulfilling its loan commitment.
H&A now appears to be defunct. It was dismissed from the lawsuit earlier.
In court papers, Squire Sanders says President Hotel's claim that Longwell owed it a duty of full disclosure misstates the law and "would surely surprise every transactional lawyer in Missouri."
Citing the doctrine of attorney-client privilege, the law firm says that Longwell, as H&A's counsel, "was precluded from disclosing the information" that President Hotel claims was fraudulently omitted.
It also says that the case is premised on the inconsistent recollections of Jury and his lawyers. The firm says President Hotel suffered no meaningful damage, losing nothing from the alleged fraud "except perhaps four months and $10,000."
Jury insists otherwise. He says that H&A's failure to close on the loan caused him losses resulting from the delay in the hotel's opening and from the opportunity to redevelop the entire city block.
"My expectations of the development of the entire block were removed from me," he said Tuesday while waiting for the trial to begin. "There were the 226 condominiums I was unable to develop, there was the hotel expansion of 320 rooms, and there was 45,000 square feet of retail."
Nearly five years ago, when Jury outlined his plan to redevelop the long vacant structure, he also announced plans to transform the then-desolate downtown block into an upscale residential community anchored by the hotel.
The plans called for the construction of luxury apartments and retail space nearby. The area is now part of the Power & Light District, which is being developed into a massive entertainment complex by the Cordish Co. of Baltimore.
President Hotel says that Longwell had shown bad faith in another transaction involving another developer. In court documents, it says that about the same time Longwell was negotiating the loan commitment with President Hotel in May 2002, it made a loan commitment to the developer of a proposed shopping mall in Texas.
That commitment also fell through. In litigation spawned by that incident, the Texas developer said in an affidavit that Longwell later admitted that he knew the commitment was worthless when it was sent out, "yet it was sent out anyway so the attorney's fees incurred by them at H&A Capital's request could be paid."
The suit comes at an unpropitious time for Squire Sanders, which media reports say is close to voting on a merger with Bryan Cave. A story in this week's Missouri Lawyers Weekly says that partner votes on the merger could take place as early as this summer. Officials of both firms have declined to confirm the merger speculation.
St. Louis-based Bryan Cave has a large office in Kansas City, with about 80 attorneys. Squire Sanders does not have an office here.
A combination of the two firms would create a legal powerhouse with 1,600 attorneys and annual revenues of more than $800 million, making it one of the 10 largest law firms in the country.
To reach Dan Margolies, call (816) 234-4481 or send e-mail to firstname.lastname@example.org.
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