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Lender: law firm breached disclosure duty to us re loan

Both sides in a heated legal battle have asked a federal judge to rule in their favor and to dismiss the other party’s claim. Unless the court opts to do so, their multi-million-dollar dispute will be headed to trial next month.

That matter is focused squarely on language set forth in a legal opinion letter (a document written by an attorney or law firm expressing views regarding a transaction’s risks that are often relied upon in a matter by its recipient).

In the instant case, that recipient was a lending entity contemplating a loan to an insurance company. The law firm was formally representing the latter.

In a lawsuit alleging fraud and legal malpractice recently filed in a California federal court, the lender claims that the law firm acted in bad faith by breaching its duty to fully disclose “relevant facts related to the loan” touching upon its client’s ability to make timely payments. The lender states that the firm was purposefully silent regarding select material information, and that its omissions played a key factor in securing the loan.

Had the insurer’s counsel abided by its duty to properly disclose, notes a case document filed last week, the lender “never would have issued the loan.”

Unsurprisingly, the law firm disputes the allegations, calling them “remarkable” and stating that the lender misreads the law regarding the firm’s duty on information disclosure.

Not true, counters the lender, which states that the law firm relied on New York law in assessing is disclosure duties when, in fact, California law is the applicable standard in the matter.

The lender seeks $16 million in damages.