US firm Piper Rudnick is being sued for at least $9m (£5.9m) in damages by the bondholders in bankrupt organisation Greater Southeast Community Healthcare System. Holders of $16.3m (£10.7m) in bonds have alleged that Piper Rudnick was negligent in its handling of a bond deal conducted in 1993.
The claim against Piper Rudnick centres on the allegation that the firm failed to file a key financing statement at the time the bonds were issued. The absence of this filing means that the bondholders are not able to gain secured creditor status. They argue that without secured status, they were unable to pursue their claim for $9m of the organisation’s assets.
Mintz Levin Cohn Ferris Glovsky and Popeo is acting for the plaintiffs, trustee of the Bank of New York and mutual funds of Eaton Vance Municipal Bond Fund, National Municipals Portfolio, High Yield Municipals Portfolio and Maryland Municipals Portfolio.
A spokesperson for the bondholders said: “The fact is that they prepared and filed the financing statements in the wrong place.”
Piper Rudnick filed the financing statement in Maryland, home of the conduit issuer Prince George’s County. It did not file a similar statement in the district where the organisation’s hospital, Greater Southeast Community Hospital, is situated. Most of the organisation’s assets are located in this district, rather than where the filing took place.
Piper Rudnick has denied any wrongdoing and will fight the claim. It has instructed Williams & Connolly partner Gerson Zweifach to orchestrate its defence.
Zweifach said: “First, Piper did not commit malpractice because it was not Piper’s responsibility to file the financial statements. Second, the bondholders’ loss has nothing to do with anything that Piper did or didn’t do.”
He has filed a motion requesting that the case be transferred to Maryland or dismissed.
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