LOS ANGELES (CN) - The former owner of the WNBA team Los Angeles Sparks accused its former attorney of legal malpractice, claiming in court that he helped the team's current owners squeeze it out of the franchise.
Gemini Basketball Holdings sued attorney Marc Samotny and law firm Patzik, Frank & Samotny, in Superior Court, over its handling of negotiations to avoid default on two loans totaling $4 million.
Gemini alleges legal malpractice, breach of fiduciary duty, fraud and negligent misrepresentation.
Gemini became majority owner of Gemini Basketball LLC when it acquired the Sparks in 2006, financing the deal with a $3.25 million loan from Broadway Federal bank, before borrowing another $750,000 from the bank in late 2008.
In early 2011, Gemini sought to modify its debt, restructure its finances, and avoid defaulting on the loans. It hired Samotny and his law firm on the recommendation of current Sparks owner and then investor, (nonparty) Williams Holding Group, according to the complaint.
Gemini says it let Samotny and the law firm represent its interests, but it was excluded from negotiations with Broadway Federal.
It claims the attorney "withheld significant material information" as it renegotiated the loans.
Kept secret was Broadway's Federal's insistence that Williams Holding Group guarantee restructured loans, Williams' refusal to put any more money into the Sparks, and Broadway's intention to default the loans, the complaint states.
The law firm also failed to disclose that Williams Holding Group "was using and relying upon GBH's [Gemini Basketball Holdings] lack of knowledge and its reliance upon the fidelity of Samotny and PFS [Patzik, Frank & Samotny] in order to further WGH's [Williams Holding Group] own plan to generate a crisis in order to force out and/or dilute GBH's ownership and its management role in Gemini," the complaint states.
It adds: "Near the end of 2011, GBH began questioning Samotny and PFS as to what was happening and why they were not getting information. At that time, Samotny and PFS stated for the first time that were not representing GBH at all, and were only representing the interests of WGH."
Because of the law firm's malpractice, Broadway Federal sued Gemini, forcing it "into accepting a squeeze-out" of its interest in the team, according to the complaint.
"By early 2012, WGH had used the financial crisis of Gemini to force GBH to dilute its ownership interest and waive accrued management fees," the complaint states.
Gemini seeks unspecified actual and punitive damages. It is represented by John Walton, of Pasadena.