Prospect Capital Files Lawsuit Against Morgan Lewis & Bockius Over Mishandling of Legal Work
Prospect Capital Corp, based in New York, has filed a lawsuit against Morgan, Lewis & Bockius, a U.S. law firm, claiming that the firm's mishandling of legal work resulted in at least $12 million in damages for the financial services company, relating to a business loan it had granted. The publicly traded Nasdaq company sued Morgan Lewis in New York state court, based in Philadelphia, alleging professional negligence about its work on loan-related matters in 2014. According to the complaint filed on October 21, Prospect argues that the law firm's failure deprived it of the opportunity to pursue specific remedies for an alleged breach of a loan agreement. Specifically, Prospect alleges that it was not informed that a critical provision had been "significantly narrowed," allowing another bank to be paid first on a loan before it could be.
Representatives from Morgan Lewis waited to reply to messages seeking comment on Wednesday immediately. An appearance in the case had yet to be made by an attorney for the firm. With over 2,200 attorneys in offices worldwide, Morgan Lewis is a significant player in the legal industry.
Prospect, on the other hand, has an in-house legal team representing them, and a lawyer for the company declined to comment. A message seeking comment from a corporate representative of Prospect went unanswered as well.
According to its website, Prospect has invested in over 375 ventures, with a total capital of nearly $20 billion. The investment company had worked with Morgan Lewis from 2013 until July 2022, when Morgan Lewis terminated its representation.
Prospect granted the 2014 loan at the center of the lawsuit to Venio LLC, a company providing services related to recovering unclaimed property.
Prospect Capital Claims Negligence by Morgan Lewis Resulted in $12 Million in Damages.
In that same year, Keane Holdings Inc, the parent company of Venio, sought a $12 million loan from Silicon Valley Bank, as stated in the complaint. The lawsuit characterized Keane as a holding company with only one asset: its ownership of Venio.
As a condition for consenting to the Silicon Valley Bank loan, Prospect required Keane Holdings, Venio, and the bank to agree to a debt subordination agreement in Prospect's favor, according to the lawsuit. Prospect claimed that its loan to Venio must be fully paid before Keane could pay off the Silicon Valley Bank loan.
The complaint alleged that Prospect believed some of the funds provided to Silicon Valley Bank would be subject to a "turnover provision" and paid to Prospect. Law firm Kirkland & Ellis represented Keane.
Prospect claimed that the $12 million paid by Keane to Silicon Valley Bank should have been paid to them instead.
Last year, Prospect sued Silicon Valley Bank in a federal court in Manhattan, but the case was settled privately in June, and the bank is not a defendant in the current lawsuit. The claim is filed under Prospect Capital Corp v. Morgan, Lewis & Bockius, in the Supreme Court of the State of New York Supreme Court, with case number 653941/2022.
Representing Prospect in the case are Adam Burton and Abraham Shaw of Prospect represent Prospect in the case, while Morgan Lewis has yet to make an appearance.
