February 9, 2011 9:22 AM
Cadwalader Sued Over Advice on Bank's Fee in Six Flags Proxy Fight
Posted by Nate Raymond
An investment vehicle closely tied to Washington Redskins owner Daniel Snyder has sued Cadwalader, Wickersham & Taft for $13 million over advice it gave on an investment bank's fee during a proxy fight at Six Flags Inc. in 2005.
The malpractice lawsuit, filed Monday by Red Zone LLC in New York state trial court, followed an October appellate ruling that the company owed UBS A.G. $8 million for its work on the Six Flags matter. While Red Zone said its lawyers at Cadwalader had claimed a contract they secured would limit the fee to $2 million, it did not, the complaint said.
Snyder became chairman of Six Flags in 2005 following a contentious proxy fight in which Cadwalader partner Dennis Block represented Red Zone, Snyder's Virginia-based investment company. Snyder left Six Flags's board in May, nearly a year after the amusement park company filed for Chapter 11 bankruptcy.
Cadwalader in a formal statement said the "lawsuit brought by Dan Snyder is both disappointing and without merit."
The firm added: "Our advice to Red Zone regarding its negotiation of the financial arrangement with its investment banker was appropriate and correct. Red Zone was successful in the proxy contest for which we were engaged, and it is unfortunate that events subsequent to the proxy contest resulted in a dispute between Mr. Snyder and his financial adviser. We look forward to a speedy resolution of these matters."
Red Zone in its own formal statement noted that neither Snyder nor any other Red Zone member was a party in the case. The company, represented by Jeffrey Jannuzzo, said in a formal statement that the complaint quotes Block's own deposition testimony from the UBS case "that the agreement he and Cadwalader negotiated would cap Red Zone's liability, and the court ruled that it failed to do so, as a matter of law."
The statement continued: "The case is as simple as that, and we are confident that we will prevail."
According to the malpractice complaint, Red Zone hired Cadwalader in mid-2004 to advise it on its investment in and possible acquisition of Six Flags. Block, one of the top rainmakers at the New York firm and a veteran of mergers and acquisitions, was the partner in charge of the engagement, the complaint said.
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