SBJ/October 8-14, 2012/Franchises

Liverpool case grinding along

It was two years ago this month that the controversial sale of Liverpool FC occurred, but the litigation surrounding the purchase is just now getting into full swing.

Lender Royal Bank of Scotland was recently served with discovery requests related to every aspect of the process. Mill Financial, a spurned buyer and lender to one of the former owners, is suing RBS, arguing it organized a sweetheart deal for the current ownership group. That group — New England Sports Ventures at the time, now known as Fenway Sports Group — is not a defendant in the litigation.

“Plaintiffs only recently served their first discovery requests on the defendants, including RBS,” the Scottish bank’s lawyer wrote in a letter dated Sept. 27 to the presiding judge, New York Supreme Court Justice Eileen Bransten. “The requests directed at RBS are wide-ranging, overly broad, and seek the production of documents, which are mostly located abroad and pertain to business matters of a professional sports franchise under intense public scrutiny.”

Mill was a lender to former Liverpool co-owner George Gillett. Mill assumed his security interest in the team after a default, and Mill ultimately signed a triparty lender agreement with RBS and Wachovia (now Wells Fargo), lenders to the embattled club.

Mill contends it was willing to buy the club for far more than New England Sports Ventures’ offer in order to protect its loan but that RBS orchestrated a sale secretly and did not inform the Virginia lender, as the triparty agreement required. As a result, Mill says it lost the entire value of the loan.

Bransten previously ruled that because the agreement prohibited the lenders from suing one another, Mill could not bring a lawsuit under that contract. However, she allowed the lender to bring claims for unfair dealing and breach of implied covenant, a ruling RBS is urging her to now reverse. A hearing on RBS’s motion is scheduled for Nov. 21.

In addition to RBS, Mill’s lawsuit names Gillett and related family assets as defendants. The lawyer for Mill, Paul O’Connor of Kasowitz Benson Torres & Friedman, did not respond to requests for comment.
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