Law Firm Stradley Ronon Stevens & Young Sued by Sovereign Bank

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On Monday, Sovereign Bank, a former client of Philadelphia-based law firm Stradley Ronon Stevens & Young, sued it over alleged errors in creating $200 million in loans to subprime lender Taylor, Bean & Whitaker Mortgage Corp. The Sovereign Bank filed the lawsuit in the Philadelphia County Court of Common Pleas alleging that Stradley Ronon was responsible for the losses that the bank suffered after Taylor Bean filed for Chapter 11.

The bank said that because of the errors caused by Stradley Ronon, the creditor’s committee of Taylor Bean could make and sustain an objection to a claim by the bank. As a result the bank failed to recover the amount it was due, or could have recovered, had the errors not been committed by the law firm.

The complaint filed in court mentions, “As a consequence of Stradley’s malpractice, Sovereign was damaged by having been rendered unable to recover the full value of the collateral to which it would have been entitled had the loan and security agreements been properly documented by Stradley.”

  

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Bill Sasso, the chairman of Stradley Ronon, had already put his pieces in place, and as pre-emptive strikes are the order of the day, the law firm had already filed for a pre-emptive declaratory judgment last month against Sovereign. Sasso said, “As stated in our complaint, we believe that the only party negligent in the transaction was Sovereign … Their complaint is totally without merit.”

Taylor Bean was once one of the largest mortgage providers in the U.S., but the company filed for bankruptcy in August 2009. The chairman and owner of Taylor Bean, Lee Farkas was found guilty of a $2.9 billion fraud and sent to prison for 30 years.

Sovereign Bank was one of the lenders of Taylor Bean and in 2006 had hired Stradley to supervise the legalities of the $200 million in loans to Taylor Bean. According to Sovereign Bank, the loans were expected to be secured with an interest in mortgage servicing contracts that Taylor Bean had with other investors like Wells Fargo Bank and Freddie Mac. However the loan documents that Stradley Ronon put together, according to Sovereign failed to include other investors.

Though Taylor Bean’s estate was able to recover $95 million from Wells Fargo and Bayview, Sovereign failed to receive any part of that money because Stradley Ronon had failed to include Wells Fargo and Bayview in the loans made to Taylor Bean.