LANCASTER – A York law firm is seeking the dismissal of a lawsuit by a bank that accused it of legal malpractice after the default of a $7 million loan.
CGA Law Firm filed an answer June 30 in Lancaster County Court of Common Pleas to Northwest Savings Bank's second amended complaint, alleging that the bank "misrepresented the nature of the commercial loan to CGA."
"The plaintiff knew this was a bad deal prior to the retention of CGA," the answer stated.
Northwest Savings Bank filed its initial complaint against the law firm on July 22, 2016. Also named co-defendants in the case are attorneys Jeffrey L. Rehmeyer II and Christopher J. Reed.
According to the initial complaint, Northwest officials in July 2014 hired CGA to prepare documents that would protect the bank in the event of a default of a $7 million loan to Cover Crop LLC, a national seed distributor. The intended collateral was radish seed grown and stored in various locations around the United States, most of it in Oregon.
The plaintiff alleged that after Cover Crop defaulted on the credit line, Northwest officers learned they did not have any security interest in seed collateral because of the "complexities of competing interests including seed growers and warehousemen," the second amended complaint, filed May 10, stated.
“The primary, if not sole, reason the defendants were hired was to unravel these competing rights and to either prepare loan documents that protected Northwest’s first priority interest in the collateral, or in the alternative, inform Northwest that its interests could not be adequately protected. The defendants did neither,” the amended complaint stated.
The plaintiff alleged the defendants made but a single filing with the Pennsylvania Secretary of State for seeds and then incorrectly represented to Northwest that the bank was protected. Northwest officials said no doubt was expressed they would be able to seize millions of pounds of valuable Oregon-grown seed in the event of a default,the amended complaint stated.
The allegations further contended that CGA officials had full knowledge that third parties had rights and interest in the seed and not only failed to advise Northwest on the status, but never sought to submit the appropriate documents transferring those rights to Northwest.
CGA alleged that Northwest did not provide information regarding the purported grower contracts and/or warehouse agreements until the day before closing. It also claimed that Northwest represented that the commercial closing was standard and withheld information so that CGA did not know about any competing rights.