RICHMOND, Va. (CN) - Investment firm Davenport and Company is seeking $15 million in damages from a pair of Virginia law firms it says fraudulently sued it for the sole purpose of "extorting a lucrative and unwarranted settlement."
In a complaint filed in the Richmond circuit court, Davenport says attorneys Douglas Palais and Frederick Payne, and their law firms, Payne & Hodous and Eckert, Seamans, Cherin & Mellott, deliberately fabricated a seven-count lawsuit against the brokerage, only to publicly apologize for their actions after the suit was dismissed on October 6, 2014.
The litigation stems from a plan by the Fluvanna County School Board in Virginia to build a new public high school.
A faction of the school board attempted to block final approval of the project, for which Davenport and Company was an advisor, but despite their opposition, the board ultimately endorsed the project and construction was scheduled to begin in 2009.
To mitigate lingering concerns about the project, "Davenport suggested that the Board investigate utilizing private placement funding, the public credit markets, state sponsored pool programs and private pool programs," the complaint says.
In August 2008, Davenport says, the school board provisionally agreed to pursue funding through standalone bonds from the Virginia Public School Authority (VPSA), so long as the bonds did not exceed $75,000, a maturity date of Dec. 31, 2035 and a true interest rate of 6 percent.
The issuance of the bonds was delayed by the onset of the global financial crisis, and in the interim, a school board election occurred in which project opponents gained the board majority.
"Because of this, on January 19, 2010, Davenport formally resigned as financial advisor to the Board," the complaint says.
In their 2011 complaint, defendants Payne & Hodous alleged $18.5 million in damages against Davenport, targeting Senior Vice President David Rose for suggesting the use of standalone bonds.
In its complaint, Davenport accuses the law firm of Payne & Hodous of common law fraud, abuse of process, malicious prosecution, interference and vicarious liability. They accuse litigants of withholding audio recordings and documents from school board meetings. Davenport says this evidence vindicated Rose by proving his absence from the meetings.
"The audio recording confirmed that Ruse did not make the November 24 statement that the Board alleged his did," said Davenport in their complaint. "In fact, Rose was not even present at that Board meeting."
"Just before the trial court in the Board's lawsuit was prepared to rule on Davenport's motion for sanctions," said the complaint, "The Lawyer Defendants informed Davenport that the Board was agreeing to voluntarily dismiss its lawsuit against Davenport, with prejudice, and to issue a public statement of apology."
In addition to $15 million in compensatory damages, Davenport seeks punitive damages and court costs on claims of malicious abuse of process, malicious prosecution, common law fraud, wrongful interference with business expectancy, and vicarious liability.
The brokerage is represented by A. Donald McEachin of McEachin & Gee in Henrico, Va.
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