A Delaware judge is temporarily blocking a special purpose acquisition company’s plan to dissolve after its former law firm Schulte, Roth & Zabel sued to recover more than $1.9 million in legal fees for work on a now-failed merger with the Philippines’ largest casino.
Vice Chancellor Travis Laster of Delaware Chancery Court on Wednesday granted Schulte’s motion for a temporary restraining order to prevent its former SPAC client 26 Capital Acquisition Corp from liquidating and dissolving before it pays its legal fees.
Schulte advised 26 Capital on its planned $2.5 billion SPAC merger with an affiliate of Japan’s Universal Entertainment that owned the Okada Manila casino resort.
Laster earlier this month refused to order Okada Manila to complete the merger in part because of disclosure failures in the deal, finding that 26 Capital “engaged in conduct that should not be rewarded” by forcing the merger to close.
The blank-check company said last week that it would dissolve entirely, liquidating its trust account and distributing its assets to its stockholders by Oct. 13.
Such a move would prohibit Schulte from recovering any unpaid legal fees, the firm alleged in its lawsuit on Tuesday.
Laster’s order said the temporary restraining order will expire Oct. 11. He granted the law firm’s bid to expedite the case and said he would hold a hearing within 10 business days.
26 Capital said in a statement that it will “fight against these unfounded legal actions.” It said it was “deeply troubled that SRZ has sought to interfere in the timely and orderly liquidation and distribution of investor capital back to its rightful parties.”
Schulte, which has more than 300 lawyers in New York, Washington, D.C., and London, said it has devoted hundreds of hours to finance and merger-related legal work for 26 Capital.
A Schulte spokesperson said Thursday the firm does not have additional comment beyond its prior statement, which said the “law is clear” that the firm is entitled to fees for the work it did on behalf of 26 Capital. — Reuters
