Noted real estate investor Tony Thompson's lawyers want to dump him as a client, citing a breakdown in communication and a failure to pay their legal fees.
The law firm of Fields Fehn & Sherwin in November notified a federal judge in San Francisco that it wanted to resign as attorneys for Mr. Thompson and his firm, Thompson National Properties. Both are defendants in a class action lawsuit in U.S. District Court in the Northern District of California brought by investors in a real estate investment
trust Mr. Thompson formerly controlled. The law firm's motion is schedule to be heard Jan. 8.
“The grounds for the motion are that there has been a breakdown in the attorney-client relationship, including a lack of meaningful communication, that prevents the attorneys from effectively representing the client in this action,” according to the filing. “Counsel also represents Mr. Thompson in a number of other actions in superior court in Southern California and will be seeking to withdraw representation in those cases too.”
“Although the prime ground for the motion is that there has been a complete breakdown in the attorney-client relationship, the defendants are also substantially delinquent in their agreed-upon obligations to pay counsel for legal services rendered and costs incurred on their behalf,” according to the filing. “The defendants currently owe the law firm a substantial amount of money for services rendered in this and the other cases mentioned above.”
The dollar amount in dispute was not stated in the court documents.
“There is a large outstanding bill that the client has not paid, and the client has not expressed any intention of paying the outstanding balance that is owed,” another filing by the attorneys states. “Before the recent breakdown in the attorney-client relationship, the client had always expressed an intention of paying any outstanding balance, and made semi-regular payments.”
In an email, Mr. Thompson said he could not be reached until later Monday. A call to Thompson National Properties was not answered because the company is closed until after the New Year. Tom Fehn, one of Mr. Thompson's attorneys, was not available to comment Monday morning.
Meanwhile, Thompson National Properties earlier this month said in a press release it had completed a successful debt to equity swap for over 700 investors. Terms of the restructuring were not announced.
Over the summer, Thompson National Properties first solicited investors to exchange dead-in-the-water high-yield notes for stock in his real estate venture.
Thompson National Properties, known as TNP, first pitched investors the exchange in July as part of a plan to restructure $50 million of debt in the form of five separate TNP-backed note programs sold to investors by independent broker-dealers. TNP followed that offer with a supplemental offer.
The notes in question were sold from 2008 to 2012. In 2008, Mr. Thompson — who made his mark in the independent broker-dealer industry last decade as a leading packager and seller of real estate deals known as tenant-in-common exchanges, or TICs — launched TNP.
The note restructuring and the fate of TNP were intertwined, according to a confidential offering memorandum. TNP “has determined that it does not have the capacity to remain in business under its significant current debt load and believes it is in the best interest” of TNP and the note holders to restructure the debt to exchange the notes for preferred equity, according to the memorandum.
TNP's failed note program is at the heart of ongoing, pending complaints by the
Financial Industry Regulatory Authority Inc. against Mr. Thompson and the defunct broker-dealer he formerly controlled, TNP Securities Inc.
Finra alleged in July 2013 that Mr. Thompson deceived and defrauded investors who bought $50 million in high-yield promissory notes sponsored by TNP.
