Posted on: September 28, 2023, 03:11h.
Last updated on: September 28, 2023, 03:11h.
The law firm representing 26 Capital (NASDAQ: ADER) is taking legal action against the special purpose acquisition company (SPAC) in an attempt to recover approximately $2 million in legal fees.
Schulte Roth & Zabel has requested the Delaware Court of Chancery to halt the planned liquidation of the blank-check company. The law firm argues that the SPAC must prioritize the payment of creditors before redeeming shareholders. 26 Capital recently announced its intention to liquidate and return capital to investors following a court ruling against it in a case related to a reverse merger bid involving the Okada Manila casino resort.
According to Schulte Roth & Zabel, “The law is clear that we are entitled to the fees we earned for the substantial work we did on behalf of 26 Capital and that 26 Capital cannot redeem investors before it makes provision for the payment of creditors.”
The law firm, which has offices in London, New York, and Washington, DC, states that it dedicated significant manpower and financial and mergers and acquisitions counsel to Jason Ader’s blank-check company.
Fast-moving Legal Action Against 26 Capital
Last week, 26 Capital announced the cancellation of its common stock on September 25 and disclosed plans to distribute the proceeds to investors by October 13 through a non-interest bearing trust account.
Schulte Roth & Zabel’s ability to collect legal fees from the SPAC would be dependent on the successful distribution of funds to investors. As a result, the law firm is taking prompt action in this matter.
As stated in the firm’s filing with the Chancery Court, “Concurrently with this Complaint, Plaintiff has filed a Temporary Restraining Order to preserve the status quo by preventing 26 Capital from transferring any funds to 26 Capital stockholders without first making provision for payment of the amounts owed to Schulte.”
The liquidation of 26 Capital is a consequence of a recent ruling by Delaware Court of Chancery Vice Chancellor Travis Laster. The ruling stated that Okada Manila’s parent company, Universal Parent, is not obligated to proceed with a previously announced merger agreement between the integrated resort and the SPAC.
Schulte Roth & Zabel began representing 26 Capital in August 2021, two months prior to the announcement of the Okada Manila reverse merger plan.
Specifics of the Agreement between 26 Capital and Schulte Roth & Zabel
According to the legal documents, Schulte Roth & Zabel charges hourly rates ranging from $1,200 to $1,695 for work performed by partners, $460 to $1,270 for duties performed by special counsels and associates, and $245 to $480 for assistants and practice support.
The firm’s agreement with 26 Capital includes a clause that grants a 33% discount on fees in the event that the Okada Manila deal falls through, which is what happened.
Throughout the period from August 2021 to July 2023, Schulte Roth & Zabel invested significant time and effort in the merger and acquisition work. The firm worked closely with 26 Capital’s management and representatives to structure the cross-border transaction, negotiate and finalize the Merger Agreement, draft the registration/proxy statement filed with the United States Securities and Exchange Commission (SEC), manage public disclosures related to the proposed transaction, and handle regular public filings, all in an effort to close the proposed transaction.
Schulte Roth & Zabel claims that 26 Capital owes them a total of $1,913,865.38.