With no merger deal, failed SPAC faces lawsuit over legal fees

The logo of law firm White & Case LLP is seen outside of their office in Washington, D.C.
The logo of law firm White & Case is seen outside of their office in Washington, D.C., U.S., August 31, 2020. REUTERS/Andrew Kelly

(Reuters) - Law firm White & Case has sued a special purpose acquisition company for more than $8.2 million in legal fees, claiming it stiffed the firm after failing to consummate a planned $480 million merger and then announcing plans to wind down this month.

New York-founded White & Case sued former client Colonnade Acquisition Corp II and its directors in New York state court late Monday, arguing the firm will be "irreparably harmed" if the blank-check company liquidates and dissolves before paying the fees it owes.

Blank-check firm Colonnade, led by investors Joseph Sambuco and Remy Trafelet, raised $300 million in an IPO and started trading on the New York Stock Exchange on March 10, 2021. In August 2022, payments provider Plastiq said it would go public through a merger with the firm, creating a company with a value of about $480 million.

The SPAC did not complete the combination by its March 12, 2023 deadline, however, and on March 9 issued a press release that it will cease operations, redeem the public shares and dissolve.

"It is unfortunate White & Case took this action given the mutually agreed-upon terms of the engagement letters and the totality of the circumstances," Colonnade said in a statement on the lawsuit Tuesday.

White & Case said it performed legal work for West Palm Beach, Florida-based Colonnade from November 2020, when the SPAC dealmaking frenzy was in full swing, until this month.

The SPAC market has sagged as regulatory scrutiny tightens and rising volatility spooks investors, triggering higher redemptions. Several SPACs have returned money they raised after failing to find suitable targets.

Two engagement letters with Colonnade described White & Case's rates and the scope of its work and said the firm would seek payment at a later date, with the earlier letter noting the firm would bill the company once it closed or abandoned a deal and the latter saying payment would be due upon closing the deal, the firm said.

White & Case said Colonnade "either ignored or rebuffed" several demands requesting payment.

The law firm said it contacted the blank-check firm as recently as late February seeking payment of the fees, which totaled about $8,289,100. The SPAC said in response that it did not owe the firm any money for the three years of work because it did not complete the business transaction, according to the complaint.

The case is White & Case LLP v. Colonnade Acquisition Corp. II et al, Supreme Court of the State of New York, County of New York, No. 651428/2023

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Sara Merken reports on privacy and data security, as well as the business of law, including legal innovation and key players in the legal services industry. Reach her at sara.merken@thomsonreuters.com