Posted Jun 15, 2007 01:13 pm CDT
A disbanded Dallas law firm is facing a $20 million suit for malpractice and breach of contract filed by a former business client that claims lawyers counseled it to accept a bad merger deal.
The defendant is Jenkins & Gilchrist, which closed on March 31 after signing a non-prosecution agreement to resolve claims that it created improper tax shelters, Texas Lawyer reports.
Tactica International claims in its lawsuit that its reverse merger deal caused a precipitous drop in stock price, forcing it to file for bankruptcy.
Tactica, which sold household and personal products, says it merged into a shell company named Diva Entertainment Inc. pursuant to advice from the law firm.
After the merger, outside investors converted preferred stock to common stock and sold the shares on the open market, causing the decline in stock price.