Developer seeks $22 million judgment against old Loomis law firm

Developer Harry Hepler is claiming $22 million in damages from alleged legal malpractice in a lawsuit against Loomis, Ewert, Parsley, Davis & Gotting, the prominent Lansing law firm that went out of business last month.

Hepler’s suit, which he filed two years ago, results from a 2013 lease agreement that went awry for the state of Michigan to rent approximately 60,000 square feet of space at 700 May St. in Lansing for the Michigan Public Service Commission. The space is part of a building behind Motor Wheel Lofts on Saginaw Street. Hepler is a principal owner of both. The space became available after the city of Lansing closed the old North Police Precinct.

The suit claims that the Loomis law firm and Jeffrey S. Theuer, one of its attorneys, “failed to timely file an otherwise-meritorious breach of contract case on behalf of Summit Street Development,” a limited liability company that owns and operates the May Street building.

The suit contends Theuer was more than a year late in filing a claim against the state over terminating the lease. The suit says by law such a claim must be filed “within 3 years after the claim first accrues” and cites an email from Theuer that the accrual date was May 4, 2014.

But, according to the suit, Theuer did not file a complaint in the Michigan Court of Claims until July 6, 2018, “over four years after the State sent Summit the termination letter.”

Summit fought the lease termination in state court, but the Claims Court sided with the state, citing Summit’s “failure to comply with the clear and unambiguous statute of limitations as the sole reason and without reaching the merits of Summit’s claim,” Summit’s suit against Loomis and Theuer states. The state Supreme Court declined to hear an appeal.

The suit discloses that the lease’s termination led to Summit’s bankruptcy under Chapter 11, from which Summit has since emerged. The suit says that the Claims Court also rejected Summit’s argument that the bankruptcy proceedings had “tolled” the statute of limitations, meaning that the proceedings had delayed when the clock started ticking. The court said that argument was “based on a misapplication and misrepresentation of the law,” the suit said. Moreover, the suit said that the “Court of Claims noted that even if Summit’s bankruptcy proceedings had in fact tolled the statute of limitations, the action would still have been time-barred as Defendants missed the hypothetical tolled deadline by five months.”

In response to Summit’s suit, Loomis filed two documents on May 17, 2022. In one, called “Defendants’ Answer to Complaint,” Loomis said, “defendants categorically deny any alleged legal malpractice or failure to timely file a breach of contract case as untrue.” The 14-page response, which asks for a jury trial, gives no specifics. Instead, it repeatedly answers that the defendants “lack knowledge or information” needed to respond to a specific allegation or that it was not legally obligated to do so.

The second document, called “Jury Demand,” contends, among other points, that the defendants “acted in good faith,” “exercised their professional judgment” and “did not have an attorney-client engagement with Plaintiff.” It also claims that the “Plaintiff has sustained no damages” and “unreasonably invested and/or loaned funds” and cite the plaintiff’s “failure to perform business and/or investment due diligence.”

Since then, the case has been in the evidence-discovery phase, to be followed by mediation and then possibly a jury trial if the parties do not settle.

Neither Hepler nor his attorney, Rebecca Cassell, of the Howell law firm of Myers & Myers, was willing to comment. Loomis is represented by Michael P. Ashcroft Jr. of Punkett Cooney, a Bloomington Hills law firm. Efforts to reach members of the former Loomis firm for comment on the suit were unsuccessful. Theuer and 11 other former Loomis lawyers have joined Foster Swift Collins & Smith, another prominent local firm.

In a related legal action, 30^th Circuit Chief Judge Joyce Draganchuk ruled against part of a motion filed by Cassell last month seeking a temporary restraining order and preliminary injunction to prevent Loomis from dissolving until the court could rule on a request by Summit for the court to appoint a receiver to oversee the dissolution process. The effort essentially sought to freeze Loomis’ funds so that they would be available for a possible judgment against the firm.

Another lawyer for Punkett Cooney, Jeffrey S. Hengeveld, successfully argued that “Loomis is not dissolving as a result of the Plaintiff’s lawsuit and Plaintiff is seeking to restrict Loomis’ assets pre-judgment when it is not a creditor of Loomis.”

Hengeveld declined to be interviewed. However, he emailed a statement that said, “Loomis’ decision to dissolve has nothing to do with these lawsuits, which is set forth in a pending motion to dismiss. In our opinion the lawsuits lack merit and we look forward to vindicating our clients' rights through the legal process.”

Some Loomis partners had retired or moved to other firms in recent years. One principal, Jack Davis, died in 2020.

Part of the concern about what happens to Loomis’ assets may stem from the knowledge that Loomis’ malpractice insurance is limited to $5 million per claim, according to testimony at a judicial oversight hearing — well below the $22 million that Summit and Hepler are claiming in damages.

Citing its losses, Summit’s suit states that it borrowed more than $5.3 million from Wolverine Bank for the build-out before the state terminated the lease.

Summit maintains in the suit that “but for Defendants’ malpractice, Summit would have been successful” in suing the state for breach of contract.

“As a direct and proximate result of Defendants’ failure to file a lawsuit against the State within the statute of limitations period, Summit suffered injuries, including but not limited to the amount it would have recovered against the State, either by way of a settlement or a verdict at trial, to compensate it for the State’s breach of the Lease, any and all fees it paid Defendants and experts, loss of future contracts and profits with the State, and any and attorney fees associated with this claim.”

The lease agreement that Summit filed with the state cites nearly $8.9 million in rent over the first 10 years, with the potential for two five-year renewals at an annual rate of nearly $975,000.

In a motion against Summit’s efforts to stop Loomis from dissolving, Loomis’ lawyer referred to “Plaintiff’s purported damages of $22 million,” called the amount “unsupported” and “speculative.” It also said the amount is “undermined by the fact that Plaintiff served an offer of judgment for less than the amount of the applicable insurance policy,” an apparent reference to possible settlement discussions.