Jacobs sues Mercantile in loan-payment dispute Orioles owner claims 'malicious scheme'

September 15, 1992|By Mark Hyman and Jon Morgan | Mark Hyman and Jon Morgan,Staff Writers

Eli S. Jacobs yesterday filed a lawsuit against Mercantile-Safe Deposit and Trust Co., accusing the bank of a "malicious scheme" to block his restructuring of his business empire and demanding at least $125 million in compensation and penalties.

In court papers filed in Baltimore City Circuit Court yesterday, Mr. Jacobs also asked the court to block the bank's efforts to force immediate payment of the $21.6 million he owes to the bank.

Yesterday's actions were the latest twists in what appears to be lTC an increasingly bitter dispute between Mr. Jacobs and the Baltimore bank. Last month, Mercantile filed suit against Mr. Jacobs, the Orioles principal owner and a New York financier, claiming that he was late making interest payments on the loan.

The court gave Mr. Jacobs until yesterday to respond.

In his suit, Mr. Jacobs charged the bank with interference with his business relationships, abuse of process, breach of contract, breach of fiduciary duty and fraud.

Responding to the Mercantile suit, Mr. Jacobs said bank officials had broken their promises to cooperate with him as he has worked with lenders on a comprehensive restructuring of his debt.

Martin Flumenbaum, a lawyer for Mr. Jacobs, declined to comment on the suit, which he termed self-explanatory.

But James M. Smith, a lawyer for Mercantile in Baltimore, said: "In almost 20 years of practice, this is one of the more frivolous pieces of litigation I have seen."

In documents filed in the case, Mr. Jacobs said he has been working on a comprehensive debt-restructuring plan "designed to treat all the lenders fairly and equitably and to obtain a restructuring satisfactory to everyone."

The documents do not say Mr. Jacobs has been unable to pay his debts. A spokesman for Mr. Jacobs said the Orioles owner would have no comment on the suit.

Mr. Jacobs said in the court filings that he had been making progress in restructuring until Mercantile filed its suit, an action Mr. Jacobs alleged is designed to thwart that effort.

Since the mid-1980s, Mr. Jacobs has had a relationship with the Baltimore-based lender, which now is his exclusive local bank, the documents say. In the process, the suit by Mr. Jacobs said, he has developed a close relationship with Mercantile Chairman H. Furlong Baldwin and other top bank officials.

On several occasions, Mr. Baldwin asked Mr. Jacobs to join the board of directors of the bank, Mr. Jacobs says in the court papers. Until recently, Mr. Baldwin sat on the board of the Orioles, according to the documents.

In July, Mr. Baldwin chartered a plane and flew to New Jersey for a meeting with Mr. Jacobs at which Mr. Baldwin said the bank would be his "strongest supporter" during his restructuring. Mr. Jacobs says he relied upon this endorsement while reordering his businesses.

At a later meeting with representatives of Mercantile and other lenders, Mr. Jacobs vowed to "work with them on a fully informed basis throughout the restructuring process," the suit said. Dealing with the banks as a group was fairer and more efficient than dealing with them individually, according to the documents.

In the past, the bank has accepted late payments, creating an "understanding" by Mr. Jacobs that legal action would not be taken, according to the documents.

"Unfortunately, the bank, after many years of a strong and close relationship with me, abruptly and fundamentally altered its course of dealing with me," Mr. Jacobs said in an affidavit.

The bank has told Mr. Jacobs since the July meeting that it wants better treatment than other lenders in the restructuring, Mr. Jacobs said in the documents. The bank filed suit Aug. 14, claiming Jacobs was late in his payments and demanding the full amount of the loan.

By demanding full repayment a day after a single late payment, )) Mr. Jacobs said, the bank has interfered with his relationships with other lenders and jeopardized his business restructuring. As a result, Mr. Jacobs said he will not be able to pay off the loan by its original due date, according to the documents.

The loan calls for full payment by Sept. 30, or when the Orioles are sold, whichever comes first. Mr. Jacobs said last year that he was considering some offers for the team, but has refused to say what became of them or if the team is still for sale. The court filings say the team has not been sold.

Mercantile's suit is not directly related to the Orioles, but the bank has asked that payments from the Orioles to Mr. Jacobs be diverted to it. In his response, Mr. Jacobs has asked the court to reject the bank's request. Those funds will remain frozen while the suit is pending.

No date has been set for a hearing. But Mr. Jacobs is scheduled to appear at a deposition in Baltimore on Sept. 25.

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