HOUSTON – Wishing to keep drawing a salary after defaulting, the Tracey & Fox Law Firm has filed suit against Armadillo Financial Partners, a lawsuit lender that has loaned the firm millions of dollars.
The petition, which seeks declaratory judgment, was filed Oct. 27 in Harris County District Court.
Tracey & Fox, founded by Sean Tracey and Shawn Fox, primarily focuses on injury lawsuits and medical device and pharmaceutical litigation.
According to the lawsuit, on Oct. 7, 2014, the firm entered into a loan agreement with Armadillo Financial, executing promissory notes worth $5.4 million and $12.6 million.
As collateral for the loans, Tracey & Fox granted Armadillo a security interest in and a lien on “Eligible Cases,” which under the agreement are defined as “settled cases” that “constitute a portion of the Collateral.”
On Aug. 31, 2016, the parties entered an amendment to the agreement for the purpose of limiting Armadillo’s available remedies in the event of a default to the collateral.
According to the lawsuit, Armadillo has “taken the position” that Tracey & Fox defaulted in April 2020 and asserts the firm is prohibited from “making any distributions whatsoever to its partners during a default, regardless of the source of the distributions.”
“A blanket prohibition would disserve … Armadillo’s interests. Such a prohibition would also create absurd results,” the suit states. “For Example, if the court were to accept Armadillo’s position, none of Tracey & Fox’s partners would be able to draw a salary during a default.”
Tracey & Fox seeks a declaratory judgment that making distributions that are unrelated to eligible cases is not a material breach of the loan agreement.
The firm is represented by Jarrod Martin and Julie Offerman, attorneys for the Houston law firm of Chamberlain, Hrdlicka, White, Williams & Aughtry.
Case No. 2020-68909