San Jose, CA (1888PressRelease)
October 03, 2009 - Following a three hour court hearing, San Mateo County Superior Court Judge Marie Weiner recently affirmed a unanimous jury decision that awarded former Alliance Bancorp Chief Executive Officer Mehrdad Elie $5.8 million in damages and rejected a cross-complaint against him for approximately $12 million. In denying the defense motions for a new trial and for judgment not withstanding the verdict, the court has affirmed that former Alliance Bancorp Chief Operating Officer Kathleen Smith was liable for damages (Elie v. Smith CIV 471364). Jeffrey Essner and Allonn Levy of the San Jose law firm Hopkins & Carley (www.hopkinscarley.com) represented Elie in the month-long trial.
“We are pleased with the judge’s decision to affirm the jury’s decision and award. This case involved complex business transactions sealed by a handshake, which tends to be a common business practice here in Silicon Valley,” said Essner. “There is a misconception that oral and implied contracts are not as enforceable as a written contract. This decision underscores the power of verbal or implied agreements.”
Case Background:
The dispute centered on a series of investments and loans Elie made to Alliance Bancorp in 2007 while serving as CEO of the now defunct mortgage company. Elie and Smith had built Alliance Bancorp together over the preceding 18-year period; however, due to the mortgage crisis, the company hit hard times. To keep the company afloat, Elie and Smith agreed they would be equally responsible for the total amount they loaned to the company, referred to as the “50/50 Split Agreement.” The cash flow provided was agreed upon without a written contract.
Through 2007, Elie and Smith loaned to Alliance Bancorp a total of approximately $50 million dollars. Of that total, Elie advanced about $15 million dollars to the company on Smith’s behalf pursuant to the “50/50 Split Agreement.” Smith signed six promissory notes that required Alliance Bancorp to repay her for $12.5 million dollars that Elie advanced on her behalf. Later in the year, even more money was expended by Elie and Smith in order to enable Alliance Bancorp to meet certain repurchase obligations. Despite the large infusions of capital, the company was unable to weather the financial storm caused by the breakdown of the mortgage industry and filed for bankruptcy. As a result, the company was unable to repay Elie and Smith.
Following the bankruptcy, Smith disavowed her obligation to repay Elie the approximately $15 million he loaned to the company on her behalf. In March 2008, Elie filed suit demanding recovery of monies he had advanced and contending that when all advances and credits made and received were accounted for, he was owed between five and six million dollars by Smith.
Smith denied the claims and cross-complained that she was owed at least $10 million plus interest with no offset owed to Elie. On August 3, 2009, the jury found that Smith was in breach of an oral contract and awarded damages of $17,302,519 to Elie, and an offset of $11,488,067 was awarded to Smith, resulting in a net award of $5,814,452 to Elie.
Hopkins & Carley is the largest law firm based in San Jose. Meeting the legal needs of high-net-worth individuals, entrepreneurs, business owners, and growth and midsize companies in a variety of industries for 40 years, Hopkins & Carley, with offices in San Jose, Palo Alto, and Burbank, specializes in the areas of litigation; intellectual property, real estate; employment; estate planning; corporate, tax and business transactions.
For additional information, visit the firm’s Web site at www.hopkinscarley.com.
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