LAWSUIT UPDATE: City of Memphis attorney Elbert Jefferson updated members of the Memphis City Council this week on preparations being made toward filing a lawsuit on behalf of the city and county against a group of national mortgage lending companies. -- PHOTO BY BILL DRIES

When the bottom fell out of several Regions Morgan Keegan mutual funds in 2007, billions of dollars in value belonging to shocked investors quickly evaporated.

Law firms throughout the country began signing up investors to represent. One of those firms is Montgomery, Ala.-based Beasley, Allen, Crow, Methvin, Portis & Miles PC.

The firm has another Memphis connection besides its probe of products managed by a unit of Memphis-based Morgan Keegan & Co. Inc. Memphis City Council members were told this week Beasley Allen is likely to be a pinch hitter for the city and county in a high-profile lawsuit soon to be filed against national mortgage lenders.

Who will lead?

City of Memphis attorney Elbert Jefferson told the City Council this week preparations for filing the lawsuit on behalf of city and county governments against predatory mortgage lenders are not complete. Backers thought more progress would have been made by now, and one reason for the delay has been the question of who would take the lead.

Both the council and Shelby County Commission already have signed off on taking an unidentified group of national mortgage lenders to court over discriminatory lending practices.

“There’s been a lag in moving forward based upon who’s going to be moving forward as lead counsel for this proposed lawsuit,” Jefferson told council members in the group’s executive session Tuesday.

Strong indications are that Beasley Allen will have that job. The County Commission last month approved a resolution allowing the county mayor to hire outside legal counsel on a contingency fee basis.

Beasley Allen already has submitted a proposal to hold local government harmless for expenses that exceed the $250,000 proposed to fund the effort. The proposed funding would be split between the city and county.

“They’re recognized across the country for their ability to handle complex litigation, which this will be,” Jefferson said.

A complaint that would be filed in federal court has been drafted. Jefferson said a handful of national mortgage lending companies has been identified in the complaint, based upon statistical analyses backers of the lawsuit have completed.

“Our outside firm will also come in and do that due diligence,” Jefferson said. “We want to make sure we’re well grounded in the allegations we make.”

County officials have given the city more time to finish its own deliberations about the case. If the city hasn’t committed by Wednesday, the county would be free to file the lawsuit alone. The city still could join in after that point.

Been there before

Local officials have said Beasley Allen would bring the cachet needed to make the mortgage lending suit successful.

The firm has represented clients in everything from medical malpractice to predatory lending cases, with scores of high-profile awards – and several cases with local ties – to boot.

The RMK investor claims offer one example.

Like many firms wanting a piece of the action, Beasley Allen set up a Web site seeking clients burned by losses in the funds.

The souring of those RMK funds became a national story. The U.S. Securities and Exchange Commission began looking into the matter. A group of state securities regulators also is probing the cause of the funds’ plunge.

The funds soured to such an extreme degree Morgan Keegan transferred management of the funds to New York-based Hyperion Brookfield Asset Management. The funds’ shareholders at the end of May approved a plan for Hyperion to liquidate the funds.

Meanwhile, Beasley Allen also has filed a class-action suit on behalf of property owners affected by an environmental accident that happened in East Tennessee in December.

And as with the Morgan Keegan claims, the firm set up a Web site for clients with possible property damage claims related to the collapse of a retention pond wall at the Tennessee Valley Authority’s Kingston Fossil Plant west of Knoxville. That accident released 1.1 billion gallons of sludge into the surrounding area, according to press accounts.

Beasley Allen also is providing free legal consultation to patients who think they may have been injured by Medtronic Inc.’s heart devices. Medtronic’s Spinal and Biologics Business is based in Memphis.

The company announced in October 2007 that it had voluntarily stopped distributing the Sprint Fidellis family of defibrillation leads because of the product’s potential for lead fractures.