VOL. 123 | NO. 36 | Thursday, February 21, 2008
First Horizon Suit Moves to Tenn.
By Andy Meek
IN ITS BACKYARD: Fifth Third Bank of Cincinnati has transferred its lawsuit against Memphis-based First Horizon National Corp. - the parent company of First Tennessee - from a federal court in Ohio to a state court in Nashville. -- Photo By Andy Meek
Fifth Third Bank of Cincinnati has transferred its lawsuit against Memphis-based First Horizon National Corp. - over what was supposed to be a routine sale of bank branches - from a federal court in Ohio to a state court in Nashville.
Fifth Third's federal suit originally was filed shortly before 10 a.m. on Feb. 8, the same day the company's deal to buy nine Atlanta-area bank branches from First Horizon was supposed to close. Without much explanation, other than that Fifth Third appears to prefer Chancery Court in Davidson County as a more appropriate forum, the Ohio-based bank refiled its suit last week in Nashville.
But where the federal suit spoke in broad terms about how exactly the deal collapsed, the Chancery Court complaint goes into more detail. Fifth Third balked, for example, when First Horizon asked earlier this month for more than $70 million for the nine bank branches, even though a 51-page agreement executed in September mentions the purchase price would fall between $11.2 million and $36 million, according to the new complaint.
First Horizon executives apparently believed the transaction did not include the banks' various loans, while Fifth Third insists the agreement did include them.
"At the midnight hour, First Horizon is attempting to coerce Fifth Third into renegotiating the purchase price," the suit reads.
Bait and switch?
Among the requests Fifth Third makes in the complaint, the company asks for an order speeding up the litigation so a trial, if one occurs, is finished by the end of March.
Said Fifth Third spokeswoman Stephanie Honan about the move from federal court in Ohio to Davidson County Chancery Court: "Our position has not changed relative to the lawsuit."
As of Tuesday morning, First Horizon had not yet filed a response to Fifth Third's refiled complaint. Charles Burkett, First Horizon's president of Tennessee and national banking, was quoted in the daily newspaper "American Banker" recently as saying that determining what to do about signage at the Atlanta banks is one of the "first things on the punch list."
Both sides in the dispute share that feeling.
In advance of the deal's expected closing on Friday, Feb. 8, Fifth Third swapped out all interior and exterior signs at the
branches in preparation for an official ownership switchover the following Monday. At the moment, all of that new signage is covered up with banners and tarps that identify the branches as still owned by First Horizon.
Since September, the Ohio-based banking company estimates it's spent about $7 million related to the purchase of First Horizon's Atlanta franchise. Among its
other sale-related expenses, Fifth Third dispatched more than 35 people to Atlanta, including electricians and technicians to change out electronics, telephones, merchandise and other equipment over a 72-hour period from Friday, Feb. 8, to the following Monday.
Fifth Third also mailed a "welcome booklet" to its new base of customers, which spelled out a lengthy list of changes that were due to occur. Among those changes were that all monthly recurring payments on a First Horizon Debit Credit Card must be tweaked by Feb. 11 to reflect new Fifth Third card numbers, or the payments would not be processed. Nor could any online transactions occur over the transition weekend.
"We will work closely with our customers and employees in Atlanta to ensure a smooth continuation of service and to maintain the high quality of our operations," Burkett said in a statement released by First Horizon Feb. 8.
Fifth Third wants the Nashville court to order First Horizon to move forward with the deal as originally conceived and has offered to place $36 million - the maximum purchase price in the September agreement - in an escrow account. Fifth Third claims it was blindsided by First Horizon's move to break off the sale.
"In connection with the written agreement for this complex transaction, both sides were advised by an army of sophisticated business people, lawyers of their choices, and investment bankers," reads a filing that's part of the Chancery Court complaint. "For approximately five months, First Horizon never questioned or raised an issue regarding the terms, meaning, clarity or enforceability of the express agreement which it signed."