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Judge Enforces Arbitration in Eidos Insurance Case

Thursday, January, 29, 2015


A complex and twisty legal battle will continue in arbitration despite the efforts of law firm McKenna Long & Aldridge, a federal judge has ruled.

 

The case involves Eidos Partners, Stairway Capital Management II, and Ironshore Specialty Insurance Company. In 2010 Eidos borrowed $20 million from Stairway in order to fund patent lawsuits, which it expected to bring in more than a billion dollars. As part of the loan deal, Eidos was required to buy insurance on the loan amount from Ironshore.

 

The patent litigation did not go as anticipated, and Eidos only recovered a single $7.9 million settlement. It failed to repay the loan to Stairway, which then demanded that Ironshore pay out on the insurance policy. However, Ironshore noted that Eidos used some of the loan money to pay its executives bonuses and to invest in subsidiary businesses, and considered that a breach of terms, and refused to cover the loan.

 

When the subsequent lawsuit was referred to arbitration as per the contractual agreements, Eidos brought in McKenna Long & Aldridge to argue that arbitration was inappropriate. This effort failed; however, not before McKenna & Long earned more than $11 million in legal fees from the process.

 

The arbitration process will still proceed, and the ultimate resolution of the dispute remains unclear, as Ironshore’s analysis of Eidos’ use of the funds could be challenged and it done successfully could still be compelled to pay out the policy as the final chapter of this complicated dispute.