Fleming Intermediate Holdings has reportedly filed a lawsuit for securities fraud, common-law fraud, and breach of contract in federal court against James River Group and its CEO and CFO concerning Fleming’s purchase of JRG Re from James River for approximately $300 million.
For some background on this story, James River announced in November of 2023 its intention to sell JRG Re, its third-party casualty reinsurance business, to Fleming.
In March of 2024, James River filed a complaint in court seeking to enforce the terms of this purchase, noting Fleming’s refusal to finalise the already negotiated transaction.
In April of 2024, Fleming’s CEO Eric Haller suggested that while the firm will continue to defend itself against the above “meritless lawsuit”, Fleming would remain willing to acquire JRG Re “if James River cures its breaches of the agreement.”
However, that same month, Fleming confirmed its agreement to acquire JRG Re at the previously agreed-upon terms, after the Supreme Court, New York County, Commercial Division, issued an order directing Fleming to complete the transaction.
Now, in a new turn of events, yesterday (June 15th), Fleming filed a lawsuit for securities fraud, common-law fraud, and breach of contract in federal court against James River, James River’s Chief Executive Officer Frank D’Orazio, and James River’s Chief Financial Officer, Sarah Doran, relating to their alleged “egregious wrongdoing” in connection with Fleming’s purchase of JRG Re.
After closing its acquisition of JRG Re, Fleming reportedly conducted an extensive investigation of James River and JRG Re’s pre-closing conduct.
As a result of that investigation, Fleming alleges that the Stock Purchase Agreement governing the transaction was “replete with misrepresentations” made by James River, and that James River “repeatedly breached” that contract after it was signed by the parties on November 8, 2023.
Fleming also alleges that James River operated JRG Re in violation of Bermuda law and in default under its most important reinsurance arrangements, even before the Agreement was signed.
“Once the Agreement was signed, moreover, James River wrongfully began looting JRG Re’s assets while simultaneously depriving both Fleming and JRG Re’s leadership of critical information, ensuring that Fleming would not receive the full value of the company it had bargained for,” Flemings official complaint reads.
The firm additionally noted that its allegations are supported by excerpts and direct quotations from internal James River documents, establishing that James River defrauded Fleming.
Flemings’s complaint continued, “James River represented that JRG Re was in compliance, and had not violated any applicable laws. But James River knew that JRG Re had filed false and outdated information with the Bermuda Monetary Authority in 2022, which Sarah Doran personally referred to in emails as ‘very stale’ and ‘unfortunately just wrong.’
“Moreover, Ms. Doran personally knew and approved of JRG Re’s plan not to submit mandatory annual filings to the Bermuda Monetary Authority in 2023.
“In February 2024 James River also caused JRG Re to violate Bermuda’s Insurance Act and Companies Act by paying an illegal $90 million dividend to James River, and illegally paying an additional $49 million to James River.
“James River also withheld from JRG Re’s leadership reports from Willis Towers Watson actuaries serving as JRG Re’s ‘loss reserve specialists’, whose opinions are required to be submitted to the Bermuda Monetary Authority. This resulted in Willis Towers Watson formally opining that JRG Re’s reserves were unreasonable and deficient as of year-end 2023.”
Flemings’s complaint went on, “James River represented that, as of the closing, JRG Re had all assets necessary to continue conducting its business as it had done prior to entering into the Agreement.
“But James River knew that it was leaving JRG Re on the brink of insolvency after taking $20 million from JRG Re in December 2023, with contemporaneous December 2023 internal emails acknowledging that JRG Re ‘would be out of cash/assets’ soon.
“Subsequent internal emails reflect that JRG Re recognized its ‘cash [was] going to be exhausted in a week or two’ shortly before James River caused JRG Re to pay $139 million to James River in February 2023.
“James River ultimately had to refund approximately $6 million to JRG Re to keep JRG Re from running out of cash entirely in April 2024, just days before the transaction closed. Fleming nevertheless still had to supply millions more after the transaction closed to keep the lights on at JRG Re.”
Stay tuned into Reinsurance News for more on this story as it unfolds.
