Fleming Files Lawsuit Against James River, Alleging Fraud During JRG Re Acquisition

Fleming Intermediate Holdings filed a lawsuit against James River Group Holdings Ltd., alleging it had been defrauded during its $300 million acquisition of JRG Reinsurance Co.

Once the deal agreement was signed in November 2023, “James River immediately began depriving JRG Re’s leadership of critical information about their own company and looting JRG Re’s assets to ensure that Fleming would not receive the full value of the company it bargained for,” said the Fleming lawsuit filed on July 15 in the US District Court for the Southern District of New York.

Fleming said it is bringing the legal action “for securities fraud, common-law fraud, and breach of contract to recover the enormous damages caused by James River’s egregious wrongdoing in connection with this $300 million transaction.”

“As a result of James River’s misconduct, at acquisition JRG Re was borderline insolvent and operating in violation of Bermuda law,” the lawsuit continued. “That was not what Fleming reasonably expected in consummating the sale or what the parties had agreed to. But upon closing, this became Fleming’s problem rather than James River’s.”

The lawsuit also personally names as defendants James River’s Chief Executive Officer Frank D’orazio and the company’s Chief Financial Officer Sarah Doran, “in light of their central roles in James River’s financial misconduct.”

James River Comments

A James River representative provided a comment about Flemings’ legal action: “James River believes the claims made by Fleming, like their arguments in New York State court proved to be, are entirely without merit and James River intends to defend itself against them vigorously.”

Legal Wrangling

Fleming tried to back out of the deal in late April indicating that James River had misrepresented the level of its casualty reserving for JRG Re. In March, James River filed a suit to get Fleming to abide by its contractual obligation to complete the acquisition. Fleming responded at the time by saying it had no obligation to close the transaction, asserting that James River had attempted to deliver JRG Re to Fleming in a condition that “dramatically violated the parties’ agreement while refusing to cure its breaches of contract.”

Ultimately, the deal was completed in mid-April after Fleming was ordered by the court to close the transaction and “Fleming had no opportunity to substantively challenge that ruling on appeal,” said Fleming in its July lawsuit.

After the sale, Fleming said it launched an investigation into what it had been sold. “That investigation revealed that James River had breached numerous covenants contained in the parties’ stock purchase agreement, which also contained myriad false and misleading material misstatements upon which Fleming had reasonably relied,” the lawsuit continued.

“James River’s conduct has injured Fleming in many ways because the version of JRG Re that Fleming was forced to acquire is not the version of JRG Re that Fleming had agreed to acquire,” according to Fleming, which is seeking compensatory, consequential and punitive damages as well as costs and expenses.

The case is Fleming Intermediate Holdings LLC v. James River Group Holdings, Ltd., 1:24-cv-05335, US District Court, Southern District of New York.

Bermuda-based James River Group Holdings owns and operates a group of specialty insurance and reinsurance companies in three specialty property/casualty insurance and reinsurance segments: excess and surplus lines, specialty admitted insurance and casualty reinsurance.

Fleming is a portfolio company of private equity sponsor Altamont Capital Partners, which is based in Palo Alto, California.