When it comes to good legal representation, that usually comes at a premium, and it’s a trip where Six Flags waits for help from their insurance company to cover the costs.
The Texas-based theme park has filed new lawsuits seeking to force its insurer to reimburse millions of dollars in attorney fees it paid to some of the nation’s largest law firms.
In the Dallas federal court retrial, Six Flags Entertainment Corp. alleged that its insurer, Travelers Casualty and Surety Co. of America, wrongly denied the park its insurance coverage for attorney fees and legal fees.
Six Flags spent the money defending itself against a U.S. Securities and Exchange Commission investigation into its business transactions in China, as well as class actions and shareholder litigation related to the transactions in China.
Six Flags operates 26 parks in the United States, Mexico and Canada, including four parks each in California and Texas, and two parks each in Georgia, New Jersey and New York, according to its website.
But COVID-19 has hit Six Flags hard: revenue of $ 82 million in the first quarter of 2021 is a 38% drop from the same period in 2019, according to the company’s latest performance report.
The park’s legal problems began in February 2020 with the SEC subpoena, according to the complaint in Six Flags Entertainment Corp. v. Voyager Casualty and Surety Co. of America, filed in the U.S. District Court for the Northern District of Texas.
Six Flags had to pay more than $ 2.5 million in fees to law firms Kirkland & Ellis, Lionbridge, Parker Lynch and Fayer Gipson to defend against the subpoena, which requested information about a partnership with a developer Chinese real estate related to Six Flags parks in China, and a negative revenue adjustment of $ 15 million.
Insurance coverage for directors and officers and for organizational liability should have covered the company’s legal costs, according to the complaint.
Additionally, in February 2020, two securities class action lawsuits were filed against the company and two former executives for the same partnership and the negative income adjustment. In essence, the same allegations were raised in shareholder derivatives lawsuits in federal and state courts against the company, officers and board members, according to the complaint.
Six Flags had to spend over $ 290,000 in fees for Perkins Coie’s attorneys to represent two executives of the company who were defendants in a class action lawsuit because there could be a conflict if the same attorneys represented the company and those individuals.
According to a search of federal court records on PACER, plaintiffs filed three derivative shareholder lawsuits that were consolidated into one case, and U.S. District Judge Mark Pittman on April 28 allowed a motion for rejection by Six Flags in the case, In Re Six Flags Entertainment Corp.. The defendants, officers and members of the board of directors of Six Flags, were represented by Kirkland & Ellis attorneys Jeremy Fielding of Dallas, as well as Daniel Cellucci, Sandra Goldstein and Stefan Atkinson, based in New York.
On March 3, Pittman allowed Six Flags’ motion to dismiss a consolidated class action suit, according to an opinion and order in that case, Electrical Workers Pension Fund v. Six Flags Entertainment Corp. Those defendants – Six Flags and two executives – had the same Kirkland & Ellis attorneys, PACER said.
In a different case – unrelated to the Chinese Six Flags parks – Six Flags had spoken to its insurance company about a “crucial event” regarding a potential proxy fight with a shareholder. Six Flags brought in Kirkland & Ellis to represent it, and the case ultimately resulted in an out-of-court settlement, according to the complaint. Six Flags incurred more than $ 100,000 in legal fees for this result, and the complaint alleged that the travelers had refused coverage.
In addition to these legal actions, the complaint alleged that at other times the Travelers attempted to reclassify and reallocate legal fees and expenses, which should have been covered by insurance. He alleged that the insurer was seeking to reduce exposure and decrease policy benefits paid to Six Flags.
The theme park company is suing its insurer for breach of contract, violation of a Texas insurance law that requires prompt and fair payment of claims, and violation of the duty of good faith and fair use.
Six Flags has asked the court for a declaratory judgment which concludes the travelers policy should cover attorney fees and legal fees. In addition to recovering those amounts from travelers, she wants reimbursement for legal fees she is spending to sue the insurance company, according to the complaint.
Six Flags attorney Jennifer LeMaster, a partner at LeMaster & Ahmed in Houston, declined to comment.
When contacted by phone, a spokesperson for Travelers said he would review the lawsuit, but the company generally does not comment on pending litigation.