A legal malpractice trial opening June 29 in Hartford Superior Court will determine whether law firm McCarter & English is liable for roughly $21.3 million in losses tied to two New York loans that collapsed nearly a decade ago.
The plaintiffs are PHL Variable Insurance Co. and Phoenix Life Insurance Co., now known as Nassau Life Insurance Co., both of which grew out of Hartford’s Phoenix Cos.
They contend that McCarter & English and one of its Hartford-based attorneys, James Scantling, failed to obtain an enforceable guarantee from a Long Island town that had agreed to back the loans, leaving the insurers unable to recover millions of dollars after the borrowers defaulted.
The case carries added significance because PHL has been in state-supervised rehabilitation since May 2024 after regulators found the insurer had a capital deficit of roughly $900 million. The company is now controlled by Connecticut’s insurance commissioner.
In a statement, the Connecticut Insurance Department said any proceeds from litigation involving PHL would be expected to flow to the PHL estate, meaning a recovery could help pay policyholder claims. PHL’s claim in the case totals about $8.9 million.
Phoenix Life, since renamed Nassau Life, is privately held and is not part of the rehabilitation.
The loans were arranged in 2011 and 2012 through a broker, NDH Capital Corp., to businesses operated by restaurateur Harendra Singh that ran concessions at a golf course and a beach owned by the Town of Oyster Bay in New York.
PHL provided a loan of about $7.8 million in 2011, while Phoenix Life made a roughly $12.3 million loan in 2012. Because the borrowers had little collateral, the insurers were willing to lend only if the town guaranteed repayment, and they told the firm they would not proceed without a town commitment that was, in their words, “ironclad” and “watertight,” court documents state.
When Singh’s businesses defaulted in 2015, Oyster Bay refused to repay the loans. Federal and New York courts later concluded the town’s promises were unenforceable because they had never been approved through a town-board resolution, as required under New York law.
The transactions later became entangled in a corruption scandal that resulted in bribery convictions for several Oyster Bay officials who had dealings with Singh.
Unable to recover from the town, the insurers turned their attention to the Hartford attorney who worked on the transactions.
The insurers assert two categories of claims. First, they argue the firm agreed to deliver a specific result — an enforceable town guarantee — and failed to do so.
Second, they allege negligence, arguing the firm failed to meet the standard of care expected of a competent attorney, including by not adequately researching the New York municipal law that ultimately invalidated the guarantees.
McCarter & English disputes both claims. The firm argues Scantling is a Connecticut transactional attorney who is not admitted in New York and that questions about the validity of the town’s actions under New York municipal law fell outside the scope of his representation.
According to court filings, the firm maintains the insurers specifically directed that legal opinions be obtained from Oyster Bay’s own attorneys confirming the transactions were properly authorized and enforceable, and that Scantling was entitled to rely on those opinions.
The firm also argues the claims were filed after the applicable three-year statute of limitations expired. It further contends that the losses stemmed from fraud by Oyster Bay officials rather than anything McCarter & English did and that the damages sought are overstated.
A judge has already declined to end the case before trial. In 2024, Superior Court Judge Cesar Noble denied the firm’s motion for summary judgment, finding that factual disputes had to be resolved at trial, among them whether the firm had committed to delivering a specific result.
The insurers are seeking about $21.3 million in damages, a figure that includes not only the unpaid loans but also investment returns they claim the funds would have generated elsewhere. Phoenix Life’s share of the claim totals about $12.4 million.
The trial is scheduled to run through July 10 before Superior Court Judge John Farley in Hartford.
The insurers are represented by David Golub and Jonathan Levine of Silver Golub & Teitell in Stamford. McCarter & English and Scantling are represented by Timothy Diemand and Joshua Taylor of Wiggin and Dana.
Both firms did not respond to requests for comment.
