Eugene Metzger

Eugene J. Metzger was a Washington, D.C. lawyer who had served as counsel to Financial General Bankshares and owned about 1.6 percent of its common stock when, in February 1978, the company sued him with Bert Lance, the Bank of Credit and Commerce International (BCCI), Agha Hasan Abedi, Jackson Stephens and others over a takeover attempt by Middle Eastern investors. In 1981 the federal district court found that he had breached his fiduciary duties to the company and ordered him to repay his fees; in 1982 the D.C. Circuit vacated the judgment on jurisdictional grounds without reaching the merits.¹

The Takeover Fight

According to the account in the Washington Post of 1978 summarized by the Kerry-Brown Senate Report, Stephens and Lance met Abedi in Atlanta on November 26, 1977, where Stephens offered to sell a block of 4.9 percent of Financial General, and recommended that Abedi meet Metzger. Robert Altman wrote to the Federal Reserve on May 9, 1978, that in late November Stephens had told Abedi "that Abedi should meet with FGB investor Eugene Metzger, and designate Metzger and Stephens as agents for these Middle Eastern investors."² The memo of the BCCI officer Abdus Sami to Abedi of January 30, 1978, explained that a disclosure filing had become necessary "on account of concentration of over 5 percent in the hands of Metzger, his knowledge and our intention to acquire control."²

Financial General filed suit on February 17, 1978, after learning that the investors had acquired twenty percent of its shares; the defendants included Lance, BCCI, Abedi, Metzger, Stephens, Stephens Inc., and Systematics Inc., and an amended complaint of March 21, 1978, added LaBelle Lance and five Middle Eastern investors, among them Kamal Adham. The Securities and Exchange Commission filed its own action on March 18, 1978, settled the same day by consent judgments; on April 27, 1978, the district court entered a preliminary injunction on the company's claim that the defendants' disclosure statements were false. On May 21, 1980, all the defendants except Metzger settled with Financial General, which agreed not to oppose the takeover in return for a premium price for its shares.¹

Judgment

Left as the sole defendant, Metzger was tried on the company's local-law claims for breach of fiduciary duty. The district court found (523 F. Supp. 744, 1981) that he had violated the duty of neutrality by participating actively in a dissident group of shareholders without disclosure to management; that he had written to another client proposing to sell a controlling block of Financial General stock, including his own shares, "to a foreign bank at a premium price"; that he had simultaneously represented Financial General and the Middle Eastern investors seeking control of it; and that he had used the list of shareholders to solicit sales of stock. It concluded: "From the outset of his representation, Metzger's attitude toward FG was marked by bad faith, secrecy, and self-dealing. He persistently placed his prerogatives as a shareholder above his fiduciary obligations as an attorney." The court ordered him to repay the 80,284.12 dollars in fees he had received, excused the company from 15,261.95 dollars in unpaid bills, and imposed 80,284.12 dollars in punitive damages.¹

On May 18, 1982, the D.C. Circuit, in an opinion by Judge J. Skelly Wright for a panel with Judges George MacKinnon and Ruth Bader Ginsburg, held that the district court had abused its discretion by retaining jurisdiction over "novel and unsettled questions of District of Columbia law," vacated the judgment, and remanded with instructions to dismiss once Metzger had waived any statute of limitations in the District of Columbia Superior Court (680 F.2d 768).¹