THE AM LAW LITIGATION DAILY: June 24, 2008

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June 24, 2008 10:51 AM

THE AM LAW LITIGATION DAILY: June 24, 2008

Posted by Brian Baxter

Edited by Andrew Longstreth

CORPORATE
Huntsman Responds to Hexion Suit: See You in Texas
Marc Wolinsky, you have your answer. Last week, we reported that Wolinsky, a partner at Wachtell, Lipton and litigator-in-chief for Hexion Specialty Chemicals, had filed a suit in Delaware Chancery Court, asserting that the financing for Hexion's planned $10.5 billion acquisition of Huntsman Corporation had fallen through because of Huntsman's weak earnings and increased debt. In its press release, Hexion dropped the "M.A.C." bomb, claiming that material adverse changes had soured the deal.

We also noted that Wolinsky seems to play as well on the road in Delaware as the Celtics do at home in the Garden. But yesterday, Huntsman's counsel at Vinson & Elkins tried to reclaim home court advantage, filing a lawsuit in Texas state court for the Houston-based company. (V&E isn't just litigation counsel; it represented Huntsman in the deal with Hexion, just as Wachtell represented Hexion.) Huntsman made the case personal: V&E named as defendants not only the private equity firm Apollo, which indirectly owns Hexion, but also Apollo partners Leon Black and Joshua Harris. Huntsman claims the Apollo team convinced it to scuttle a deal with the Netherlands-based chemical company Basell in favor of the Hexion merger. Huntsman is demanding $3 billion in damages for its lost deal with Basell--and the $100 million break-up fee it still owes its erstwhile European partner.

We wonder whether this debacle is headed for a trial a la Cerberus and United Rentals, in which we were treated to the spectacle of M&A lawyers taking the witness stand to defend their contract language. We called one of Huntsman's lawyers, Vinson & Elkins senior partner Harry Reasoner, but his secretary said he's referring all calls to the company.

INTERNATIONAL
Cleary Sanctions Argument Set for Tomorrow
In what had to be a painful moment for the firm's lawyers, last year New York federal district judge Loretta Preska sanctioned Cleary Gottlieb for trying to convince a witness not to testify in a case against its client, the Republic of Congo. "Civil litigation is not always civil," Preska wrote at the beginning of her memorable ruling. Cleary Gottlieb issued a statement at the time declaring that it "[believed] strongly that all of our attorneys acted properly and professionally and that this ruling is unwarranted and unfair." The firm hired Roy Reardon at Simpson Thacher, appealed Preska's ruling, and, we've been told, will make its case to the Second Circuit tomorrow.

The underlying case in which Cleary was sanctioned involves a so-called vulture fund, the topic of a feature article in this month's issue of Portfolio. Specifically, the Portfolio piece looks at funds that buy up the debt of third world countries at well-below-par value, then sue to collect on the bonds. Not surprisingly, the Bono-Jeff Sachs types fighting for third-world debt relief are not big fans of that strategy. But as this article in the Sunday Times points out, others argue that the vulture funds, through their investigations, expose a shocking level of corruption within debtor governments.

That debate aside, representing the vultures has been a nice business for lawyers. In the Congo case mentioned above, Kensington International (which is affiliated with Elliott Associates) was represented by Robert Cohen of Dechert and Kevin Reed at Quinn Emanuel. We understand that Cohen is involved in several similar cases for Elliott-affiliated entities against Argentina.

WHITE-COLLAR
Supreme Court Declines to Review Government's Case Against W.R. Grace
The government's criminal case against W.R. Grace and seven executives for their role in releasing asbestos from a Montana mine got off to a rocky start after it was filed in 2005, with the district court judge in Montana stripping away some of the prosecution's key charges. But things seem to be turning around for the Justice Department. First the Ninth Circuit reversed many of the district court's decisions in a 2007 ruling. Then yesterday, the Supreme Court turned down W.R. Grace's petition to review the case, which means that the criminal trial can now go forward. At trial, W.R. Grace will be relying on Larry Urgenson, a Kirland & Elllis partner and a former chief of the fraud section of the Justice Department's criminal division. Urgenson, you may remember, recently had to switch from defense counsel to potential witness for another troubled client, Chiquita Brands International. It was Urgenson who advised the company to stop making payments to a Colombian paramilitary group that the U.S. had designated a terrorist organization.

IP
New York Judge Rules for Naked Cowboy in Suit Against Mars
Oh, the strange world that litigators inhabit. Take Joseph Price of Arent Fox. For the last four months, he's been defending the Mars Company from a suit filed by one Robert Burck, who is much, much better known as the Naked Cowboy. You've seen Burck in New York's Times Square wearing nothing but white boots, white underwear, a white hat, and a strategically-located guitar. Yeah, that guy. Burck sued Mars for trademark infringement: Last year Mars began running an advertisement in Times Square that featured a blue M&M wearing nothing but a cowboy hat, underwear, cowboy boots and a guitar. Burck is fine with selling his image--Chevrolet ran a Naked Cowboy spot during the Super Bowl. But Mars apparently never received his consent for the Naked M&M ad, and Burck is not okay with that.

Yesterday New York federal district court judge Denny Chin ruled that some of the Naked Cowboy's claims can go forward. We wondered what Burck plans to wear at trial, but his lawyer, solo practitioner Kevin Mulhearn, hasn't called us back to let us know if Burck will soon be appearing in Foley Square as the Naked Plaintiff.

SECURITIES
Subprime Litigation: Who's Representing Whom
We've got some news in the department of who's representing who (or whom for you grammarians). In an auction-rate securities class action in the Northern District of California, defendant Bank of America has brought in O'Melveny & Myers. No surprise there, since O'Melveny has long represented the bank. Looks like O'Melveny partner Debra Belaga will be facing off with plaintiffs lawyers from Girard Gibbs; her name appeared last week on a joint stipulation requesting more time to answer the complaint.

There have been multiple defense appearances in the HarborView Mortgage Loan Trust litigation, which claims that the defendants made false and misleading statements in connection with the issuance of more than $6 billion worth of mortgage pass-through certificates. The case names the Royal Bank of Scotland, bank subsidiaries that created certificate-issuing trusts, and the trusts themselves, but it also makes claims against ratings agencies for allegedly failing to assure on the quality of the certificates. Kevin LaCroix of D&O Diary believes that's a first. "As far as I am aware, the plaintiffs' complaint in the HarborView Mortgage Loan Trust lawsuit represents the first occasion as part of the current subprime litigation wave where subprime investors have sought to hold the rating agencies liable for their ratings," he wrote earlier this month.

The case, originally filed in New York Supreme Court in May, has since been removed to federal court in Manhattan. Thomas Rice and James Gamble at Simpson Thacher are representing the various trusts named as defendants. Floyd Abrams, Susan Buckley, Adam Zurofsky, and Tammy Roy are representing McGraw Hill Companies, the corporate parent of Standard & Poor's Rating Service. Abrams is there for a reason: As LaCroix notes in the post mentioned above, ratings agencies have historically enjoyed First Amendment protection for their opinions. Martin Flumenbaum and Roberta Kaplan of Paul, Weiss are representing Fitch Ratings, and James Coster and Joshua Rubins of Satterlee Stephens Burke & Burke are representing Moody's Investors Service.

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