March 16, 2010 5:02 PM
The Bedeviling Confidentiality Issues in the Tribune Bankruptcy
Posted by Zach Lowe
The Tribune Company bankruptcy keeps producing juicy legal story lines: a bench smackdown of Sidley Austin's proposed $1100 per hour rates, a debate over expensive fee examiners, a cameo from Warren Beatty, and, most central to the case, a possible lawsuit against the banks who engineered the leveraged buyout that ruined Tribune.
Now, that last issue has produced a new twist: Possible sanctions against a bondholder after its law firm, Brown Rudnick, mistakenly included confidential papers in a public filing, court records show. Martin Siegel, a Brown Rudnick partner, says the mistake was "inadvertent," and that the firm has pulled the offending material from its filing. But Siegel says his firm will challenge the motion, filed by JPMorgan Chase and its lawyers at Davis Polk & Wardwell, to sanction Brown Rudnick's client (a bondholder called Wilmington Trust Company). Possible sanctions include a ban on Brown Rudnick's client from accessing a trove of critical confidential documents, according to a source familiar with the matter.
What exactly did Brown Rudnick file that it shouldn't have filed? Lawyers in the case won't say, but court records indicate it is paperwork linked to the pursuit of claims against the banks, including JPMorgan and Merrill Lynch, who financed the 2007 leveraged buyout that left Tribune with $10 billion in fresh debt. The creditors committee would normally be the entity to pursue such claims, but the committee's counsel in the Tribune case, Chadbourne & Parke, said from the beginning that it would not do so because of its relationships with JPMorgan and Merrill, according to court records and our prior reporting. The committee thus retained Zuckerman Spaeder as special counsel to conduct discovery and research possible litigation against the banks, Tribune chief Sam Zell, and others involved in the buyout.
The key parties, including JPMorgan and Merrill, agreed to turn over documents to Zuckerman's attorneys under a broad confidentiality agreement. Lawyers representing some Tribune bondholders have access to the depository of confidential documents provided they don't make them public or break a number of rules detailed in the agreement, court records show. Brown Rudnick slipped up and included something from the depository in one of its filings, court records show. Siegel and Dennis Glazer, the Davis Polk partner representing JPMorgan in the matter, would not reveal what document Brown Rudnick mistakenly filed. Siegel declined to pinpoint who made the error.
But the Brown Rudnick mistake--and the possible repercussions for the firm's client--are only a small piece of a larger confidentiality battle looming in the Tribune bankruptcy, one that will help to determine how much the public eventually will learn about the disastrous Zell LBO. Last month, Zuckerman attorneys asked for the go-ahead to sue parties associated with the leveraged buyout, but the firm requested permission to file that complaint under seal, since it contains confidential information from the banks involved in the buyout, court records show. In other words: The entity suing the banks wants to keep documents sealed in part out of respect for the banks it is suing. Not surprisingly, JPMorgan Chase likes the idea, according to papers it filed backing the request last month.
One problem: An asset management fund that is also a Tribune creditor wants the Zuckerman complaint made public, according to a filing last month by the fund's lawyers at Greenberg Traurig. (Those lawyers--partners Scott Cousins and Nancy Mitchell--did not return calls seeking comment.) Noting that "creditors committees most often advocate for transparency," the Greenberg team argues that allowing Zuckerman to file what could be a blockbuster complaint under seal "sets bad precedent, namely that important aspects of the litigation can be conducted behind closed doors." The Greenberg team, representing Aurelius Capital, says Zuckerman hasn't shown that any of the documents are defamatory, scandalous, or otherwise too sensitive to be made public.
JPMorgan and Merrill Lynch want none of this. The former responded last month with a motion labeling any attempt to unseal a complaint against the buyout participants "a transparent attempt to interfere" with the bankruptcy case and something that would "undermine [Tribune's] efforts to broker a consensual resolution" to the Chapter 11 matter. Merrill Lynch, represented by Kaye Scholer, joined JPMorgan's motion to keep the documents sealed. Madlyn Primoff and Jane Parver, the Kaye Scholer partners on the matter, did not return messages seeking comment.
So after a bunch of small fights, we've got a doozy on our hands.
Photo by Tim Boyle/Bloomberg via Getty Images: Newspaper street vendor selling copies of the Chicago Tribune along a street in Chicago, Illinois.Make a comment