THE AM LAW DAILY

SURVEYS AND RANKINGS

MAGAZINE

SPECIAL REPORTS

The Work

October 6, 2008 10:00 AM

The Am Law Litigation Daily: October 6, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

M&A
Fight for Wachovia Rages All Weekend in State, Federal Court
A 3 a.m. message to Citigroup from Wachovia CEO Robert Steel and his attorney H. Rodgin Cohen of Sullivan & Cromwell has touched off a battle that's beginning to take on the epic proportions of the Penzoil v. Texaco fight for Getty Oil. This weekend featured non-stop strategic maneuvering by a star cast of litigators.

It began with the Friday morning message from Steel and Cohen, in which they informed Citigroup that Citi's days-old, $2.1 billion deal to buy Wachovia's banking operations was off. Wachovia was instead turning to Wells Fargo, which was offering $15 billion for the whole company. By the end of the day Friday--after Citi lawyers spent hours consulting with deal counsel from Davis Polk--the jilted bank had hired Greg Joseph, the onetime Fried, Frank litigation chairman who now heads his own 14-lawyer firm. Joseph filed a complaint in New York state supreme court to block the Wells Fargo deal, alleging that Wachovia was in material breach of an exclusivity agreement, which required Wachovia not to negotiate with any bidder but Citi until October 6.

On Saturday New York state supreme court judge Charles Ramos held an extraordinary three-hour meeting at his Cornwall, Connecticut home, with Wachovia's lawyer, David Boies of Boies, Schiller & Flexner, reportedly participating via cellphone. Joseph represented Citi; Wells Fargo had Paul Rowe of Wachtell, Lipton, Rosen & Katz. After the impromptu hearing Ramos issued an order that temporarily prevented Wachovia from entering into negotiations with any other party, including Wells Fargo.

But on Sunday evening, less than 24 hours after Ramos signed the order extending Citi's exclusivity (reportedly in his dining room), New York associate justice James McGuire of the Appellate Division vacated Ramos's injunction. In a terse one-page order, Justice McGuire wrote that "substantial questions have been raised regarding the authority of Justice Ramos to have issued the order while physically located outside the state of New York." He also questioned the impact of Ramos's injunction. "Whether the order has any effect on the rights of the parties is far from clear," McGuire wrote, "as Wachovia is not ordered to do or refrain from doing anything by the terms of the order." Citigroup later said it would appeal McGuire's ruling.

Meanwhile, Wachovia's Boies Schiller lawyers filed suit against Citigroup in Manhattan federal district court, seeking a declaratory ruling that Wachovia could proceed with the Wells Fargo deal. On Sunday afternoon, lawyers for all three banks were before Judge John Koeltl. In a bizarre twist, Citi's counsel, Greg Joseph, argued by phone from Moscow, where he is scheduled to offer testimony for Bank of New York Mellon, which Boies Schiller is defending in a RICO case brought by the Russian government.

Joseph told Judge Koeltl that the exclusivity agreement signed by Citi and Wachovia "categorically barred Wachovia from signing another agreement for a week." Although Judge Koeltl said it nevertheless "appears" that Wachovia should be able to negotiate with Wells Fargo, he declined to rule and set a show-cause hearing for tomorrow at noon. In Koeltl's three-page order, the judge also denied Citi's request for a temporary restraining order.

The Wall Street Journal is reporting this morning that the Fed is pushing for a deal in which Citi and Wells Fargo will divide Wachovia's assets. How will the double-jurisdiction litigation affect those talks? We're going to be following this one closely. Stay tuned for what promises to be a bumpy ride.

WHITE-COLLAR
Jury Acquits Former McAfee GC, Give High Marks to Defense Attorney Stephen Neal
Former McAfee general counsel Kent Roberts will not become the first lawyer to go to jail over charges of backdating options. On Friday afternoon, after a two-and-a-half week trial and three days of deliberations, a federal jury acquitted Roberts of mail fraud charges. San Francisco prosecutors--who had won convictions in backdating cases against two executives at Brocade--alleged that Roberts changed one of his grant options in 2000. He never cashed those options, however, and one juror told The Recorder that prosecutors couldn't convince the jury that Roberts intended to break the law.

"Nowhere in the e-mail trail was there an indication he had initiated what the government called 'a scheme to defraud' the company, or to get the option repriced," one of the jurors told the Recorder. "Certainly he went along with it, but there was no evidence he initiated what ultimately resulted in a repricing of his options. That was a big issue for me and the jury."

The same juror gave props to Roberts's defense attorney, Stephen Neal of Cooley Godward. "Stephen Neal, he was smooth as butter," he told the Recorder. "I know he didn't come cheap."

This was the trial, you'll recall, that was temporarily thrown into chaos when McAfee suddenly turned over previously undisclosed e-mails that been subpoenaed two years earlier. When McAfee's lawyers from Howrey blamed the mistake on contract lawyers, Neal said he'd move to dismiss the indictment. But we're betting he likes this result even better.

APPELLATE
Supreme Court Begins New Term Today
In this week's issue of Legal Times, ace Supreme Court reporter Tony Mauro covers a lot of ground in his preview of the high court's new term, which begins today. Naturally, he plays the perennial court watchers' parlor game: Who will be the next justice to retire? Conventional wisdom says it will be 88-year-old John Paul Stevens, with David Souter and Ruth Bader Ginsberg following closely behind. The outcome of the presidential election, of course, will likely help wavering justices make up their mind. Mauro reports that Walter Dellinger III, former acting solicitor general and current O'Melveny & Myers partner, recently predicted that all three would retire if Barack Obama is elected, but that "no one will voluntarily step down" if John McCain wins.

Mauro also looks at some of the key cases to be decided. There are few blockbusters this term aside from two major preemption cases that will be closely watched by the business community, Wyeth v. Levine and Altria Group v. Good. For pure entertainment value, we're looking forward to the obscenity case, FCC v. Fox Television Stations, which will address whether broadcasters can be fined for fleeting appearances of the f-word and the s-word on the airwaves. Carter Phillips of Sidley Austin, who will represent Fox, promises he will not use euphemisms for either word.

The Supreme Court practice, Mauro writes, is increasingly competitive. In the short term, private practitioners can expect some new blood from the SG's office to enter the market following a change in administration. Among those who will be ripe for the picking: former SG Paul Clement, former deputy SG Thomas Hungar, and current SG Gregory Garre. Mauro also takes notice of an increasing number of law schools that are getting involved in Supreme Court cases as law firms--such as Mayer Brown (Yale), Sidley Austin (Northwestern), and Jones Day (New York University)--partner with them.

APPELLATE
Thompson & Knight Partner to Make First Oral Argument Before Supreme Court Tomorrow
Among the new faces appearing before the Supreme Court this term will be Thompson & Knight partner David Furlow, who will argue tomorrow for the plaintiff in Kennedy v. Dupont Savings. The case considers the complicated question of the proper recipient, under federal common law and the Employee Retirement Income Security Act, of pension funds accrued in the account of a deceased Dupont depositor named William Kennedy. Furlow will argue that DuPont should not have turned over the funds to Kennedy's ex-wife, who had waived those benefits in a divorce settlement. DuPont, which will be represented by a Supreme Court regular, Mark Levy of Kilpatrick Stockton, claims that Kennedy did not properly remove his ex-wife as a beneficiary.

We wondered what it was like to prepare for your first Supreme Court argument, so on Friday, we caught up with Furlow, who was already in Washington, D.C. He told us he had arrived from Houston the day before for a moot court session at the Georgetown University Law Center Supreme Court Institute. He said he's hoping to take a sneak peek at today's oral arguments in Altria v. Good. But Furlow wouldn't cop to being star-struck, intimidated, or even just plain nervous.

"I've been arguing similar types of case, including one for two hours before First Court of Appeals [of Texas] just ten days ago," Furlow told us. "They have nine justices on our court, too, and they ask questions in machine-gun fashion, so the Supreme Court is just another appellate court."

BANKRUPTCY
Quinn Emanuel Takes on Special Counsel Role to Creditors in Lehman Bankruptcy
The wait paid off for Susheel Kirpalani. The Quinn Emanuel Urquhart Oliver & Hedges partner says that in the aftermath of the Lehman bankruptcy he received calls from several clients. But Kirpalani decided to hold off until the creditors committee hired counsel. As we know now, the committee hired Milbank, Tweed, Hadley & McCoy. What's less well known is that Quinn Emanuel was hired to be the committee's special counsel in the event that Milbank has a conflict.

The firm's selection is no accident. Kirpalani is a former Milbank partner and a close former colleague of Dennis Dunne, who is leading Milbank's effort on behalf of the creditors committee. When Kirpalani left Milbank for Quinn in 2007, part of his business plan was to make himself available to Milbank when that firm needed special counsel to avoid conflicts. Milbank, which has significant relationships with JPMorgan, Citigroup, and Bank of America, has already had to hand off Lehman creditors' work to Quinn.

Last Thursday, Kirpalani filed a claim in the New York federal bankruptcy court, arguing that JPMorgan was responsible for the run on the bank that took Lehman down. Lehman had more than $17 billion in cash and securities, but Lehman creditors claim that JPMorgan froze those assets, which led to Lehman's bankruptcy. The lawyers at Quinn have asked the court to interview JPMorgan officials and review certain documents to evaluate potential claims against the bank--which also happens to be a huge Lehman creditor.

Howard Novikoff of Wachtell, Lipton, Rosen & Katz, who represents JPMorgan, declined to comment on Quinn's filing to Bloomberg.

CORRECTION
Last week, in an item about an expected boom in credit default swap litigation, we said that Quinn Emanuel had lost a bellwether case in the area. While the firm did, in fact, lose a ruling from Manhattan federal district court judge Jed Rakoff that granted Merrill Lynch's request to force a unit of Quinn Emanuel's client--Security Capital Assurance Ltd.--to honor the default protection on $3.1 billion of collateralized debt obligations, SCA later settled with Merrill for a payment of less than 15 cents on the dollar, a deal that permitted the company to emerge from its deeply distressed financial condition.

Make a comment

Comments (1)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions

Comments

Report offensive comments to The Am Law Daily.

It is extremely important that Wells Fargo honor the Wachovia pensions for Wachovia retirees.

The comments to this entry are closed.

By: TwitterButtons.comhttp://www.facebookloginhut.com/facebook-login/


theamlawdaily@alm.com




From the Law.com Newswire

Sign up to receive Legal Blog Watch by email
View a Sample

Advertisement