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March 7, 2011 6:13 PM

Schulte Roth Wins $1.7 Million Arbitration Award Against Ex-Client

Posted by Brian Baxter

Schulte Roth & Zabel has been awarded $1.7 million in legal fees as a result of a civil suit filed against private investment firm and former client The Belstar Group.

According to a nine-page filing on March 3 in New York State trial court, a three-member panel of the American Arbitration Association awarded Schulte fees for its services to Belstar on March 1. Schulte subsequently filed papers with the court in Manhattan seeking to confirm the award.

Schulte litigation cochair Robert Abrahams and litigation partner Michael Swartz, who represented the firm in the dispute, declined to comment on the case. Martin Stein, an attorney for Belstar with New York's Heller, Horowitz & Feit, did not return a phone call seeking comment. (Stein has been representing Belstar in unrelated litigation filed by Wesleyan University against its former chief investment officer and several other advisers.)

Court papers show that Schulte entered into an alternative fee arrangement with Belstar's CEO Daniel Yun, a former vice president at Lehman Brothers who founded the private investment firm in 1998. Belstar, which is based in New York and Seoul, manages more than $1.5 billion on behalf of financial institutions around the world.

The fee was tied to the firm's work on something identified in court records as the "Lynt project," a structured finance transaction stemming from the Term Asset-Backed Securities Loan Facility (TALF). Schulte, known for its hedge funds and investment management work, assigned structured products and derivatives partner Joseph Suh in New York to draft an engagement letter with Belstar.

The company claimed in arbitration that it's agreement with Schulte stated Belstar would owe the firm nothing if the transaction--potentially worth $62.5 million--didn't close. However, Schulte was entitled to a percentage of the value of the deal if it did close. In the event of a dispute, both parties agreed to resolve their differences in arbitration.

The Lynt transaction never closed and Belstar didn't pay Schulte for its work. But as detailed in court records, the three-member arbitration panel rejected Belstar's argument that Schulte had been hired to handle Lynt matter on contingency. According to the panel's interpretation of Belstar's contract with Schulte, it found that the engagement letter contained "no language that would suggest that any aspect of the arrangement is contingent on future events."

The arbitration panel of John Holsinger, James Daniels, and Barbara Mentz awarded Schulte the $1.7 million for its work, which is about 2.7 percent of the potential Lynt transaction. The panel also ordered Belstar to reimburse Schulte for $5,725 in fees and expenses for work performed during the arbitration in excess of the firm's previously apportioned costs.

 

  Contact Brian Baxter at bbaxter@alm.com

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