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Representative Litigations
Our recent bankruptcy litigation representations have included:
- Wachovia Bank in the Chapter 11 reorganization of leading cable company Adelphia Communications Corporation and its subsidiaries. Wachovia served as the Administrative Agent for the Prepetition Lenders under an $800+ million senior secured credit facility. On behalf of Wachovia, we played a key role in the negotiations that resulted in confirmation of a plan of reorganization providing for full payment of the secured lenders’ claims with interest, and the creation of indemnification funds to pay the banks’ costs in the multi-billion dollar litigation commenced by the Official Committee of Unsecured Creditors of Adelphia. Wachovia’s share of these funds amounted to $21 million.
- JPMorgan Securities Inc. in a professional negligence and breach of fiduciary duty action brought by the bankruptcy estate of Commercial Financial Services, Inc. (CFS). Although CFS became insolvent prior to JPMSI’s involvement, CFS nonetheless claimed damages based on a theory of “deepening insolvency.” We successfully moved for summary judgment in Oklahama state court claiming, among other defenses, that there was no basis under Oklahoma law for CFS’s deepening insolvency claim. In September 2006, the Oklahoma Civil Court of Appeals affirmed the dismissal and upheld an award to JPMSI of over $1 million in attorneys’ fees.
- Former SEC Chairman Richard C. Breeden as the Chapter 11 Trustee for the Bennett Funding Group, Inc. and its related debtors. The Bennett case was recognized at the time of Bennett’s Chapter 11 filing as the largest Ponzi scheme in United States history. As counsel for the trustee, we have recovered in excess of $200 million on behalf of creditors in a variety of adversary proceedings and contested matters involving fraud, fraudulent conveyance, breach of fiduciary duty and turnover claims. This included a significant settlement on the Trustee’s behalf with Sphere Drake Insurance and a number of related parties. When the Bankruptcy Court issued an order permitting the Trustee to enter into this settlement, a group of Bennett investors objected to the settlement and filed an untimely notice of appeal. The Bankruptcy Court dismissed the appeal, and the investors then appealed to the Northern District of New York. Following another dismissal, the investors appealed yet again. We recently achieved a Second Circuit affirmation of the District Court ruling in the Trustee’s favor.
- Countryside Power Income Fund and its subsidiaries and managers in the Chapter 11 reorganization of U.S. Energy Biogas Corporation (USEB). At the time USEB filed for bankruptcy, it owed Countryside $90 million. USEB asserted a host of “lender liability” theories against Countryside in an effort to defeat or at least reduce the amount of Countryside’s claim. These allegations had disastrous consequences for Countryside’s stock, which plummeted by 35%. After the initial hearing in the case, Countryside replaced its counsel with Simpson Thacher. We vigorously defended Countryside’s position, and soon achieved a settlement of $99 million plus interest. Following announcement of the settlement, Countryside’s securities quickly returned to their original trading value.
- Travelers Indemnity Company and a number of its affiliates in an effort to defeat thousands of asbestos claims against Travelers based on its insurance relationship with Johns-Manville Corporation. As part of the 1986 confirmation of Johns-Manville’s reorganization plan, the Bankruptcy Court entered orders protecting Travelers and other insurers from future Manville-related claims. Notwithstanding these orders, Travelers found itself besieged by lawsuits filed by asbestos claimants — including a number of class actions — seeking to recover for Manville-related damages. In 2002, we obtained a temporary restraining order from the Bankruptcy Court halting these actions. Following mediation, we entered into a series of settlement agreements on Travelers’ behalf, creating new funds for asbestos claimants. These settlements were conditioned on Travelers prevailing in its motion for an order confirming that all Manville-related asbestos claims are barred by the Bankruptcy Court’s prior orders. In 2004, the Bankruptcy Court granted our motion, but multiple parties appealed. Two years later, the Southern District of New York affirmed the nationwide injunction — bringing much-needed certainty and closure to Travelers.
- Travelers Casualty and Surety Company as the sole objector to the pre-negotiated Chapter 11 reorganization plan of ACandS, a former asbestos producer. The ACandS plan contemplated approval of billions of dollars of tort settlements and an immediate several billion dollar payment by Travelers to a “settlement trust.” After extensive briefing, a contested evidentiary hearing and oral argument, the Delaware bankruptcy court denied confirmation of the ACandS plan. In the landmark ruling, Judge Randall Newsome found that the ACandS plan arose from the self-dealing of the asbestos plaintiffs bar, discriminated between asbestos claimants, was not proposed in good faith, and was not fundamentally fair. This remarkable result has had a significant impact on the asbestos landscape.
- Certain Marathon Asset Management note holders against claims brought by other note holders, who demanded equal priority in connection with Marathon’s Chapter 11 filing. We maintained that our clients had superior priority. In New York state court, we defeated the note holder plaintiffs’ motion for a preliminary injunction. After the plaintiffs removed the case to Bankruptcy Court, the court stayed the action, expressing disapproval of the plaintiffs’ position. The plaintiffs ultimately voluntarily dismissed the case.
- Travelers Casualty and Surety Company in a contested confirmation hearing for Global Industrial Technologies’ plan of reorganization. As part of this plan, Global sought to establish an insurer-funded trust to pay silica-related claims. We presented expert testimony demonstrating that Global’s silica claims projections were fatally flawed in numerous respects. Shortly before closing arguments, Global settled with Travelers for an amount well below Global’s initial demands. The bankruptcy court approved this settlement in January 2007.
- Duke Energy and American Electric Power in connection with energy claims trading-related litigation in the Enron bankruptcy proceedings. Our work included active litigation of various aspects of the bankruptcy case, including the prosecution of confirmation objections. We ultimately achieved a successful resolution of the claims of both clients in court-sponsored mediations.
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