Bankruptcy litigation requires a combination of solid litigation expertise as well as skillful negotiation tactics. Our lawyers bring both talents to the table. We have handled major matters within a bankruptcy context for debtors in possession and on behalf of trustees to recover for the debtor’s estate for the benefit of its creditors. The following are examples of our experience in this area:
In re Maxus Energy Corporation
We represent Occidental Chemical Corporation as the largest private creditor in the bankruptcy of Maxus Energy Corporation. Maxus owes Occidental an obligation to defend, indemnify, and hold harmless Occidental against, broadly, all claims and losses relating to, among other things, any environmental liability with respect to pollution from the Diamond Company prior to its purchase by Occidental from Maxus in 1986. Occidental’s claims against Maxus under the contractual indemnity exceed $500 million in already-incurred costs, as well as future, non-contingent costs. Occidental also has alter ego claims against Maxus’s parent company, YPF S.A., for these claims and losses. In the bankruptcy, YPF provided DIP financing to its subsidiary, Maxus, part of which was contingent upon a proposed settlement of certain alter ego claims against YPF. Maxus and the creditors’ committee presented a bankruptcy plan under which, among other aspects, Occidental provides DIP financing and financing of a Liquidating Trust to be formed to liquidate and distribute trust assets, including alter ego claims against YPF.
The bankruptcy court has confirmed the plan presented by Maxus and the creditors committee. We continue to represent Occidental in enforcing bankruptcy orders, in litigating satellite matters, and in advising with respect to Occidental’s membership on the Liquidating Trust.
National Century Financial Enterprises Securities Litigation;
The Unencumbered Assets Trust, et al.
We represent a litigation trust created out of the collapse of National Century Financial Enterprises, Inc. (NCFE), an issuer of billions of dollars of asset-backed securities. When NCFE and its affiliates went into bankruptcy it was revealed that the vast majority of the assets backing its “AAA” rated securities were, in fact, worthless. On behalf of the litigation trust, we asserted numerous claims against a number of individuals and entities for breach of fiduciary duty, fraud, conspiracy, violations of the Ohio RICO act, as well as of other causes of action. We settled the trust’s claims against the majority of the Defendants and continue to pursue claims against the founders of NCFE and the investment bank that placed its note offerings.
Former Directors of Peregrine Systems, Inc.
We successfully represented several former directors of Peregrine Systems in defending state and federal litigation brought by former shareholders and a litigation trust formed in the bankruptcy of Peregrine Systems. In the litigation trust action, the trust challenged over $500 million in stock sales by the Peregrine board, seeking treble damages of $1.5 billion under a California insider trading statute. Following three hours of oral argument and months of motion consideration, the judge ruled in favor of our clients by dismissing all claims in the action. The firm also succeeded in obtaining summary judgment on behalf of its client in related California state court investor litigation and successfully defended that ruling on appeal.
The Fleming Post-Confirmation Trust was a bankruptcy trust established to recover damages sustained by the creditors of Fleming Companies Inc., formerly one of the nation’s largest grocery wholesalers, after it collapsed amid allegations of a massive accounting fraud, including the alleged understatement of vendor offset reserves and failure to account properly for vendor concession income. We sued many of the vendors involved and Fleming’s accounting firm to recover the damages the company had sustained as a result of the fraud. We negotiated $27 million in settlements, including a significant confidential settlement from Deloitte & Touche LLP.
In re: Enron Corp. Securities Litigation
We were retained to represent the Outside Directors of Enron’s Board in the defense of all the litigation and regulatory investigations that arose from Enron’s collapse. This litigation was unique in a variety of ways:
First, our clients remained on Enron’s board for some time after its collapse. During that phase of representation, we advised them as they worked actively to investigate wrongdoing at the company, in a process that ultimately yielded the Powers Report. We also advised our clients as they oversaw the initial shepherding, preservation, and sale of certain of Enron’s assets through the early phases of Enron’s bankruptcy.
Second, on a parallel track to these ongoing fiduciary responsibilities, we served as lead counsel to the Outside Directors as they responded to numerous congressional inquiries, regulatory investigations, and over 100 lawsuits that were filed against them in jurisdictions around the country. Those lawsuits were consolidated in a multi-district litigation in Houston. We successfully obtained orders dismissing all of the fraud claims filed in the securities class action, and the remaining claims were settled thereafter in a settlement in which insurance proceeds covered 95% of the settlement costs. In order to effectuate that settlement, we handled groundbreaking litigation in the District Court and the United States Court of Appeals concerning the interpleader of the insurance policies and whether the policy limits could be exhausted to fund settlements for our clients, when claims against other insureds remained outstanding. Both the District Court and the Fifth Circuit held that the settlements could be funded.
Third, we assisted our clients in responding to numerous requests for testimony from enforcement personnel and criminal prosecutors. Our clients cooperated fully and–though virtually every senior Enron executive was charged with criminal or regulatory wrongdoing of some type–our clients were never charged with any criminal or regulatory violations of the securities laws.
In Re: World Satellite Network, Inc. and WSNet Holdings, Inc.
We represented Cerberus Capital Management, LP and a number of individuals in a case brought by the Chapter 11 Trustee for the bankruptcy estate of WSNet Holdings, Inc. alleging claims of breach of fiduciary duty, equitable subordination and seeking in excess of $100 million. We defended the claims on the merits as well as on the grounds that the estate did not own the claims because they were derivative in nature and actually belonged to a subsidiary that was also in bankruptcy. The parties entered into a confidential settlement shortly thereafter.
Former CFO of Franklin Bank Corporation
We represented the former Chief Financial Officer of Franklin Bank Corporation, Russell McCann, in two class action securities lawsuits that were filed following Franklin Bank’s failure and bankruptcy in 2008. In March 2011, the court granted our client’s motion to dismiss in both lawsuits. The ruling dismissed all of Plaintiffs’ claims, with prejudice, and a final judgment was entered.
Friede Goldman Halter, Inc.
We represented former directors of Halter Marine Group in the defense of a securities fraud matter arising out of the merger and subsequent bankruptcy of Friede Goldman and Halter Marine, two of the world’s largest ship and rig building companies at the time of the merger. Plaintiffs alleged hundreds of millions of dollars in damages. The matter was successfully resolved as part of a confidential settlement.