Dow Chemical Co., the largest U.S. chemical maker by sales, said an arbitration panel ruled Kuwait must pay $2.16 billion in damages because it canceled a 2008 agreement to buy a stake in the company’s plastics business.
Law firm Shearman & Sterling LLP represented Dow in the arbitration. The firm’s team was led by international arbitration partners Henry Weisburg in New York, Emmanuel Gaillard in Paris, Jon Greenblatt in Washington, Richard Kelly in London and Chris Ryan in Washington.
The award by the London-based International Court of Arbitration doesn’t include costs or interest and is final and binding, Midland, Michigan-based Dow said yesterday in a statement. The timing of the payment and other terms of the agreement are confidential, Nancy Lamb, a Dow spokeswoman, said in an e-mail.
“Anything north of $1 billion is a pleasant surprise,” said Hassan Ahmed, a New York-based analyst at Alembic Global Advisors. “I don’t think the market was giving Dow any credit for an imminent settlement.”
Kuwait’s Petrochemical Industries Co., under pressure from lawmakers, canceled a contract to form a 50-50 venture with Dow’s plastics unit in December 2008. The failure of the so-called K-Dow venture deprived Dow of a $9 billion payment during the global financial crisis, almost derailed its 2009 purchase of Rohm & Haas Co. (DOW) and forced the company’s first dividend cut.
“We are studying what legal action is available to pursue,” Petrochemical Industries Chairwoman and Managing Director Maha Mulla Hussein said in a telephone interview. The company is a unit of state-owned Kuwait Petroleum Co.
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Dewey’s Downfall Speeded by Pay Deals; Clean-Up May Take Years
Dewey & LeBoeuf LLP, a law firm with 103 years of history, collapsed in a matter of weeks. Cleaning up the debris may take years.
A trickle of partner defections in March turned into a torrent, with at least 250 of Dewey’s 304 partners having now found new jobs. All five senior partners named to a new chairman’s office in March have left, and the firm faces a criminal probe. The staff at the firm’s Manhattan offices has been gone for more than a week. Joff Mitchell of Zolfo Cooper, a restructuring company, is running things.
Mitchell’s task is to wind the firm down while dunning former clients for bills they have little incentive to pay in full. That’s bad news for the firm’s creditors, including bank lenders owed at least $75 million and bondholders owed $125 million or more. Other creditors range from partners who got pay guarantees worth about $100 million to the firm’s janitors, who have sued for about $300,000 in unpaid bills.
“The Dewey debacle has all the orderly progression of the Great Chicago Fire,” said Ed Reeser, a former managing partner for the Los Angeles office of Sonnenschein Nath & Rosenthal LLP, who’s now a consultant. Including a bankruptcy, he said, “I wouldn’t be surprised if the wind-down took a minimum of six to seven years. It could take 10.”
Dewey & LeBoeuf was the result of a 2007 merger between Dewey Ballantine, a firm dating from 1909 whose most famous partner was two-time Republican presidential candidate Thomas E. Dewey, and LeBoeuf Lamb Greene & MacRae. Created to enter the club of powerhouse international law firms, Dewey collapsed amid a culture characterized by a lack of disclosure and controls where an inner circle of partners reaped most of the rewards.
“The combination of outsized debt and widely spread pay guarantees divorced from performance put the firm in a situation with almost zero margin for error,” said Bruce MacEwen, a lawyer and law-firm consultant at Adam Smith Esq. LLC in New York. “Markets have a habit of punishing firms in that posture.”
Dewey, which at the time of the merger had 1,300 lawyers, offices in 25 cities and revenue of more than $900 million, is the biggest U.S. law firm to fail, Reeser said. Other firms that have collapsed in the past, including Brobeck, Phleger & Harrison LLP in 2003 and Heller Ehrman LLP in 2008, are still unwinding their debts and obligations, Reeser said.
More than 50 former Dewey partners have hired lawyer Mark Zauderer of Flemming Zulack Williamson Zauderer LLP to protect their interests, he said. He’ll do such things as sue former managers or defend his clients from lawsuits to claw back pay they received, according to a person familiar with his hiring.
Since Dewey’s legal bills secure its bank loans, lenders including JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) didn’t immediately put Dewey in bankruptcy involuntarily because they saw more chance of collecting the bills outside of court, according to a person familiar with the firm’s finances. Bankers now think a bankruptcy is needed to establish the pecking order for creditors, the person said.
JPMorgan and Citigroup declined to comment on Dewey’s financial position.
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Allen & Overy announces Vietnam Opening With Mayer Brown Partner
Allen & Overy LLP announced plans to open two offices in Vietnam, one in Ho Chi Minh City and the other in Hanoi, after regulatory approvals. Dao Nguyen, a Vietnamese lawyer who was formerly managing partner of Mayer Brown LLP in Vietnam, was hired to head the new offices.
“Vietnam is rapidly establishing itself as a key jurisdiction within Southeast Asia and is of increasing interest to international companies and investors,” Thomas Brown, Allen & Overy’s Asia Pacific managing partner, said in a statement.
Nguyen, who will join later in the year, focuses on corporate and commercial matters, particularly real estate, foreign investment in Vietnam and dispute resolution, according to her biography on Mayer Brown’s website.
Mayer Brown issued a statement thanking Nguyen for her service and saying, “Our Hanoi and Ho Chi Minh offices will continue to operate as usual. Mayer Brown JSM has been operating in Vietnam since 1994, and we remain deeply committed to having a strong presence in this important growing market to continue serving all our valued clients.”
John Marsden will serve as the interim managing partner for the firm’s Vietnam office.
With the addition of the two new offices, Allen & Overy will have 42 offices in 29 countries around the world.
Drinker Biddle Adds Dewey Corporate Partner in New York
A Dewey & LeBoeuf LLP partner and another lawyer joined Drinker Biddle & Reath LLP’s corporate & securities practice group in New York.
Partner Joseph L. Seiler III, a corporate lawyer, focuses on serving insurance and insurance holding companies on public and private securities offerings and financings, as well as mergers and acquisitions and restructurings. He also advises private and public clients in the leisure, manufacturing and technology industries, among others.
In January, Drinker Biddle added a group of insurance regulatory lawyers, which included three partners. The new additions bring the total number of lateral hires in the firm’s New York office to eight since July 2011, the firm said.
“When you have an opportunity to add lawyers who can complement your existing practice while building out new offerings, you do it,” Alfred W. Putnam, Jr., Drinker Biddle’s chairman, said in a statement.
Robert C. Juelke, chairman of Drinker Biddle’s corporate and securities practice group, said, “Our clients have been asking us more and more to help them with their insurance transactional work. These additions allow us to better meet their needs.”
Drinker Biddle has 650 lawyers in 11 offices nationwide.
Restructuring Partner Joins Gibson Dunn’s Los Angeles Office
Gibson, Dunn & Crutcher LLP hired restructuring partner Jeffrey Krause in the Los Angeles office. Previously, he was at Stutman, Treister & Glatt.
Krause has handled debtor and creditor committee representations, as well as representations of examiners appointed in bankruptcy cases, and secured and unsecured creditors.
His recent matters include representation of the official committee of unsecured creditors in In Re Azabu, representation of Ranch Capital and the investment vehicle it formed to fund the reorganization plan for Hawaiian Airlines, and representation of Falcon Industries in its Chapter 11 reorganization, the firm said.
MBIA Tells Court Restructuring Protects All Policyholders
MBIA Inc.’s (MBI) 2009 restructuring was approved by New York regulators because it protected all policyholders, including the banks challenging the decision, Marc Kasowitz, an attorney for the bond insurer, told a trial judge.
Banks suing MBIA can’t prove their argument that the approval of the restructuring was “arbitrary and capricious,” Kasowitz, with Kasowitz Benson Torres & Friedman LLP representing Armonk, New York-based MBIA, told a state judge yesterday in Manhattan.
“The banks are throwing as much money as they can at the wall in the hope that something will stick,” Kasowitz said.
Justice Barbara Kapnick of state Supreme Court is hearing a nonjury trial on claims by Bank of America Corp. and Societe Generale SA (GLE) that the February 2009 approval of MBIA’s proposal by then-Superintendent Eric Dinallo was based on inaccurate and incomplete information and should be annulled.
More than a dozen financial institutions sued MBIA and the state insurance department in 2009 over the restructuring. Bank of America and Societe Generale are the only banks left in the litigation after JPMorgan Chase & Co., Morgan Stanley, UBS AG and other banks dropped out.
The banks claim the restructuring exposed them to losses as policyholders by transferring $5 billion in assets out of an MBIA unit that insured risky mortgage debt.
The case being tried by Kapnick is a challenge to the approval brought under the state’s Article 78 law, which allows challenges of administrative decisions. Bank of America and Societe Generale have another lawsuit pending against MBIA, and MBIA is suing Bank of America over mortgage loans.
David Holgado, a lawyer in state Attorney General Eric Schneiderman’s office, earlier this week asked Kapnick to dismiss the lawsuit, saying the approval was rational and based on an “extraordinary” analysis by a former Insurance Department official, Jack Buchmiller.
Kasowitz said yesterday that the approval was based on a yearlong state investigation that included weeks of on-site review at MBIA’s headquarters.
The banks’ arguments that the restructuring was a “secret plan” of which they were not notified conflicts with statements issued in February 2008 after MBIA first announced the proposal -- including a Bank of America equity research note that said it was “feasible and reasonable,” Kasowitz said.
“This secrecy argument turns out to be absolutely false,” Kasowitz said. “The banks knew all along about the proposed transformation.”
The trial began May 15 and is expected to last two to four weeks. Lawyers for the banks made their opening statements last week, and attorneys for the state completed theirs earlier this week.
The case is ABN Amro Bank v. Dinallo, 601846-2009, New York state Supreme Court (Manhattan).
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