Aug. 10 (Bloomberg) -- Bank of New York Mellon Corp. yesterday won a U.S. Appeals Court ruling affirming its entitlement to a $312 million lien on the holdings of the bankrupt suburban Chicago cash management firm Sentinel Management Group Inc.
Lawyers from Mayer Brown LLP and Dechert LLP represented the bank in the litigation.
The case dates back to 2007, when Sentinel filed for bankruptcy. The liquidation trustee Frederick Grede sued the New York-based lender claiming its employees knew the firm was improperly using investor assets as credit-line collateral and sought to disallow or subordinate its lien.
U.S. District Judge James B. Zagel, in a post-trial ruling in 2010 rejected Grede’s claim that the bank’s actions enabled Sentinel to deceive its clients. Zagel also dismissed the trustee’s bid to invalidate the lien as illegal.
In the unanimous appellate ruling, U.S. Circuit Judge John D. Tinder held that “perhaps the bank should have known that Sentinel violated segregation requirements, but as the district court found, ‘such a lack of care does not rise to the level of egregious misconduct necessary for equitable subordination.’”
Grede, in a phone interview yesterday, said he was disappointed by the court’s decision and that he and his attorneys were evaluating their options. More than $1.2 billion in claims have been filed against the firm’s assets, he said.
“Given all of the things that are going on in the industry, it doesn’t bode well for the protection of customer funds,” he said of the appellate court ruling.
Grede is represented by Chris Gair, a partner at Jenner & Block LLP, according to documents filed in the case.
“We are pleased the appeals court has affirmed the district court’s ruling in our favor,” Kevin Heine, a spokesman for the bank, said in an e-mailed statement.
The bank was represented by partners Jeff Sarles, Matthew Ingber and Sean Scott of Mayer Brown and partner Hector Gonzalez of Dechert.
The case is In re Sentinel Management Group Inc., 10-3787, 10-3990 and 11-1123, U.S. Circuit Court of Appeals for the Seventh Circuit (Chicago).
Dewey to Protect Some Partners From Liability, Retirees Say
Bankrupt Dewey & LeBoeuf LLP is “rushing” to implement a plan that would largely free select partners from liability for mismanagement while imposing burdens on others at the firm, including retired partners, a group of retirees said.
They made the statement in a federal court filing in Manhattan, asked for a trustee or an examiner to look into the “gross mismanagement” that continues after the bankruptcy, eroding assets, they said. Assigning an examiner to probe and pursue or settle clawback or other claims related to the conduct of Dewey and its executives also would be beneficial, they said.
Dewey before bankruptcy was run to provide “disproportionate” benefits to select partners, who received more than $250 million just in the year before the firm failed, they said, citing a July disclosure of Dewey’s finances. The pattern persists even after the largest law firm collapse in history, they said.
Since its failure, Dewey has been proposing a settlement seeking $90.4 million from more than 700 partners and former partners. Partners in exchange wouldn’t be sued, said the so-called ad hoc committee of retired partners.
Albert Togut, Dewey’s chief bankruptcy lawyer, and spokesman Michael Sitrick didn’t immediately respond to an e-mail seeking comment on the filing.
The product of a 2007 merger between Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, the firm at one point had more than 1,300 attorneys spanning 12 countries. Dewey, based in New York, fell apart in a matter of weeks this year after ousting its chairman and watching partners decamp to competing firms.
In bankruptcy, Dewey has been criticized by the U.S. trustee who supervises bankruptcies. The estate’s $700,000 bonus plan and its retention plans may not be cost effective or economically feasible for a liquidating law firm, the trustee, Tracy Hope Davis, said. She also faulted nine of Dewey’s proposals to hire advisers, including the law firm Togut Segal & Segal LLP. A judge approved several of the hirings anyway.
The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
JPMorgan Says Credit-Card Swipe-Fee Case Cost Bank $1.2 Billion
JPMorgan Chase & Co., the biggest U.S. credit-card lender, will contribute about $1.2 billion to settle a price-fixing case brought by retailers over credit-card swipe fees.
JPMorgan agreed to cover about 20 percent of a $6.05 billion deal to settle claims that the bank conspired with MasterCard Inc. and Visa Inc. to rig credit-card processing fees, the New York-based bank said yesterday in a filing.
Bank of America Corp., the second-biggest U.S. credit-card lender, said last week that it will contribute a total of $738 million to settle the case.
Visa and MasterCard, the world’s biggest payment networks, and some of the largest U.S. banks agreed last month to pay merchants $6.6 billion and temporarily reduce credit-card swipe fees, or interchange, to settle the antitrust lawsuit. The deal includes cash payments of $6.05 billion to merchants who take part in the proposed class action and $525 million to individual plaintiffs. The larger amount would be reduced if some plaintiffs don’t agree to participate.
Yesterday, lawyers for the plaintiffs, which include merchants and retail industry associations, updated U.S. Magistrate Judge James Orenstein on the status of the case in the first court appearance since the settlement was unveiled.
“We are making progress and getting the underlying documents drafted,” K. Craig Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP who represents the plaintiffs, said. “We are going as fast as we can. Not as fast as we would like.”
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).
Three Firms Advise on Carlyle Group’s Purchase of TCW
Carlyle Group LP agreed to buy TCW Group Inc. from Societe Generale SA in a deal that will give TCW’s management and employees a 40 percent stake.
Skadden Arps Slate Meagher & Flom LLP is representing Societe Generale. From Skadden are partners Ralph Arditi and David Hepp, and counsel Justin Askew and David Barrett.
Simpson Thacher & Bartlett LLP is representing Carlyle. Partners Lee Meyerson and Elizabeth Cooper led the deal team while partner Christopher Brown worked on the financing.
Debevoise & Plimpton LLP is representing TCW. The Debevoise team is led by partner Jeffrey Rosen and includes partners Elizabeth Pagel Serebransky, Gregory Gooding and Peter Furci.
Carlyle will fund the purchase of the $127 billion money manager through two of its private-equity funds and with money from TCW’s management, according to a joint statement yesterday from the Washington-based private-equity firm and the Los Angeles-based asset manager. Financial terms of the deal weren’t disclosed.
Former California Judge Joins Law Firm in Sacramento
Arthur G. Scotland, the former Presiding Justice of the Court of Appeal, Third Appellate District in California, has joined Nielsen Merksamer Parrinello Gross & Leoni LLP in the firm’s Sacramento office.
Scotland, who retired from the bench in 2010 after serving on the Court of Appeal for 23 years, will be a member of the firm’s government law section, and will assist in litigation as well as political law.
Nielsen Merksamer specializes in government, political and initiative law, litigation, taxation and as well as in other areas.
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