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Simon Counts on Seasoned Lawyer to Snuff Out Taubman Mall Buyout

  • Attorney Lew Clayton helped Fresenius scuttle Akorn deal
  • Merger accord has specific pandemic provision, professor says
Shoppers walk past stores at the Simon Property Group Roosevelt Field mall in Garden City, New York in 2018.
Shoppers walk past stores at the Simon Property Group Roosevelt Field mall in Garden City, New York in 2018.Photographer: David Williams/Bloomberg

Simon Property Group Inc. is counting on mergers and acquisitions lawyer Lew Clayton to work his magic to scuttle a $3.6 billion buyout of rival mall owner Taubman Centers Inc. for failing to effectively deal with the Covid-19 pandemic’s fallout.

It isn’t the first time the attorney’s been called to the rescue. Two years ago, Clayton -- a partner with New York’s Paul, Weiss, Rifkind, Wharton & Garrison LLP –- persuaded a judge that the fine print in an acquisition deal allowed German drugmaker Fresenius SE to cancel a $4.3 billion buyout of U.S. rival Akorn Inc., which tried to cover up serious quality-control problems.

Clayton is citing the same material-adverse effect clause in Simon’s case against Bloomfield Hill, Michigan-based Taubman, claiming it didn’t move quickly enough to cut costs and manage expenses to withstand the pandemic’s economic body blows. That violated the deal’s terms, the argument goes.

“Lew is one of the top lawyers in this country when it comes mergers and acquisitions,” William Lafferty, a Wilmington, Delaware-based lawyer who represented Akorn in the Fresenius case. “He’s a tremendous strategist and he’s great in the courtroom. I have nothing but respect for him.”

Simon filed its busted-deal case in state court in Michigan, where Taubman is based. The case joins more than a dozen others filed in courts from Delaware to Arizona citing the coronavirus as a legitimate basis for canceling deals. Michigan, along with Delaware and a handful of other states, has specialized business courts to deal with high-profile corporate disputes.

In one case, WeWork co-founder Adam Neumann is suing SoftBank Group Corp. over the Japanese company’s decision to renege on a $3 billion deal to buy stock from employees and other shareholders. SoftBank officials cited Covid-19 as the reason for nixing the purchase.

There haven’t been many recent court rulings on what constitutes a material-adverse effect in corporate transactions. The Michigan judge must interpret the specific terms of the $3.6 billion agreement to see if Clayton’s arguments hold water, said Larry Hamermesh, a University of Pennsylvania law professor.

In the Fresenius case, Clayton was able to convince Delaware Chancery Judge Travis Laster that wrongdoing by Akorn executives cast doubt on the validity of its data and profitability. That allowed Fresenius to walk.

In the Simon case, the merger agreement contains a specific clause ruling out pandemics as triggering a material-adverse event, Hamermesh said. The agreement also notes that if Clayton can show taubman was disproportionately affected by the pandemic, then the exclusion may not apply, according to court filings.“