Financing Litigation

Kasowitz is a leading law firm for all types of disputes concerning capital structure transactions, including unconsummated acquisitions, alleged fraudulent conveyances, litigation concerning “Material Adverse Change” provisions in acquisition and financing agreements, insolvency issues, and contractual loan disputes.  In this area, the firm represents private equity firms, domestic and foreign banks, hedge funds and other investors, bondholders, trustees, issuers and other stakeholders in a broad range of cases.

Some of the firm’s high-profile representations concerning financings include:

• Apollo Management’s Hexion Specialty Chemicals in its action against Credit Suisse and Deutsche Bank seeking specific performance of the banks’ $15 billion commitment to finance Hexion’s acquisition of Huntsman Chemical.  After expedited discovery, Kasowitz successfully negotiated a settlement with Huntsman, bringing an end to one of the largest-ever battles over a leveraged buyout.  Major media outlets, including The Wall Street Journal, lauded the settlement negotiated by Kasowitz as a "sweet deal" for Apollo and Hexion. 
• The Adelphia Recovery Trust, which was created pursuant to the plan of reorganization of Adelphia Communications, Inc., recently obtained a $175 million settlement in an action against numerous banks and financial institutions alleging that they aided and abetted the Rigas family in looting the Adelphia cable companies through their creation of unprecedented lending structures that assisted the Rigases' misconduct.  The firm represented the Unsecured Creditors Committee in the Adelphia bankruptcy proceedings, and continues as the Trust's counsel to pursue a variety of other claims, including fraudulent conveyance claims, on behalf of Adelphia’s unpaid creditors.
• A commercial real estate investor and one of his affiliated entities, Lightstone Holdings LLC, in defense of separate actions brought by two groups of lenders, each of which is seeking to enforce a $100 million non-recourse carve-out guarantee relating to the $8 billion financing through which the investor and Lightstone acquired the Extended Stay Hotel chain.
• Freescale Semiconductor, defending against injunctive and damages litigation by senior lenders who claim that a Material Adverse Change had occurred, and that their interests were diluted, when the company issued incremental debt of $750 million.
• A group of 2015 Noteholders in their action against The Bank of New York Mellon, as indenture trustee for the notes, seeking $1 billion in damages caused when BNY wrongfully approved the leveraged buyout of Lyondell Chemical Company by Basell AF, the issuer of the notes.  Kasowitz successfully defended against BNY’s motion to dismiss the complaint, allowing for the Noteholders’ breach of contract and negligence claims to proceed.
• Fontainebleau Las Vegas Holdings, LLC in litigation against numerous lenders relating to the development of the multi-billion dollar destination casino-resort at the north end of the Las Vegas strip. 
• Interstate Bakeries Corp. as special litigation counsel in order to enforce commitments to provide $600 million in exit financing for IBC to emerge from chapter 11 bankruptcy.
• Teachers Insurance and Annuity Association, New York Life Insurance Company, Angelo Gordon & Co., and other investors in their action against State Street Bank and Trust Company seeking tens of millions of dollars arising from State Street’s failure to deliver a document to a collateral trustee, resulting in the plaintiffs receiving less when the issuer filed for bankruptcy protection.  Over the objections of State Street and the American Bankers Association that such a decision would reverse decades of New York law, the firm successfully obtained a decision by the New York Court of Appeals establishing that prior to an event of default, an indenture trustee owes noteholders an extra-contractual obligation to perform basic, non-discretionary, ministerial functions, and that the failure to perform those obligations will subject the trustee to liability in tort.
• TSL (USA), Inc., an affiliate of National Australia Bank, in two separate actions seeking more than $600 million against OppenheimerFunds, Inc., Harbourview Asset Management Corporation and AAArdvark IV Funding Limited relating to the mismanagement of loans by TSL to the AAArdvark IV special funding vehicles.
• Royal Park Investments SA/NV, an entity created in connection with the Belgian State’s sale of Fortis Bank SA/NV to BNP Paribas S.A. for the purpose of purchasing and managing certain of Fortis Bank’s structured credit risks not assumed by BNP Paribas, in an action against Oppenheimer and its affiliates relating to defendants’ misconduct as administrators of a structured finance vehicle, alleging damages of more than $400 million.
• Fortress Credit Corp. and FCOF UL Investments LLC, affiliates of asset manager Fortress Investment Group LLC, in a $50 million action relating to the issuance of a legal opinion letter by Dechert LLP in connection with a sham transaction put together by disbarred attorney Marc S. Dreier. 
• The Le*Nature’s Liquidation Trustee in several separate actions, against, among others, Wachovia, BDO Seidman, CIT, and Krones AG, a major German manufacturer, for, among other things, each of their participation and substantial assistance in Le*Nature's massive Ponzi scheme fraud.  In these actions, the firm asserted over 20 separate causes of action, including RICO, fraud, aiding and abetting, and malpractice seeking over $500 million in damages that trebles under RICO law to over $1.5 billion in damages.  The firm successfully defeated all of the federal and arbitral motions to dismiss, protectively expanding the law on the gate keeping issue of in pari delicto for litigation trustees, in the multi-district litigation that includes Wachovia, Krones, CIT, and in the BDO Arbitration’s motion to dismiss, with the court upholding 25 of the 26 claims, and confirmed that Wachovia and the other defendants could be held liable for all of the money raised and lost in the Ponzi scheme.
• A special purpose entity formed by Clayton, Dubilier & Rice, Bain Capital and Carlyle Investment Management, LLC, in their dispute against JPMorgan Chase, Lehman Brothers and Merrill Lynch concerning the banks’ refusal, based on allegations of Material Adverse Changes, to finance their $10 billion acquisition of Home Depot Supply. 
• Fortress Investment Group affiliates in their actions against AIG subsidiary MorEquity, Inc. to require MorEquity to sell to plaintiffs certain unique residential mortgage loans and residential real estate, with an approximate unpaid principal balance in excess of $554 million. 
• The former developer of Meadowlands Xanadu, a retail and entertainment complex with more than one million square feet of retail space, an indoor ski slope, and other amenities, in its disputes with the lender group over a more than $1 billion financing commitment, including a successful appeal to the Appellate Division, First Department that reinstated the developer’s claims for breach of a construction loan agreement and related guaranty.
• Edge Group WAICCS LLC in its action against The Sapir Group LLC seeking, among other things, specific performance compelling Sapir to close on a multi-million dollar acquisition of an interest in a limited liability company from Edge Group.  The firm successfully defeated Sapir’s motion for summary judgment, and obtained summary judgment on a substantial portion of the Edge Group's complaint.