Brown Rudnick, international practice group, has settled a $300 million malpractice lawsuit alleging it mishandled work as a litigation trustee in the 2009 bankruptcy of chemical company LyondellBasell Industries.
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Last week, the involved parties advised U.S. District Judge Paul A. Engelmayer that all litigation claims were settled in principle, so on January 26th the judge made an order officially dismissing the claims without prejudice.
The suit claimed that Brown Rudnick, specifically attorney Edward Weisfelner, failed to prove that Lyondell was insolvent when it made a $300 million loan repayment. Brown Rudnick had sought to claw back the enormous payment but only obtained $12 million, which the court determined to be a repayment of their commitment fee.
In late 2008, Lyondell was in trouble and needed liquid capital. They opted to take out a revolver, a line of credit functioning similarly to credit cards, for $300 million. They borrowed from billionaire Leonard Blavatnik’s Access Industries Holdings Inc. after Lyondell merged with an Access subsidiary a year earlier.
Lyondell then repaid the loan in three $100 million installments that same month. It then requested a draw of $750 million, the full amount extended by Access, but was denied. Only a week later, Lyondell filed for bankruptcy.
Following the bankruptcy declaration, former trustee Edward Weisfelner, filed numerous claims against Blavatnik, including a claim that Access breached the revolver terms by refusing the December 2008 request and that the October 2008 payments were made when Lyondell was already insolvent.
The bankruptcy court found Access Industries Holdings Inc. had breached the agreement but that the agreement contained an enforceable liability limitation that barred Weisfelner from collecting anything but compensatory damages.
Upon appeal in 2018, the court upheld the finding that Weisfelner had failed to provide sufficient evidence of insolvency and dismissed the clawback claims. In January of 2020 Brown Rudnick sought dismissal of the payment, ultimately receiving a similar result, with only one claim being thrown out.
The malpractice settlement follows a single day after Weisfelner, the global chair of Brown Rudnick’s bankruptcy and corporate restructuring practice group, announced his retirement. A firm spokesperson has stated that the retirement had no connection to the settlement.
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