U.S. Supreme Court justices suggested they will shield companies from some suits alleging complicity in overseas atrocities, as the court debated how far to go in scaling back a favorite legal tool of human-rights advocates.
During arguments in Washington on accusations that two foreign-based units of Royal Dutch Shell Plc (RDSA) facilitated torture and execution in Nigeria, the justices yesterday questioned whether American courtrooms were the proper site for such claims. The case centers on the two-century-old Alien Tort Statute.
Shell’s lawyer, Kathleen Sullivan, of Quinn Emanuel Urquhart & Sullivan LLP, urged the court to issue a sweeping decision that would categorically bar suits for conduct that occurs beyond the U.S. borders. The U.S. shouldn’t impose “our law onto foreign countries,” she said.
Paul L. Hoffman, of Schonbrun DeSimone Seplow Harris & Hoffman LLP in Venice, California, the lawyer for the Nigerians who sued, told the court that “the trend in the world today is toward universal justice for people that -- and corporations that -- violate these kinds of norms.”
A ruling cutting back the Alien Tort Statute would be a coup for companies, dozens of which have faced suits under the law in recent years. Exxon Mobil Corp. (XOM:US), Coca-Cola Co. (KO:US), Pfizer Inc., Unocal Corp., Chevron Corp. (CVX:US) and Ford Motor Co. have all been sued under either the Alien Tort Statute or a related law, known as the Torture Victim Protection Act.
By the end of the hour-long session, the focus of the debate was how far the court should go in trimming the Alien Tort Statute. Some justices suggested they would continue to allow suits against alleged perpetrators who took refuge in the U.S., while the Obama administration urged the court to bar claims against foreign units -- and throw out the Shell case -- without deciding whether U.S. companies could be sued.
The justices were hearing arguments for the second time on the suit, being pressed by Nigerians who say two Shell units were complicit in torture and execution in the country’s Ogoni region from 1992 to 1995.
The high court in February considered contentions that the Alien Tort Statute doesn’t permit suits against corporations. Several justices, including Alito, suggested then that they were more interested in hearing arguments that the law can’t be applied overseas.
The justices then expanded their review, ordering re- argument on a potentially more sweeping question: whether the statute applies beyond the U.S. borders. A decision limiting the law to misconduct on U.S. soil would shield corporate officers as well as the companies.
U.S. Solicitor General Donald Verrilli, representing the Obama administration, urged the court to rule in Shell’s favor without reaching some of the broader questions. He said the court should leave intact the 1980 decision that allowed suits against perpetrators who had moved to the U.S.
The case is Kiobel v. Shell Petroleum, 10-1491, U.S. Supreme Court (Washington).
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Adoboli’s UBS Co-Worker Says He Used Secret Umbrella Account
John Hughes, a former UBS AG (UBSN) trader, testified he made the same unauthorized trades as his co-worker Kweku Adoboli, who is being prosecuted for fraud.
Hughes said during his fourth day of testimony at Adoboli’s fraud and false accounting trial in London that he made trades that benefited the fund Adoboli had dubbed his “umbrella” -- the first time another worker admitted using that account.
Charles Sherrard, Adoboli’s lawyer, presented evidence of at least five transactions on the umbrella account made by Hughes while Adoboli was on vacation in Greece in June 2011, and that accounting firm KPMG LLP had evidence of other such trades. Adoboli called it the umbrella because it could be tapped on “rainy days” to cover trading losses, prosecutors have said.
Sherrard asked Hughes why, if he had made the trades, he told UBS management and their lawyers after Adoboli’s arrest last year “that you hadn’t played a part in anything” even though the last trade Hughes personally made was executed “just six weeks earlier.”
Hughes confirmed he’d made the trades, which were real transactions on the bank’s books tied to fake hedges that hid risk from the desk’s regular trading book. Profit from such trades went into the umbrella fund for later use by the exchange-traded fund desk, Sherrard said.
Adoboli was charged in relation to unauthorized trades on which UBS lost $2.3 billion. The former trader admitted hours before his arrest in September of last year that he had risked $5 billion on Standard & Poor’s 500 futures and a further $3.75 billion in the German futures market, a former manager testified. Adoboli has pleaded not guilty.
Sherrard has said previously that Hughes had made his own off-book trades, knew of the umbrella account and “at times controlled it.”
Hughes reiterated yesterday he didn’t control the umbrella fund and that he didn’t know how to directly access it on Adoboli’s computer. He also said he didn’t know about the fund until about January 2011, though Adoboli created it in 2008. Others who were fired, including Adoboli’s former manager Ron Greenidge, weren’t aware of the umbrella, Hughes said.
Sherrard said Hughes abandoned Adoboli as the scheme unraveled and let him take the fall on his own, instead of admitting he’d been part of it. Hughes also agreed for the first time he had a supervisory role over Adoboli and that he repeatedly lied when asked by the ETF desk’s manager to report on their daily profits and losses.
CVC Agrees to Buy Cunningham Lindsey From Stone Point, Fairfax
A group led by CVC Capital Partners Ltd. agreed to buy Cunningham Lindsey Group Ltd., one of the world’s largest insurance-claims adjusters, from owners Stone Point Capital LLC and Fairfax Financial Holdings Ltd. (FFH)
Debevoise & Plimpton LLP advised Cunningham on the deal. Weil, Gotshal & Manges LLP and Clifford Chance LLP provided legal advice to CVC’s investor group.
The international Debevoise team is led by partner Stephen R. Hertz and includes partners Jeffrey P. Cunard, Vadim Mahmoudov and Pierre Maugüé.
Weil’s lawyers were led by partner Doug Warner and also included partners JP Bernard, Angela Fontana and Marc Silberberg.
Clifford Chance’s London partners Kem Ihenacho and Imogen Clark also advised CVC.
The deal values Cunningham at about $900 million to $1 billion including debt, said a person familiar with the transaction who declined to be identified because the figure is private. Fairfax is selling a stake for about $260 million, according to a statement yesterday. Stone Point, run by former Goldman Sachs Group Inc. executives Stephen Friedman and Charles Davis, and Fairfax plan to remain investors, a separate statement showed.
Private-equity firms have bought and sold insurance- services firms this year as some look to cash out investments made during the buyout boom half a decade ago and others look to invest in an industry with steady cash flow and little need for capital expenditures. Cunningham, with about 7,000 employees, helps insurers and other companies determine losses and has operations in nations including Australia, Brazil, Germany, India, Japan and the U.S.
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3M to Buy Ceradyne for $860 Million in CEO’s Largest Deal
Cleary Gottlieb Steen & Hamilton LLP advised 3M Co. (MMM:US), the manufacturer whose new chief executive officer has said he’s considering larger deals, on an agreement to buy Ceradyne Inc. (CRDN:US) for $860 million to expand into ceramics used in energy, aerospace and defense industries. Stradling Yocca Carlson & Rauth PC advised Ceradyne.
3M agreed to pay $35 a share and plans to complete the transaction by the end of the year, according to a statement yesterday. The board of Mesa Costa, California-based Ceradyne has recommended shareholders accept the offer, which is 43 percent higher than the closing price on Sept. 28.
The Cleary Gottlieb corporate team includes partner Christopher Austin. Also working on the deal were partners A. Richard Susko, employee benefits; Leonard Jacoby, intellectual property; and Mark Leddy, Brian Byrne and Stephan Barthelmess, antitrust aspects.
Stradling’s team included corporate shareholders Robert “Bob” Rich and Marc Alcser.
Kirkland & Ellis LLP represented Citibank, financial adviser to Ceradyne. The Kirkland team included partners Daniel Wolf and Joshua Zachariah.
The purchase, the biggest announced by St. Paul, Minnesota- based 3M this year, will help the company expand into ceramics as the material becomes more popular across several industries. Ceramics are more frequently used because they are more heat- resistant and harder than metal, said Nick Heymann, an analyst with William Blair & Co. in New York.
3M agreed to pay about 6 times Ceradyne’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That’s similar to the 5.3 ratio of similar deals.
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Jones Day Will Open Amsterdam Office in 2013 Led by Houben
Jones Day will open an office in Amsterdam early next year. The Amsterdam office will be the firm’s 38th worldwide, and 10th in Europe.
Led by Luc Houben, who was previously the partner-in-charge of Jones Day’s Brussels office, the Amsterdam office will initially focus corporate, mergers and acquisitions, private equity, capital markets, litigation and antitrust law matters.
Houben, a M&A lawyer who has been with Jones Day for more than 20 years, has also practiced in New York and Tokyo and is currently closely involved in the firm’s Japan practice, the firm said.
Yvan Desmedt will become the administrative partner for the Amsterdam office. Desmedt is currently a partner in the antitrust and competition practice at Jones Day’s Brussels office, focusing on EU and national antitrust as well as EU regulatory matters.
Ferdinand Mason, formerly a partner at a Dutch law firm, is joining Jones Day in its London office, where he will help build the firm’s Dutch presence. Mason headed up the corporate/M&A and capital markets department at his previous firm, and opened its London office in 2010. His practice primarily encompasses mergers and acquisitions, capital markets, governance, and strategic corporate matters for industrial and private equity clients. He is joined in London by a senior associate.
“The Netherlands is a leading and internationally important business and legal market with close ties to the United States,” Jones Day’s managing partner Steve Brogan said in a statement. “The opening of our Amsterdam office, together with the recent addition of our Dusseldorf office, is a demonstration of Jones Day’s confidence in and commitment to the future of the European Union, which remains the largest economy in the world.”
Jones Day opened a Dusseldorf office in February of this year. The firm has 450 lawyers in 10 European locations. The firm has more than 2,400 lawyers in 35 offices worldwide.
Carlton Fields Opens New York Office With Rosner & Napierala
Carlton Fields opened a New York City office yesterday by taking on 6 lawyers from Rosner & Napierala LLP, including name partners Brian Rosner and Natalie A. Napierala. Rosner will serve as managing shareholder for the office.
“Many of our national clients are based in or near New York, and our attorneys from our offices in Florida and Atlanta travel there often to work with these clients. So the new office is a natural step for us,” Carlton Fields’ president and CEO Gary L. Sasso said in a statement.
Carlton Fields’ new office, it’s eighth, will be in the Standard Oil building near Wall Street.
Rosner and Napierala are members of the firm’s business litigation and trade regulation practice.
Three senior counsel and an of counsel join the firm’s corporate, securities, and tax practice group,
Carlton Fields has more than 300 attorneys and government consultants in 8 offices in Florida, Atlanta and New York.
Burr & Forman Combines with Tampa Firm Williams Schifino
Burr & Forman LLP combined yesterday with Tampa law firm Williams Schifino Mangione & Steady PA, to create a 277-lawyer firm with nine offices in five Southeastern states.
By adding the 23-lawyer firm to open a Tampa office, Burr & Forman has opened four new offices in as many years. The firm now has 55 attorneys across Florida, with three offices in the state.
“Strategically, expansion into the Tampa market is the perfect solution for our banking and financial institutions clients who desire local legal counsel,” William Lee Thuston, managing partner of Burr & Forman said in a statement.
William J. Schifino Jr., who previously was managing director of Williams Schifino, will become Burr & Forman’s Tampa office managing partner.
Burr & Forman’s 275 attorneys are at offices in Alabama, Florida, Georgia, Mississippi, and Tennessee.
Petrobras Venezuela GC Joins Hogan Lovells in Caracas
Diogenes Bermudez, former general counsel for Petrobras Venezuela, joined Hogan Lovells LLP’s Caracas office as counsel in the infrastructure and project finance practice.
“Diogenes is one of the best oil and gas lawyers in Venezuela, and he brings a wealth of experience that will be of great value to our clients,” said Bruno Ciuffetelli, co-head of Hogan Lovells’ Latin America practice.
In his previous position with Petrobras Venezuela, Bermudez counseled on oil and gas law and led complex negotiations with national oil companies, government officials and international partners, related to major energy projects, the firm said. He has experience negotiating oil and gas contracts and granting instruments, such as mixed companies, joint venture agreements, operating services agreements, and gas licenses.
Hogan Lovells has over 2,300 lawyers in more than 40 offices around the world.
Law Firms Mergers Reach 39 in First Three Quarters
Law firms merged or acquired other firms in 14 cases during the third quarter of this year, bringing the past nine month’s total to 39, law firm consulting firm Altman Weil MergerLine said in a statement yesterday. The tally for the first nine months of the year is slightly less than the same period last year, which was 43.
“Most of the deals we’re seeing are small, highly targeted moves to boost expertise or enhance geographic footprint,” Altman Weil principal Tom Clay said in a statement. “Firm leaders want to be sure they’re matching supply with demand to avoid diluting firm productivity even in the short term.”
Four of the 14 combinations were mergers, while 10 were acquisitions of small law firms. The second quarter of this year saw a dip in firm mergers and acquisitions, to 11, while the first quarter was also 14.
The merger of Jacoby & Meyers with Chicago-based Macey Bankruptcy Law, was the largest of this quarter, resulting in a combined firm of 300 lawyers with 135 offices in 50 states.
Also of note was the announcement by DLA Piper LLP, the second largest law firm in the U.S., to acquire the Paris firm, Frieh Bouhenic.
Philadelphia-based firm Pepper Hamilton LLP, which has 500- lawyers, acquired 8-lawyer white-collar defense boutique Freeh Sporkin & Sullivan in Wilmington, Delaware, led by former federal judge and director of the Federal Bureau of Investigation Louis Freeh.
For more details on law firm mergers and acquisitions, see www.altmanweil.com/MergerLine.
Dewey Sued by Former Client to Return Unused Retainer
Dewey & LeBoeuf LLP, the defunct law firm, was sued by one of its former clients and is facing opposition to payment of a $165,000 bonus to finance director Frank Canellas.
The lawsuit by former client Entegra Power Group LLC raises interesting issues regarding the status of retainers. Entegra was known as Union Power Partners LP when Dewey was engaged as special counsel during the company’s Chapter 11 reorganization completed in 2005. Dewey was paid a $300,000 retainer.
Entegra said in the lawsuit filed last week in bankruptcy court in New York that it paid all of Dewey’s fees. Asked to return the retainer after bankruptcy, the firm said it hadn’t been segregated. Consequently, Dewey says the former client has nothing more than an unsecured claim.
Entegra contends the firm violated fiduciary duties by not segregating the retainer. The company wants the bankruptcy judge to impose a constructive trust on Dewey funds so the retainer can be repaid in full.
The U.S. Trustee and the official committee for former partners are both opposing payment of a $165,000 bonus to Canellas. If paid, Canellas will have received $665,000 in 2012, an amount the committee said would be “excessive” even if Dewey were an operating firm.
Dewey contends that the proposed bonus is being paid in the ordinary course of business and doesn’t require court approval. The U.S. Trustee and the partners’ committee both contend Canellas is a senior executive and cannot be paid a bonus for remaining with the firm. The issue will be presented to the bankruptcy judge for approval at an Oct. 4 hearing.
The court previously approved other bonuses. For a discussion of the judge’s opinion approving some of the bonuses, click here for the July 31 Bloomberg bankruptcy report. For discussion of the $700,000 bonus program when proposed, click here for the July 6 Bloomberg bankruptcy report.
Dewey has two official committees, one for unsecured creditors and the other for former partners. The firm once had 1,300 lawyers before liquidation began under Chapter 11 in May.
There was secured debt of about $225 million and accounts receivable of $217.4 million at the outset of bankruptcy, the firm said. The petition listed assets of $193 million and liabilities of $245.4 million as of April 30.
The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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