1. The Use of Fraudulent Conveyance
Principles to Overturn LBOs
Wednesday, June 6, 2012
arnoldporter.com
2. New York Seminar Series
Financial Markets Regulatory Roundtable
The Use of Fraudulent Conveyance
Principles to Overturn LBOs
Wednesday, June 6, 2012
12:00 − 2:00 p.m.
Table of Contents
Agenda......................................................................................................................... Tab 1
Presentation Slides..................................................................................................... Tab 2
Moderator/Speaker Biographies................................................................................ Tab 3
Grant Vingoe, Michael L. Bernstein, Stewart Aaron
Practice Overviews..................................................................................................... Tab 4
Bankruptcy and Corporate Restructuring, Financial Services, Litigation
Supporting Material.................................................................................................... Tab 5
.
„„ For Some LBO Participants, Section 546(e)’s “Blanket” Protection for Securities
Contract Settlement Payments Has Holes
4. New York Seminar Series
Financial Markets Regulatory Roundtable
The Use of Fraudulent Conveyance
Principles to Overturn LBOs
Agenda
12:00 – 12:30 p.m. Lunch and Registration
12:30 – 12:40 p.m. Welcome and Overview
12:40 – 1:45 p.m. Presentation and Discussion
Grant Vingoe, Partner, Financial Services Practice,
Arnold & Porter LLP, New York, NY
Michael Bernstein, Partner, Bankruptcy and Corporate Restructuring
Practice, Arnold & Porter LLP, Washington, DC
tewart Aaron, Partner, Litigation Practice and Office Head,
S
Arnold Porter LLP, New York, NY
1:45 – 2:00 p.m. Questions and Answers
6. The Use of Fraudulent Conveyance
Principles to Overturn LBOs
D. Grant Vingoe, Arnold Porter LLP
Michael L. Bernstein, Arnold Porter LLP
Stewart D. Aaron, Arnold Porter LLP
June 6, 2012
1
Fraudulent Conveyance
Fraudulent conveyance laws exist to protect a company and its
creditors from transactions that cause harm by extracting value
without giving reasonable value in return.
Anyone who benefited from the transaction can potentially be found
liable for the fraudulent transfer.
An LBO transaction that goes bad can be a prime target for
fraudulent conveyance claims because lenders, management and
shareholders may benefit g
y greatly, while the debt used to finance the
y,
deal can render the company insolvent.
Because fraudulent conveyance claims are difficult and expensive to
litigate, these cases often, but not always, settle.
2
7. Leveraged Buyouts
An LBO is typically an acquisition using a significant amount of borrowed
money t meet th cost of th acquisition. Di tl or i di tl th assets of
to t the t f the i iti Directly indirectly, the t f
the company being acquired are used as collateral or support for the
leveraged transactions.
The purpose of LBOs is to allow companies to make acquisitions of
companies without committing a lot of their capital to make the acquisition.
LBOs are credited with creating a market for corporate control by funding
potential owners who would not otherwise have access to sufficient capital.
LBOs t ti ll
LBO potentially create value for the firm as a whole but also potentially
t l f th fi h l b t l t ti ll
transfer value from creditors to equity holders.
Loan proceeds are typically obtained by the acquiring entity, secured by the
target entity’s assets, and used by the acquiring entity to buy-out the
existing holder(s) of the target entity.
3
LBO Fraudulent Conveyance Litigation
If the target of an LBO fails, parties may initiate fraudulent transfer litigation to:
– Avoid the liens granted to the third party lenders that financed the LBO; and
– Recover the payments made to the target company’s former shareholders when they cashed
out their equity positions.
The potential for fraudulent conveyance liability most frequently arises when it is
alleged that the debtor failed to receive adequate consideration for the transfer and
the debtor at the time of, or as a result of, the transfer was balance sheet insolvent,
equitably insolvent, or left with unreasonably small capital.
Unsecured creditors need recourse under fraudulent conveyance laws because:
– They
Th are not a party to the LBO;
t t t th LBO
– They have no good proxy among the parties to assert their claims; and
– Absent legal recourse, many have no ability to negotiate protection against uncompensated
harm.
4
8. LBO Fraudulent Conveyance Litigation (cont’d)
Fraudulent transfer law originally developed in response to the
situation where debtors on the verge of insolvency would transfer
their assets to friends or relatives, leaving little or no value in their
estates for creditors.
The English legal system responded to this problem by allowing
creditors to petition a court to void the transfer as a “fraudulent
conveyance.”
The standard under which a fraudulent transfer could be voided was
first codified in England in 1570, which permitted creditors to set
aside transfers made with the intent to delay, hinder or defraud
creditors. Similar standards are used in modern U.S. law.
5
LBO Fraudulent Conveyance Litigation (cont’d)
There has been increased attention on fraudulent
conveyance litigation over the last few years.
During the credit boom, banks and bondholders financed
many highly leveraged transactions.
As the debts became due and businesses struggled to
refinance their debts, there was a wave of defaults,
bankruptcies and inter creditor disputes
inter-creditor disputes.
6
9. Theory of Clawbacks
The term “clawback” is used generally as a theory for
g y y
recovering benefits that have been conferred under a
claim of right, but that are still recoverable because
unfairness would otherwise result.
– Retroactive Clawbacks- imposed after the contractual right has
arisen and benefits have been conferred.
– Prospective Clawbacks- introduced into contracts before the
claim of right t the benefits h arisen.
l i f i ht to th b fit has i
7
Increasing Attention on Clawbacks
Madoff Clawbacks- trustee has sought to recover payments of
fictitious profits and withdrawals of principal.
Executive Compensation Clawbacks- based upon restatements or
subsequent period losses.
Sarbanes Oxley Section 304 gives the SEC the power to recover
certain restatement-related compensation and stock profits from
CEOs and CFOs of public companies in the event the restatement
was caused by misconduct.
y
Dodd-Frank Section 954 requires the SEC to order national
securities exchanges and associations to prohibit the listing of a
security whose issue does not have a clawback policy.
8
10. Potential Defendants in Fraudulent Transfer
Litigation
Claims for Fraudulent Transfer (among others)
can be brought against several parties involved
in a failed transaction, including:
– Officers and Directors;
– Lenders;
– Financial Advisors; and
– Former Shareholders.
9
Two Types of Fraudulent Transfer
Actual Fraud involves intent to defraud where
Fraud-
the trustee must prove that the debtor made
transfers with “actual intent to hinder, delay, or
defraud” investors.
Constructive Fraud- does not require fraudulent
intent but looks at the underlying economics of
y g
the transaction.
10
11. Actual Fraud
Because direct evidence of fraudulent intent is often unavailable, courts
typically l
t i ll rely on circumstantial evidence t i f f d l t i t t I
i t ti l id to infer fraudulent intent. In
evaluating the transferor’s actions, courts have looked at various “badges of
fraud” including:
– Becoming insolvent because of the transfer;
– Lack or inadequacy of consideration;
– Family or insider relationship among parties;
– The retention of possession, benefits or use of property in question;
– The existence of the threat of litigation;
– The financial situation of the debtor at the time of transfer or after transfer;
– The existence or a cumulative effect of a series of transactions after the onset of
debtor’s financial difficulties;
– The general chronology of events;
– The secrecy of the transaction in question; and
– Deviation from the usual method or course of business.
11
Actual Fraud (cont’d)
The presence of one or more badges of fraud shifts the
p g
burden of proof from the creditor to the debtor. The
debtor must then prove that despite the circumstantial
evidence, the transfer was made with no fraudulent
intent.
Proof of insolvency and fair consideration are not
material to a determination of actual intent to defraud.
12
12. Constructive Fraud
A constructive fraudulent transfer typically
occurs when a debtor makes a transfer and
receives less than reasonably equivalent value,
and at the time of such transfer the debtor:
– Was insolvent;
– Had unreasonably small capital for any business in
which the debtor was or was about to become
engaged; or
– Intended to incur or believed that it would incur debts
beyond the debtor’s ability to pay as such debts
matured.
13
Reasonably Equivalent Value
In the LBO context, the party that assumes the debt and pledges its
assets generally does not receive the proceeds of the loan financing
the transaction.
The value received and given does not need to be equal, but a
significant shortfall in the value received will result in a finding that
the debtor received less than reasonably equivalent value.
Whether the debtor received reasonably equivalent value is
measured from the perspective of the creditors.
p p
Bankruptcy Code Section 548(a)(1)(B)(i) provides for avoidance of
an obligation if the debtor received less than reasonably equivalent
value in exchange (and the other requirements of Section
548(a)(1)(B) are also met).
14
13. Unreasonably Small Capital
The Bankruptcy Code does not define the term “unreasonably small
capital.”
Courts have described the term as a financial condition short of
“equitable insolvency,” but which leaves the transferor unable to
generate sufficient profits to sustain operations so that the transferor
is technically solvent but doomed to fail. The transferor is left with so
few assets that its inability to pay debts in the future should have
been reasonably foreseeable.
– Equitable insolvency occurs when an entity is unable to pay its debts as
they become due in the ordinary course of business.
Determination of “unreasonably small capital” is conducted on a
case-by-case basis and often relies on industry-specific financial
metrics.
15
Unreasonably Small Capital (cont’d)
Courts consider a variety of factors in determining
y g
“unreasonably small capital” including:
– Historical performance;
– Availability of funds;
– Causation;
– Time horizon;
– Nature of business;
– Likelihood of future growth or contraction;
– Composition of asset portfolio;
– Amount of insurance;
– Likelihood of incurring substantial debt in the future.
16
14. Bankruptcy Code Provisions
Under the Bankruptcy Code, generally the debtor has the “avoiding
power,” including the right to commence an action alleging
fraudulent transfers under the Bankruptcy Code.
Section 548 allows avoidance of transfers made or obligations
incurred within 2 years of the filing of a bankruptcy petition. 11
U.S.C. § 548.
Section 550 allows the debtor to recover property that has been
“fraudulently” transferred. 11 U.S.C. § 550.
y
Section 544 allows the debtor to avoid transfers under applicable
non-bankruptcy laws, i.e., state fraudulent conveyance statutes. 11
U.S.C. § 544.
Section 546(e) provides a safe harbor within which transfers cannot
be avoided as fraudulent. 11 U.S.C. § 546(e).
17
Section 546(e)
Section 546(e) of the Bankruptcy Code is intended to reduce systemic risk
to
t markets th t can result f
k t that lt from undoing t
d i transactions upon which counter-
ti hi h t
parties have relied, hedged and re-allocated proceeds.
Among other things, the trustee may not avoid transfers that are settlement
payments or that are made in connection with securities contracts, by or to
(or for the benefit of) a financial institution, unless the transfer was made
with actual intent to hinder, delay or defraud creditors.
– The term “settlement payment” is defined to mean “a preliminary settlement
payment, a partial settlement payment, an interim settlement payment, a
settlement payment on account, a final settlement payment, a net settlement
payment, or any other similar payment commonly used in the forward contract
trade or the securities trade.” 11 U.S.C. § § 101(51A); 741(8).
– The term “financial institution” is defined to include, among other things, all
commercial and savings banks, savings and loan associations and federally-
insured credit unions. 11 U.S.C. § 101(22).
18
15. Section 546(e) (cont’d)
– Case law has been inconsistent in applying the requirement that
the transfer be “by or to (or for the benefit of)” a financial
institution. The majority of courts have held that any participation
by a financial institution is adequate under the plain language of
the statute and some judges have interpreted the provision to
protect shareholders who trade through financial institutions.
– The safe harbor does not apply to claims for actual fraudulent
conveyance.
– Creditors have sought to find a way around the safe harbor by
suing for constructive fraudulent conveyance under state law,
where they argue that Section 546(e) does not apply.
19
State Laws
Section 544 of the Bankruptcy Code allows recovery under state law
incorporating the Uniform Fraudulent Transfer Act (UFTA).
(UFTA)
43 states and the District of Columbia have adopted the UFTA. The UFTA
allows creditors to void transfers that are intentionally or constructively
fraudulent under similar criteria to Section 548.
UFTA Section 5 states:
– (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor
whose claim arose before the transfer was made … if the debtor made the transfer
or incurred the obligation without receiving a reasonably equivalent value in
exchange for the transfer … and the debtor was insolvent at the time or … became
insolvent as a result of the transfer
transfer.
State laws generally have a longer statute of limitations than the Bankruptcy
Code, allowing a trustee to avoid transfers not otherwise voidable under
Section 548 of the Bankruptcy Code.
– UFTA has a 4-year statute of limitations, though a number of states have varied
this.
– New York has a 6-year statute of limitations.
20
16. Collapsing Transactions
A threshold inquiry in certain LBO fraudulent transfer actions is
whether the particular transaction(s) sought to be avoided can be
considered in isolation or should be considered as part of an
integrated transaction. Treating a series of LBO or restructuring
transactions as a whole is referred to as “collapsing” the
transactions.
Courts typically consider three things in determining whether to
collapse transactions:
– Whether all of the parties had knowledge of the multiple transactions;
– Whether each transaction would have occurred on its own; and
– Whether each transaction was dependent or conditioned on the other
transactions.
The fact that transactions were separated by considerable time does
not, by itself, prevent collapsing transactions.
21
Tribune Co.
In 2007, the board of directors of Tribune Company approved an LBO proposal by
Sam Zell to take the company private In connection with the LBO Tribune borrowed
private. LBO,
over $12 billion to buy out its public shareholders and become wholly owned by a
newly formed employee stock ownership plan (“ESOP”).
Two-Step Transaction:
– In Step One, in June 2007, the ESOP purchased 8,928,571 shares of Tribune common stock
at $28 per share. An entity owned by Mr. Zell also made an initial investment of $250 million
in Tribune in exchange for 1,470,588 shares of Tribune common stock at a price of $34 per
share and an unsecured subordinated exchangeable promissory note of Tribune in the
principal amount of $200 million. Thereafter, Tribune commenced a cash tender offer to
repurchase approximately 52% of its outstanding common stock. Tribune then retired the
p pp y g
repurchased shares. Step One Shareholders received approximately $4.3 billion for their
shares.
– In Step Two, in December 2007, Tribune merged with a Delaware corporation wholly owned
by the ESOP, with Tribune surviving the merger. Upon completion of the merger, all issued
and outstanding shares of Tribune’s common stock (other than shares held by Tribune or the
ESOP) were cancelled and Tribune became wholly owned by the ESOP. Step Two
Shareholders received approximately $4 billion for their shares.
22
17. Tribune Co. (cont’d)
Tribune filed for bankruptcy on December 8, 2008.
In February 2010, a group of unsecured creditors, the Official
Committee of Unsecured Creditors (the “Committee”) sued for relief
under fraudulent conveyance law arguing that Tribune did not receive
reasonably equivalent value in exchange for the debt it incurred in the
LBO and that Tribune took on this debt for the benefit of the parties
driving the deal (i.e., the buyers, the former shareholders, and the
lenders financing the LBO).
The Committee argued that Tribune was rendered insolvent by the
LBO or, if not, it was foreseeable Tribune would become insolvent if
the LBO occurred.
They asked the Delaware bankruptcy court to strip the lenders of their
liens and subordinate their claims, denying them their position at the
front of the line for distribution of the remaining value in Tribune.
23
Tribune Co. (cont’d)
In April 2010, the bankruptcy court directed the appointment of an
independent examiner, Kenneth Klee, to evaluate allegations that
the LBO violated bankruptcy law. In July 2010, the examiner issued
a report concluding that Tribune did not receive reasonably
equivalent value in exchange for the obligations it incurred to
finance the LBO, that it was “highly likely” that Tribune was rendered
insolvent and without adequate capital by Part Two of the LBO.
The examiner wrote in his report that fiduciaries charged with the
responsibility f overseeing management’s actions and d t
ibilit for i t’ ti d determining
i i
whether the Step Two transactions would render Tribune insolvent
did not adequately discharge their duties.
The examiner found some evidence suggesting intentional fraud in
Step Two of the transaction, however, he said that the evidence
supporting constructive fraud was much stronger.
24
18. Tribune Co. (cont’d)
In December 2010, Tribune ceded its rights to bring suits to the Committee,
which obtained permission to file a claim alleging intentional f d against
hi h bt i d i i t fil l i ll i i t ti l fraud i t
shareholders before the two-year statute of limitations expired.
– The bankruptcy court recently granted the Committee’s motion to dismiss claims
against former named shareholders who received less than $50,000 in proceeds
from the LBO.
The bankruptcy judge stayed the suit pending the completion of the Chapter
11 process, hoping that the various parties could find a way to settle the
charges.
The Committee let the statute of limitations lapse on the constructive
fraudulent conveyance claims in December 2010, which meant that
individual creditors could bring claims under state law, arguably beyond the
reach of the Section 546(e) safe harbor.
In March 2011 creditors sought authority from the bankruptcy court to bring
state law fraudulent conveyance actions.
25
Tribune Co. (cont’d)
Several parties objected to the state law fraudulent conveyance actions arguing that,
among other things:
– the debtor has exclusive authority to pursue the claims; and
– the prohibition on pursuing avoidance of transfers subject to Section 546(e) has preempted
state law and cannot be avoided by pursuing the claims in state court instead of bankruptcy
court.
In April 2011, the bankruptcy court issued an order allowing noteholders to file their
avoidance actions in state court, stating:
– “Because no state law constructive fraudulent conveyance claims against shareholders
whose stock was redeemed or purchased in connection with the [LBO] were commenced by
or on behalf of the Debtors’ estates before the expiration of the applicable statute of
limitations under 11 U.S.C. § 546(a), the Debtors’ creditors have regained the right, if any, to
prosecute their respective state law constructive fraudulent conveyance claims against [the
shareholders] to recover stock redemption/purchase payments made to such shareholders in
connection with the LBO.”
– The bankruptcy court, however, specifically stated that it was making no finding regarding the
standing of the noteholders or any creditors to assert the state fraudulent conveyance claims
or whether such claims were preempted or otherwise impacted by Section 546(e).
26
19. Tribune Co. (cont’d)
Approximately 1,700 individual defendants have been named in the state
lawsuits, including i tit ti
l it i l di institutions and i di id l who sold more th $75 000
d individuals h ld than $75,000
worth of stock. Junior noteholders have also asserted “class allegations”
intended to include all other shareholders.
In all, 33,000 to 35,000 investors are potentially liable for money they
received in 2007 when the company went private.
On December 20, 2011 the U.S. Judicial Panel on Multidistrict Litigation
consolidated 44 fraudulent conveyance suits that had been filed in 21 states
in the U.S. District Court for the Southern District of New York.
However, the consolidated cases were stayed due to Tribune’s bankruptcy
proceedings pending further order of the Bankruptcy Court for the District of
Delaware or the Southern District of New York.
The Tribune case differs from many other fraudulent conveyance cases
because it includes a number of large deep-pocketed shareholders who
have sold billions of dollars worth of stock in the deal.
27
Lyondell Chemical Co.
Lyondell Chemical Company merged with Basell AF S.C.A. in July
2007, creating one of the world’s largest polymers, petrochemicals
and fuel companies.
Basell was an international chemicals company controlled by
Leonard Blavatnik. Over a few years, Blavatnik made several offers
for Lyondell’s shares. In May 2007, Blavatnik acquired 21 million
shares of Lyondell stock and disclosed in his SEC filing that he
might seek to acquire of all Lyondell’s outstanding stock.
In July 2007, Basell agreed to purchase Lyondell in an LBO for $48
per share. As a result of the LBO, Lyondell shareholders received
$12.5 billion.
In January 2009, Lyondell and certain affiliates and subsidiaries filed
for Chapter 11 protection.
28
20. Lyondell Chemical Co. (cont’d)
In July 2009, the Creditors Committee filed a fraudulent conveyance
lawsuit against Lyondell and its financing parties, among others,
alleging that at the time of the merger (i) Lyondell was insolvent
because the stated value of its liabilities exceeded the fair value of
its assets; (ii) Lyondell was insufficiently capitalized to fund its
operations through a downturn; and (iii) the bankruptcy was
foreseeable. In the same action, the Creditors Committee sued
Barclays Global Investors, N.A. individually and as class
representative of the Lyondell shareholders.
shareholders
In a settlement approved by the bankruptcy court in March 2010, the
Creditors Committee settled with the LBO lenders for $450 million.
29
Lyondell Chemical Co. (cont’d)
In April 2010, the bankruptcy court confirmed a plan of
reorganization for Lyondell.
The Creditors Committee then amended its complaint and removed
the claim against the shareholder class. A creditor trust was created
to litigate state law avoidance actions against the former Lyondell
shareholders.
In October 2010, the trustee of the creditor trust filed a lawsuit
against former Lyondell shareholders, asserting only state-law
g y , g y
fraudulent conveyance claims in the Supreme Court of the State of
New York.
In December 2010, the case was referred to the United States
Bankruptcy Court for the Southern District of New York, which is
administering the Lyondell bankruptcy case.
30
21. Lyondell Chemical Co. (cont’d)
Since January 2011, the shareholders have filed numerous motions to dismiss and
related joinders arguing in part that the creditor trust may not make an end run
joinders, part,
around the safe harbor of Section 546(e) of the Bankruptcy Code.
– Shareholders have argued that the creditor trust’s claims are preempted by the Bankruptcy
Code.
– The creditor trust has countered that, although creditors may not prosecute fraudulent
transfer claims against nondebtors as long as the trustee retains standing to do so, the
bankruptcy case does not relieve a transferee’s liability to such creditors. The creditor trust
asserted that these causes of action could revert to the creditors once relinquished by the
trustee, through abandonment, expiration of the automatic stay of Section 362 of the
Bankruptcy Code or otherwise.
– The creditor trust has also taken the position that the language, context and legislative
history of Section 546(e) indicate that Congress intended to protect financial markets only
from the sweeping avoidance powers of the bankruptcy trustee and not the independent
state law claims of creditors.
– The court has not yet ruled on the motions to dismiss.
31
Consequences of Fraudulent Conveyance Suits
Markets that depend on the finality of a settled
p y
transaction can be disrupted.
Investors may not be able to properly assess the risks of
participating in a leveraged buyout.
32
22. Questions?
Contact:
Grant Vingoe
+1 212.715.1130
Grant.Vingoe@aporter.com
Michael L. Bernstein
+1 202.942.5577
Michael.Bernstein@aporter.com
Michael Bernstein@aporter com
Stewart D. Aaron
+1 212.715.1114
Stewart.Aaron@aporter.com
33
24. D. Grant Vingoe
Partner Contact Information
Grant.Vingoe@aporter.com
tel: +1 212.715.1130
D. Grant Vingoe is a partner in the New
fax: +1 212.715.1399
York office of Arnold Porter LLP. He
concentrates his practice in cross-border 399 Park Avenue
securities transactions and financial New York, NY 10022-4690
services regulation. Mr. Vingoe has been
deeply involved in regulatory policy Practice Areas
matters for the Canadian securities industry. He has represented Corporate and Securities
numerous non-US issuers and underwriters in US public Financial Services
offerings and private placements. He has established many Education
financial services affiliates for non-US banks and brokerage LLM, New York University
firms. He also advises these firms on ongoing compliance, School of Law, 1984
governance, and risk management issues. He has also advised JD, Osgoode Hall Law School
senior management of International stock exchanges and self- of York University, 1981
regulatory organizations concerning regulatory policy matters Admissions
and cross-border business initiatives. Additionally, he has New York
received the ICD.D director certification from the Institute of Ontario, Canada
Corporate Directors.
Representative Matters
Advises international financial services trade
organizations on US and cross-border developments
affecting their members.
Established financial services affiliates of non-US banks
and brokerage firms and counsels them on US regulatory
compliance, corporate finance, and risk management
issues.
Advises non-US securities market participants on the
impact of US regulatory developments on their
operations and competitive positions.
Represents Canadian and other non-US issuers and
underwriters in inbound corporate finance transactions,
including Rule 144A and Regulation D private placements
and offerings effected under the Multi-jurisdictional
Disclosure System.
Represents participants in cross-border financial services
arnoldporter.com
25. mergers and acquisitions transactions.
Conducts governance reviews for securities self-regulatory organizations.
Conducts internal investigations involving securities market activities.
Public policy advice concerning financial services regulation.
Professional and Community Activities
Professional Activity
Guest lecturer on US securities law in the Osgoode Hall Law School LL.M Program
Investment Industry Regulatory Organization of Canada (IIROC), Canada's investment
industry self-regulatory organization
Independent director
Chair, Governance Committee
Previously an independent director and chair of the Governance Committee of Market
Regulation Services Inc., the self-regulatory organization for trading activities on
Canadian marketplaces, later merged with IIROC.
Appointed in 1999 to a term with the Ontario Securities Commission Securities Advisory
Committee
Member, Securities Industry and Financial Markets Association, Compliance Legal
Society
Member, Ontario Bar Association, Securities Law Subcommittee
Member, Atlantic Council of Canada
Member, Institute of Corporate Directors
Member, National Society of Compliance Professionals
Community Activity
Director and Chair of the Human Resources and Strategy Committee, Reach the World, a
New York-based nonprofit that uses a mixture of computer-based and real time
connections with sponsored travelers and class visits to enhance elementary and
secondary student knowledge of the world beyond their neighborhoods.
Presentations
D. Grant Vingoe. Fundamentals of U.S. Securities Law-2011: The Public Offering Process
Osgoode Professional Development, Toronto, ON, June 7, 2011.
D. Grant Vingoe
Arnold Porter LLP 2
26. D. Grant Vingoe. Cross Border Issues Financial Administrators Section Annual
Conference 2010, Investment Industry Regulatory Organization of Canada, Toronto, ON,
September 24, 2010.
Kevin F. Barnard and D. Grant Vingoe. Financial Regulatory Reform Osgoode
Professional Development, Toronto, ON, October 19, 2009.
D. Grant Vingoe. Regulatory and Industry Differences Between Canada and the US
National Society of Compliance Professionals Annual Seminar, Philadelphia, PA, October
7, 2009.
D. Grant Vingoe. Fundamentals of US Securities Law-2009 Osgoode Professional
Development, Toronto, ON, April 21, 2009.
D. Grant Vingoe. The Canadian Institute's 19th Annual Securities Superconference The
Canadian Institute, Toronto, ON, February 17-18, 2009.
Advisories
International Implications of New FINRA Registration Rules for Securities Back Office
Personnel. Aug. 2011.
Private Fund Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection
Act. Jul. 2010.
SEC Adopts Restrictions on Short Sales. Mar. 2010.
SEC Seeks Comments on Alternative Short Sale Rule. Aug. 2009.
SEC Announces Additional Steps to Prevent Abusive Short Sales and Increase Market
Transparency. Jul. 2009.
FINRA Proposes Registration Category for Investment Banking Professionals. Mar. 2009.
SEC Adopts Significant Amendments to the Foreign Private Issuer Exemption from
Securities Exchange Act Registration. Oct. 2008.
SEC Proposes to Ease Requirements on Foreign Broker-Dealers. Jul. 2008.
SEC Answers Questions Relating to Rule 15a-6 and Regulation Analyst Certification.
Jun. 2005.
Multimedia
Alan Avery, Kevin F. Barnard, Michael F. Griffin, Kathleen Scott and D. Grant Vingoe.
WEBCAST: Implications of the Dodd-Frank Act for Non-US Banking Organizations,
Securities Firms, and Other Financial Companies December 02, 2010. (also available as a
Podcast)
D. Grant Vingoe
Arnold Porter LLP 3
27. Michael L. Bernstein
Partner Contact Information
Michael.Bernstein@aporter.com
tel: +1 202.942.5577
Michael Bernstein is chair of the Firm’s
fax: +1 202.942.5999
national bankruptcy and corporate
restructuring practice. He is consistently 555 Twelfth Street, NW
distinguished as one of the top bankruptcy Washington, DC 20004-1206
and restructuring lawyers in Washington,
DC by Chambers USA Leading Lawyers Practice Areas
for Business, which praises him as a creative and loyal Bankruptcy and Corporate
Restructuring (practice chair)
advocate whose knowledge of the Bankruptcy Code makes him
Financial Services
incredible at getting the best results for his clients’’ (2011), an
outstanding lawyer [with] fantastic analytical skills and Education
intellectual prowess’’ (2009), for being ‘‘creative and practical JD, Northwestern University
(2008), noting that he ‘‘completely understands [his client’s] School of Law, 1989
business’’ (2007), and has ‘‘an ability to assess risks in a BA, Brandeis University, 1986
meaningful way and address the tribunal in a strong and Admissions
tenacious manner’’ (2006). District of Columbia
Supreme Court of the United
He represents secured and unsecured creditors, creditors' States
committees, bondholders, investors, asset purchasers, debtors,
and other parties in a wide variety of bankruptcy and workout
matters, and in related litigation throughout the United States.
He has been involved in large bankruptcy cases, including
Chrysler, Lehman Brothers, US Airways, LandAmerica, TWA,
Adelphia, Asarco, G-1 Holdings, Mirant, Criimi Mae, Enron,
FoxMeyer Drug, Alterra Healthcare Corporation, Fruit of the
Loom and Continental Airlines, as well as many other cases
throughout the United States.
Mr. Bernstein's bankruptcy experience spans many industries,
including telecommunications, energy, real estate, finance,
mining, manufacturing, technology, retail, airline, healthcare,
and pharmaceuticals. His clients have included AOL, American
Capital, American Red Cross, Ardent Communications Creditors'
Committee, Bear Stearns, Boehringer Ingelheim, BBT, Cingular
Wireless, Criimi Mae Creditors' Committee, Dynex Bondholders
Committee, Gate Gourmet, Glaxo, Guinness Import Company,
Health Care REIT, Hilton Worldwide, Lennar Partners, Major
League Baseball, Perseus LLC, Sodexo, Texas Pacific Group, The
George Washington University, and the Washington
Corporations, among others.
arnoldporter.com
28. Mr. Bernstein is a fellow of the American College of Bankruptcy and a member of the Board of
Directors of the American Bankruptcy Institute. He has co-authored two books and has published
many articles on bankruptcy-related topics. He is a frequent lecturer, has been interviewed by
major newspapers and on television and radio, and has been recognized as a leading bankruptcy
lawyer by numerous publications. Mr. Bernstein served as co-chair of the Labor and
Employment Committee of the American Bankruptcy Institute. He has testified before Congress
as an independent expert on the status of collective bargaining agreements, retiree and pension
benefits, and executive compensation in bankruptcy.
Rankings
Washingtonian's Top Lawyers for Bankruptcy
Chambers USA: America's Leading Lawyers for Business for Bankruptcy/Restructuring
Washington, DC Super Lawyers for Bankruptcy Creditor/Debtor Rights, Real Estate, and
Business Litigation
Best Lawyers Washington, DC Bankruptcy and Creditor-Debtor Rights Lawyer of the
Year
The Legal 500 US Leading Lawyer for Bankruptcy
Fellow of the American College of Bankruptcy
Washington Business Journal's Top Washington Lawyers Finalist for Bankruptcy
ABI Publications Award
Euromoney's ‘‘Guide to the World's Leading Insolvency Restructuring Lawyers’’
Professional and Community Activities
Fellow, American College of Bankruptcy
Member, Board of Directors, American Bankruptcy Institute
Member, Advisory Board, ‘‘Views From the Bench’’ program, co-sponsored by
Georgetown University Law School and American Bankruptcy Institute
Master of the Bench, Walter A. Chandler American Inn of Court
Served as co-chair of the Labor and Employment Committee of the American Bankruptcy
Institute
Books
Prof. John Ayer and Michael L. Bernstein. Bankruptcy in Practice (co-author) (4th Ed.
2007).
Michael L. Bernstein
Arnold Porter LLP 2
29. Jonathan Friedland, Michael L. Bernstein, Prof. George Kuney and Prof. John Ayer.
Chapter 11-101 (co-author) 2007.
Michael L. Bernstein. Bankruptcy Workouts Chapter, Small Business Compliance
Advisor (Thompson 1994).
Articles
Michael L. Bernstein and Charles A. Malloy. Bankruptcy Venue Laws May Be Changing
Dow Jones DBR Small Cap Nov. 2011.
Michael L. Bernstein and Rosa J. Evergreen. Labor Issues: What Impact Would the
Protecting Employees and Retirees in Business Bankruptcies Act of 2007 (H.R. 3652)
Have on Chapter 11 Reorganizations? November 2009.
Michael L. Bernstein and Charles A. Malloy. Bankruptcy and the Board NACD-----
-
Directors' Monthly September 2008.
Michael L. Bernstein and Charles A. Malloy. Deepening Insolvency: An Emerging Theory
of Liability Bloomberg Corporate Law Journal Summer 2006 (Volume 1: Issue 3).
Michael L. Bernstein. Chapter 11-201 column -- ongoing monthly column in ABI Journal
on intersection of bankruptcy and other areas of law (2008).
Michael L. Bernstein. Chapter 11-101 column -- monthly column in ABI Journal (2003-
2005).
Michael L. Bernstein and Charles A. Malloy. Master Leases and Cross Default Clauses in
Bankruptcy, Real Estate Finance Journal, Spring 2003.
Presentations
Michael L. Bernstein. Intercreditor Issues: Trends in Tranche Warfare, Mezzanine Lender
Issues, Syndicated Loans and Standing for Certificate Holders Bankruptcy 2011: Views
from the Bench, Georgetown University Law Center, Washington, DC, September 16,
2011.
Michael L. Bernstein. Bankruptcy Practice and the Law of Unintended Consequences: Be
Careful What You Wish For American Bankruptcy Institute 29th Annual Spring Meeting,
National Harbor, MD, April 2, 2011.
Michael L. Bernstein. Intercreditor Issues and Subordinate Financing: Tranche Warfare
Bankruptcy 2010 Views from the Bench, Georgetown University Law Center, Washington,
DC, October 1, 2010.
Michael L. Bernstein. Protecting Employees and Retirees in Business Bankruptcies Act of
2010 Testimony before the US House Committee on the Judiciary, Subcommittee on
Commercial and Administrative Law on proposed legislation to amend certain provisions
of Chapter 11 of the US Bankruptcy Code, May 25, 2010.
Michael L. Bernstein and Susan E. Hendrickson. WMACCA Technology IP Forum:
Treatment of IP in Bankruptcy/Buying IP Assets out of Bankruptcy Arnold Porter LLP,
McLean, VA, May 2010.
Michael L. Bernstein
Arnold Porter LLP 3
30. Michael L. Bernstein. Labor and Employment: Litigating the Section 1113 Dispute ABI
Annual Spring Meeting, May 1, 2010.
Michael L. Bernstein. Chapter 11 at the Crossroads: Does Reorganization Need Reform?
A Symposium on the Past, Present and Future of U.S. Corporate Restructuring (panel on
Labor Issues: Would Reform of Federal Law Employee and Benefits Claims Help or Hurt
Reorganizations?), November 16-17, 2009.
Michael L. Bernstein and Rosa J. Evergreen. Bankruptcy and Restructuring: Navigating
Employment Issues Under the Code Best Practices to Negotiate, Modify and Terminate
Employment Agreements and Benefit Plans, Strafford, August 20, 2009.
Michael L. Bernstein. Advising Emerging Growth Companies in Turbulent Times Panel,
DC Bar, April 28, 2009.
Michael L. Bernstein. Nuts and Bolts of Bankruptcy ABI Annual Spring Meeting (panel,
April 2010 and prior years).
Michael L. Bernstein. Views From the Bench Georgetown University Law Center (panel
on real estate-homebuilders, commercial and hotels), September 12, 2008.
Michael L. Bernstein. Understanding Today's Capital Markets 4th Annual Mid-Atlantic
Bankruptcy Workshop, American Bankruptcy Institute, Chesapeake Bay, Cambridge, MD,
July 31-August 2, 2008.
Michael L. Bernstein. Protecting Employees and Retirees in Business Bankruptcies Act of
2007 Testimony before the US House Committee on the Judiciary, Subcommittee on
Commercial and Administrative Law on proposed legislation to amend certain provisions
of Chapter 11 of the US Bankruptcy Code, June 5, 2008.
Michael L. Bernstein. Twelfth Annual Great Debates (Whether Congress Should Amend
the Bankruptcy Code to Eliminate All Forms of Incentive, Bonus or Similar Compensation
for Senior Executives and Other Insiders), ABI Annual Spring Meeting, April 2008.
Michael L. Bernstein. Views From the Bench Georgetown University Law School (panel
on reclamation and other trade vendor issues), October 2007.
Michael L. Bernstein. American Workers in Crisis: Does the Chapter 11 Business
Bankruptcy Law Treat Employees and Retirees Fairly? Testimony before the US House
Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on
the status of collective bargaining agreements and employee benefits in Chapter 11
proceedings, September 6, 2007.
Michael L. Bernstein. ABI Mid-Atlantic Program (panel on union, pension and labor
issues in bankruptcy), August 2007.
Michael L. Bernstein. Economic Paradox - Healthy Economy, Sick Healthcare Provider
Sector - 2007 Outlook Thoughts on Avoiding or Dealing with Operating Distress
Turnaround Management Association, January 2007.
Michael L. Bernstein. Labor Issues in Bankruptcy ABI Southeast Regional Meeting (Fall
2005).
Michael L. Bernstein
Arnold Porter LLP 4
31. Michael L. Bernstein. Workout, Bankruptcy and Collateral Liquidation for Lenders
Lorman (Summer 2003).
Michael L. Bernstein. Dealing with Insolvent and Bankrupt Companies AOL Time Warner
in-house CLE (Spring 2002).
Advisories
Are You Prepared? A Compendium of Advisories on the Dodd-Frank Act. Jul. 2010.
Dodd-Frank Act Creates New Resolution Process for Systemically Significant
Institutions. Jul. 2010.
Purchasing Real Estate and Loan Assets from the FDIC. Oct. 2008.
Michael L. Bernstein
Arnold Porter LLP 5
32. Stewart D. Aaron
Partner Contact Information
Stewart.Aaron@aporter.com
tel: +1 212.715.1114
Stewart Aaron heads the firm's New York
fax: +1 212.715.1399
office. He practices commercial litigation
with an emphasis on securities law 399 Park Avenue
matters. For over 25 years, Mr. Aaron's New York, NY 10022-4690
practice has involved the representation of
clients in litigated matters in state and Practice Areas
federal courts, and before regulatory bodies and self regulatory Securities Enforcement and
Litigation
organizations.
Litigation
Appellate and Supreme Court
Mr. Aaron currently serves as President of the 9000-member
New York County Lawyers' Association. He is a frequent author Education
and lecturer on legal topics, generally in the areas of securities, JD, summa cum laude,
commercial, and prisoners' civil rights litigation. Syracuse University College of
Law, 1983
BS, Cornell University, 1980
Representative Matters
Admissions
Fairfax Financial Holdings Limited v. S.A.C. Capital New York
Supreme Court of the United
Management, LLC, et al., Docket No. L-2032-06 (N.J.
States
Superior Court, Morris County). Successfully
US Courts of Appeals for the
represented hedge fund defendant against, among Second, Fourth, and Ninth
others, claims alleging violations of the New Jersey Circuits
Racketeer Influenced and Corrupt Organization Act US Tax Court
related to short selling of Fairfax stock.
In re Initial Public Offering Securities Litigation, 21 MC 92
(SAS). Represented underwriter in 67 of 310 consolidated
actions in the US District Court for the Southern District
of New York alleging that IPO underwriters, IPO issuers
and individual officers and directors of issuing
companies engaged in scheme to inflate the issuers'
share price, in violation of the federal securities laws.
Scott-Macon Securities, Inc. v. Zoltek Companies, Inc.,
2005 WL 1138476 (S.D.N.Y. 2005), aff'd in part, 2007 WL
2914873 (2d Cir. 2007). Represented plaintiff placement
agent in connection with action for breach of agreement
pursuant to which plaintiff was to act as exclusive
placement agent in connection with placement of equity
and/or debt securities of defendant Zoltek. Obtained
partial summary judgment as to liability on behalf of
arnoldporter.com
33. plaintiff, and judgment in favor of plaintiff after trial awarding fees and warrants totalling
in excess of US$6 million. Affirmed in substantial part by Second Circuit, and remanded
for consideration of whether fees and warrants are due on two take-downs of fifth and
final placement.
In re Mutual Funds Investment Litigation, 384 F. Supp. 2d 845 (D. Md. 2005). Represented
mutual fund management company in class and derivative actions involving allegations
of market timing and late trading.
Waldock v. M.J. Select Global, Ltd., 2005 WL 2737502 (N.D. Ill. 2005). Represented hedge
fund and its principals in securities fraud lawsuit. Obtained dismissal with prejudice of all
claims against them.
Keeney v. Larkin, 306 F. Supp. 2d 522 (D. Md. 2003), aff'd, Fed. Sec. L. Rep. 92,868 (4th
Cir. 2004). Obtained dismissal of securities fraud claims against Chief Executive Officer
and Chief Financial Officer. Affirmed by Fourth Circuit.
Decker v. Yorkton Securities, Inc., 106 Cal. App. 4th 1315 (Ct. App., 1st Dist. 2003).
Affirming summary judgment in favor of broker that transferred stolen stock certificates;
in deciding issue of first impression under California Commercial Code, appellate court
held that, in order to hold broker liable, plaintiff must show that broker had subjective
knowledge of a significant probability of an adverse claim.
JPMorgan Chase Bank v. LibertyMutual, et al., 189 F. Supp. 2d 24 (S.D.N.Y. 2002).
Represented surety company in this Enron-related litigation during month-long trial;
favorably settled prior to jury deliberations.
Rankings
Chambers USA: America's Leading Lawyers for Business 2009-2011 for Litigation:
Securities
New York Super Lawyers 2006-2011 for Business Litigation and Securities Litigation
Professional and Community Activities
President, New York County Lawyers' Association (NYCLA)
Member, Board of Directors, NYCLA Foundation
Member, NYCLA Executive Committee
Past Chair, NYCLA Committee on the Federal Courts
Member, NYCLA Task Force on Judicial Independence
Past Chair, Litigation Committee, New York City Bar
Member, Entertainment Committee, New York City Bar
Past Member, House of Delegates, New York State Bar Association (NYSBA)
Stewart D. Aaron
Arnold Porter LLP 2
34. Member, NYSBA Nominating Committee
Past Chair, NYSBA Committee on Federal Legislation
Member, Federal Bar Council
Member, Lawyers Committee, National Center for State Courts
Member, New York American Inn of Court
Fellow, Litigation Counsel of America
Fellow, American Bar Foundation
Fellow, New York Bar Foundation
Mediator, US District Court for the Southern District of New York
Books
Stewart D. Aaron. Ethical Issues in Commercial Cases Author of Chapter 58 in
Commercial Litigation in New York State Courts, Second Edition (Robert L. Haig ed.)
(West NYCLA 2009).
Articles
Stewart D. Aaron. Reflections on 9/11 and the Law New York Law Journal Sep. 2011.
Stewart D. Aaron and Cara Peterman. Rule 10b-5 Liability of Secondary Actors: Second
Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific Investment
Management Co. v. Mayer Brown Bloomberg's Securities Law Report, Vol. 4, No. 26,
July 2010.
Stewart D. Aaron and Cara M. Peterman. Rule 10b-5 Liability of Secondary Actors:
Second Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific
Investment Management Co. v. Mayer Brown Bloomberg Law Reports, Vol. 4, No. 26,
July 2010.
Stewart D. Aaron and Lauren R. Bittman. Proposed Investor Protection Act Could Clarify
Reach of U.S. Securities Laws March 2010.
Stewart D. Aaron, Marcus A. Asner and Yue-Han Chow. Second Circuit Rules Computer
Hacking May Be Deceptive Under Section 10(b) of the Securities Exchange Act of 1934
Privacy Data Security Law Journal, Octobe 1, 2009.
Stewart D. Aaron and Laura Weiss Tejeda. The Realities and Economics of Civil Litigation
in Federal Court and Its Impact on Litigation Management Bloomberg's Litigation Law
Report, Vol. 2, No. 25, June 23, 2008.
Stewart D. Aaron and Susan L. Shin. Considerations Surrounding Motions in Limine
New York Law Journal April 2, 2007.
Stewart D. Aaron
Arnold Porter LLP 3
35. Stewart D. Aaron. Inside The Minds: Securities Litigation Aspatore Books, Publishers of
C-Level Business Intelligence, October 2005.
Advisories
The Second Circuit Clarifies the US Supreme Court's Ruling on the Extraterritorial Reach
of US Securities Laws. Mar. 2012.
US Supreme Court Limits Extraterritorial Reach of the US Securities Laws; Congress
Acts. Jul. 2010.
Pacific Investment Mgmt. Co. v. Mayer Brown: The Second Circuit Rejects the Creator
Theory and Adopts the Attribution Requirement For 10b-5 Liability of Secondary
Actors. May. 2010.
Supreme Court to Consider Whether Foreign-Cubed Securities Fraud Cases May Be
Heard in US Courts. Apr. 2010.
First Circuit Rejects Attempt to Impose Rule 10b-5 Primary Liability for Implied
Statements. Mar. 2010.
SEC Announces New Guidance For Cooperation with Investigations. Jan. 2010.
US Supreme Court Grants Certiorari to Review Foreign-Cubed Securities Transaction
Case Despite Solicitor General's Opposing View. Dec. 2009.
The Eleventh Circuit Finds Subject Matter Jurisdiction in Foreign-Cubed Securities
Lawsuit. Sep. 2009.
Fourth Circuit Reinstates Complaint But Maintains Strict PSLRA Scienter Pleading
Standard. Aug. 2009.
Second Circuit: SEC May Investigate and Regulate Certain Forms of Computer Hacking.
Jul. 2009.
Fourth Circuit Adopts Strict Standard for Pleading Scienter in Securities Fraud. Jan.
2009.
Second Circuit Rejects Bar on Foreign-Cubed Securities Lawsuits. Oct. 2008.
In re: Initial Public Offering Securities Litigation. Dec. 2006.
The Supreme Court Toughens the Requirements for Private Securities Fraud Claims.
Apr. 2005.
Stewart D. Aaron
Arnold Porter LLP 4
37. BANKRUPTCY AND CORPORATE RESTRUCTURING
Arnold Porter LLP's Bankruptcy and Corporate Restructuring practice represents a diverse
client base, including corporate debtors, investors and asset purchasers, committees,
bondholders, secured and unsecured creditors, parties dealing with distressed businesses,
officers and directors, and other interested parties in corporate restructurings, bankruptcy
proceedings, and related litigation throughout the United States.
Our firm and its bankruptcy partners have been recognized by numerous publications as being
among the leading bankruptcy lawyers in the United States. Bankruptcy Court Decisions-Weekly
News Comment named Arnold Porter one of 12 law firms in the United States providing
exemplary service to corporate bankruptcy clients. We have repeatedly been recognized in
Chambers USA: America's Leading Business Lawyers as a leading bankruptcy and restructuring
practice. Our lawyers have also appeared in The Best Lawyers in America, Lawdragon 500, Legal
500 US: Corporate and Finance, Super Lawyers, Guide to the World's Leading Insolvency and
Restructuring Lawyers, and other publications. Our bankruptcy partners are frequent lecturers,
published authors, and widely recognized professionals in their field.
Our bankruptcy lawyers are experienced litigators. We appear in trial and appellate courts
throughout the United States and are often involved in precedent-setting cases. Our
transactional experience is equally extensive. Our Bankruptcy and Corporate Restructuring
group has taken the lead in a number of sophisticated transactions in some of the country's
largest bankruptcy cases. We have also negotiated and structured successful out-of-court
restructurings, helped clients acquire distressed assets or businesses, and advised clients on
their dealings with troubled companies.
Our practice includes full-time bankruptcy professionals as well as attorneys from other practice
areas, such as litigation, corporate and securities, finance, tax, environmental, antitrust, real
estate, intellectual property, and government contracts, who assist with particular issues on an
as-needed basis. As bankruptcy issues rarely arise in a vacuum, this multidisciplinary
coordination is particularly valuable to our clients. Readily available substantive experience in
related areas of the law is often essential to efficient and effective representation.
Although we have a national practice and are often involved in high profile, complex cases, we
also can (and regularly do) handle smaller local and regional bankruptcy matters in an efficient,
cost-conscious way. Our lawyers staff matters leanly and are mindful of the economic pressures
under which many of our clients operate. We provide the same standard of excellence whether
the case is a routine bankruptcy litigation matter, a large international insolvency, or a major
corporate reorganization.
arnoldporter.com
38. Bankruptcy Advice and Counseling
In these challenging economic times, our clients often face concerns about the financial strength
and viability of parties they are doing business with-----their suppliers, customers, joint venture
-
partners, lenders, borrowers, licensors, licensees, or other contract counterparties. Many of our
clients recognize that they are better off considering these issues before a default or a
bankruptcy occurs. They are interested in understanding their rights in the event of a
counterparty's insolvency or bankruptcy, and maximizing their protections through the
structuring and documentation of their transactions. We have been able to help our clients-----on
-
a cost-effective basis-----to understand their rights and to maximize their protections. We often
-
come up with creative solutions to address bankruptcy and insolvency risks. This sort of
preventive medicine can add enormous value-----helping to avoid significant expense and
-
business disruption.
Large Reorganizations
We play a prominent role in many of the country’s largest corporate reorganizations. Companies
involved in these cases often turn to us because we are able to mobilize a team of experienced
lawyers quickly, providing bankruptcy and cross-disciplinary experience. For example, we have
represented major airlines in their bankruptcy reorganizations; debtors and other parties in
cross-border insolvency proceedings; investors in billion-dollar-plus bankruptcy investments;
major parties in some of the country’s largest mass tort and environmental bankruptcies;
creditors’ committees in large and complex chapter 11 cases; broker-dealers and customers in
complex securities industry liquidations; banks and bank holding companies in financial
institution reorganizations; parties engaged in litigation with corporate debtors; and a wide
variety of other parties in large bankruptcy and reorganization matters.
Corporate Debtors
Arnold Porter LLP’s restructuring lawyers combine their experience in bankruptcy law with the
capabilities of the firm’s lawyers in other practice areas to address the many corporate, tax,
environmental, real estate, litigation, antitrust, and regulatory issues that a company faces when
operating in chapter 11.
In 2009, we guided Quebecor World, the second largest commercial printer in North America,
through a cross-border restructuring that resulted in confirmation of a successful stand-alone
plan of reorganization only 18 months after the company filed chapter 11. We were also lead
bankruptcy counsel to US Airways in its second chapter 11 proceeding, obtaining confirmation
of its successful plan of reorganization just one year after the commencement of its chapter 11
case and culminating in its successful merger with America West. We also represented the
largest South American cable company in its successful cross-border restructuring, with formal
chapter 11 proceedings in the United States and simultaneous consensual out-of-court
restructurings of its subsidiary companies in six South American countries.
In other cases, we have served as special counsel to chapter 11 debtors. For example, we served
as special environmental/bankruptcy counsel to a roofing company facing hundreds of millions
of dollars of environmental claims and government cleanup orders that threatened the success
of its reorganization effort; acted as special bankruptcy/labor counsel to an airline in
groundbreaking trial and appellate litigation regarding a debtor’s right to modify its collective
bargaining agreements and a union’s right to strike; were retained as special
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 2
39. bankruptcy/workers’ compensation counsel to a national retail chain in its successful
reorganization; and have represented several debtors as special intellectual property counsel,
addressing the unique issues involving the status of IP in bankruptcy. In each of these cases, our
clients benefitted from our combined experience in bankruptcy and other substantive areas of
the law.
In addition to our representation of corporate debtors in chapter 11 proceedings, we have
substantial experience in advising corporations and other business entities regarding
alternatives to bankruptcy, including state-law mechanisms and out-of-court workouts. We have
frequently helped clients avoid bankruptcy and achieve consensual, out-of-court restructurings,
which may be faster and less costly than a chapter 11 proceeding.
Finally, we have been called upon to counsel boards and independent directors with respect to
their duties as directors of troubled companies, both before and after a bankruptcy filing.
Out-of-Court Restructurings
It is sometimes said that the mark of a good bankruptcy lawyer is not how many bankruptcy
cases she files, but instead how many companies she is able to help keep out of bankruptcy. We
have deep experience representing companies and their lenders in negotiating out-of-court
restructuring agreements. In many cases, these agreements enable the parties to achieve their
objectives quickly, and without the risks and expense of a chapter 11 proceeding. Our
bankruptcy lawyers understand corporate finance. Where necessary, we are also able to call
upon our colleagues with particular experience in securities law, debt finance, mergers and
acquisitions, and tax law-----many of whom have significant experience working in the
-
restructuring arena-----to assist in these matters.
-
Our clients are all over the capital structure-----from borrowers and equity investors, to senior
-
lenders, second lien lenders, mezzanine lenders, unsecured lenders, bondholders, and other
constituencies. We are familiar with the complex, multi-tier structures that have become
increasingly common. We are sensitive not only to borrower versus lender issues, but also to
the complex intercreditor issues that must be faced in the typical corporate restructuring.
Real Estate Bankruptcy and Restructuring Matters
We regularly represent developers, lenders, landlords, investors, and other parties in real estate-
related bankruptcies, workouts, and restructurings. We understand the business of real estate, as
well as the legal issues, and we work closely with our colleagues in the firm's highly regarded
real estate practice, several of whom also have substantial bankruptcy experience. This enables
us to achieve our clients' objectives with creative, expeditious, and cost-effective solutions.
Our bankruptcy lawyers regularly represent secured lenders in enforcing their remedies,
including through foreclosure or receivership and in bankruptcy court. In single-asset real estate
cases, we have had success in obtaining relief from the automatic stay, defeating cramdown
plans, confirming creditors' plans, pursuing collection litigation, and defending lender liability
suits. We have also negotiated creative, consensual resolutions, quickly and with relatively little
expense, in many single-asset cases.
We also represent real estate developers, owners and investors in resolving issues with their
lenders. Often we are able to achieve the desired results without the need for a bankruptcy filing.
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 3
40. However, where an out-of-court strategy is not workable, we will help achieve the necessary
restructuring in a chapter 11 proceeding.
We also represent investors in acquiring real estate assets from chapter 11 proceedings, and in
purchasing debt secured by real estate assets. We have particular experience in the unique
issues involving hotel debtors and have represented creditors, owners, and investors in a wide
variety of bankruptcy and debt restructuring matters involving hotels.
We also regularly represent landlords facing the bankruptcy or insolvency of their tenants or
seeking to structure their lease transactions in a way that will minimize their risk of an
insolvency or bankruptcy.
In addition to our extensive experience in single-asset bankruptcy cases, we also play a
significant role in some of the largest and most complex real estate-related bankruptcy cases in
the country. Many of these matters involve complex financing structures, novel legal issues, and
hundreds of millions of dollars in debt.
Creditors' and Equity Committees
We represent creditors’ and equity committees in a variety of bankruptcy cases, from medium-
sized local cases to mega-cases involving hundreds of millions of dollars of debt, across all types
of industries. Our lawyers also represent ad hoc committees in workouts and out-of-court
restructurings. We have had success in reconciling the diverse interests of committee members
and in structuring negotiated solutions that avoid litigation and expedite recoveries. Where a
negotiated solution is not possible, we have the litigation capability to pursue creditors’
remedies aggressively. The breadth of our practice allows committees to rely upon us not only
for bankruptcy advice, but also for advice in other substantive areas of the law.
Investors and Asset Purchasers
Our lawyers regularly represent clients interested in purchasing assets, business units, and
entire operating businesses out of bankruptcy. Our experience ranges from straightforward
single-asset acquisitions to complex billion-dollar-plus mergers and acquisition transactions. We
help clients structure investments to minimize costly bidding wars, obtain protections such as
break-up and topping fees, minimize the risks of successor liability, defer and/or reduce tax
liabilities, and otherwise take advantage of the procedural and substantive protections offered
by bankruptcy. Working with our corporate and tax lawyers where appropriate, we are able to
handle all aspects of distressed MA transactions. We also represent parties buying and selling
distressed debt and bankruptcy claims.
Secured Lenders
We regularly represent secured lenders in bankruptcy cases, state law insolvency proceedings,
and non-bankruptcy restructurings and workouts. We have also successfully defended secured
lenders in litigation brought by debtors, trustees, and committees, including claims for equitable
subordination, recharacterization, deepening insolvency, breach of duty, and other lender
liability theories, as well as efforts to challenge liens or prepetition payments.
We have also represented debtor-in-possession lenders in structuring, documenting and
obtaining court approval of their loans.
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 4
41. We represent both senior as well as subordinated secured lenders. We have particular
experience with issues concerning second lien, tranche B, and mezzanine financing, and we
advise both senior and junior lenders on intercreditor issues, restructurings, rights in
bankruptcy, and related issues.
Unsecured and Trade Creditors
We represent trade creditors in some of the largest bankruptcy cases, as well as in smaller cases
throughout the country. Our lawyers have represented unsecured creditors with claims as large
as hundreds of millions of dollars. Our lawyers advise clients on reducing or altering trade
credit;planning for a customer’s bankruptcy; filing and pursuing claims against debtors; potential
recoveries from non-debtor parties;rights of reclamation, set-off, and recoupment; and other
issues faced by trade creditors. We also represent clients in selling bankruptcy claims, as a way
to achieve a quick and certain recovery. We represent unsecured creditors in a wide variety of
litigation, including preference and fraudulent conveyance matters.
Environmental Matters
We have substantial experience in representing the interests of clients impacted by the
intersection of environmental law and bankruptcy law and have been involved in some of the
most prominent cases in this area. We have represented both debtors and creditors in this
regard, and have addressed a broad array of issues, such as the scope of the automatic stay and
bankruptcy discharge in relation to environmental claims, as well as the liquidation and
estimation of complex environmental claims in the bankruptcy context. Our work in this area
benefits from the fact that we have attorneys who practice in both the environmental and
bankruptcy areas. Moreover, we can, as necessary, access the extensive resources of our
nationally-recognized environmental practice.
Structured Finance
Bankruptcy lawyers play a vital role in structuring corporate and financial transactions to
anticipate and avoid bankruptcy risks. Much of our work involves helping clients structure
transactions to avoid or minimize the perils of bankruptcy or state insolvency laws.
We work closely with our corporate, tax, and finance colleagues in structuring off-balance-sheet
financing transactions, employing multitier structures and otherwise crafting the complex
structures required, and providing the requisite legal opinions that are the predicate for such
transactions. Moreover, we have considerable experience in the structuring and documentation
of securitized transactions in the areas of receivables financings, structured financing of financial
products, real estate financing, and other structured finance transactions.
Bankruptcy Litigation
Bankruptcy litigation is often fast-moving, and significant cases can proceed from filing through
trial in a matter of weeks or months. The pace of these cases, and the complexity of the legal
issues, demands trial lawyers who have a sophisticated understanding of bankruptcy law (both
procedural and substantive) and can quickly get up to speed in order to effectively try a case.
Our experience includes bankruptcy litigation on behalf of debtors, creditors, and other parties.
The firm’s bankruptcy litigators have represented clients in, among other things: avoidance
actions (including preference and fraudulent conveyance claims), claims against the officers and
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 5
42. directors of the debtors (including breach of fiduciary duty claims), litigation relating to section
363 asset sales, claims under the Worker Adjustment and Retraining Notification Act (WARN)
Act, lender liability issues, successor and alter ego liability, recharacterization and equitable
subordination claims, cash collateral and debtor-in-possession financing litigation, and litigation
regarding the confirmation of plans of reorganization. We have also handled environmental,
intellectual property and antitrust litigation in bankruptcy court proceedings. Several of our
litigators have particular experience in emergency litigation.
Arnold Porter bankruptcy litigators have been involved in some of the most prominent cases
in the country, including Adelphi, TWA, and Chrysler.
Appellate Practice
Clients often turn to us for counsel in bankruptcy appellate matters, particularly where
considerable sums of money or novel or important legal issues are at stake. Arnold Porter LLP
has had a reputation since its founding as a firm with a highly respected appellate practice, and
the bankruptcy group continues that tradition. Our group includes highly regarded appellate and
Supreme Court advocates.
Airline Industry
Over the past 25 years we have played a significant role in nearly every major airline bankruptcy
or restructuring, including those involving US Airways, TWA, Northwest, United, Continental,
Delta, and many others. In these airline bankruptcy cases, we have represented debtors, major
creditors, suppliers, investors, and other parties.
Banking and Financial Institutions
Our bankruptcy lawyers regularly partner with lawyers in our highly regarded financial services
group to counsel banks and other financial institutions, officers and directors of such
institutions, and investors in, and creditors of, such institutions, on issues that arise when banks
(or bank holding companies) and other financial institutions encounter bankruptcy, insolvency,
or receivership situations. Our firm's combined experience in financial institutions regulation
and bankruptcy law enables us to provide effective representation in these matters.
Broker-Dealer / Securities Industry
We have substantial experience in addressing client needs at the intersection of bankruptcy law
and the securities and derivatives industry. Our bankruptcy lawyers represent creditors,
customers and broker-dealers in SIPA proceedings and represent individual customers, large
financial institutions, creditors, and committees in significant bankruptcy and insolvency
proceedings involving broker-dealers or other securities and derivatives market participants. We
also represent hedge funds and private equity funds in their creditor, lender, and investor
activities in the bankruptcy arena and counsel foreign exchanges and clearing houses on the
bankruptcy implications of their US activities. Where appropriate, we call upon the experience of
our colleagues in the securities regulatory practice, including lawyers who have held senior
positions at the Securities and Exchange Commission and the Commodity Futures Trading
Commission.
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 6
43. Healthcare Industry
Bankruptcy and insolvency matters in the healthcare industry present unique business and legal
issues. We represent hospitals and healthcare facility operators; lenders and lessors of hospitals,
senior living facilities and similar facilities;parties to contracts with such entities; investors
acquiring such facilities; and other parties that are affected by insolvencies and bankruptcies in
the healthcare industry. We also represent creditors and other parties in pharmaceutical,
biotechnology, and medical device bankruptcies and insolvencies. Where appropriate, we are
able to call upon our colleagues in the healthcare and pharmaceutical practice groups for
assistance, including deep regulatory experience.
Bankruptcy and Corporate Restructuring
Arnold Porter LLP 7
44. FINANCIAL SERVICES
Widely acknowledged as one of the nation's premier financial services practices, the Arnold
Porter LLP Financial Services practice group of over 35 lawyers provides US and international
financial institution clients with comprehensive regulatory, litigation, legislative and
transactional services. The practice group handles complex regulatory and transactional issues,
represents clients in legislative matters (including Congressional hearings and investigations)
and litigates cases involving the financial services industry at the administrative level and in the
state and federal courts, including the US Supreme Court.
The practice group is recognized for developing innovative structures and novel solutions to
regulatory issues, which allow clients to optimize their business strategy. Clients include a broad
cross-section of bank holding companies, savings institutions, foreign banks, insurance
companies, securities firms, investment managers, electronic commerce businesses, and foreign
governments.
The practice group offers extensive experience in dealing with financial institutions and
securities regulatory agencies, both federal and state, and with state insurance regulatory
authorities, as well with the recently established Federal Insurance Office. Several members of
the practice group have served in senior positions at the key federal regulatory agencies. The
team is supported by the full interdisciplinary resources of Arnold Porter, including the
Corporate and Securities; Litigation; Public Policy and Legislative; Antitrust/Competition; Tax,
Trusts, and Estates; ERISA; Environmental; and Intellectual Property practice groups.
Anti-Money Laundering and USA Patriot Act Defense
We have been active in a variety of Patriot Act, anti-money laundering, and computer security
matters for our financial services clients, including internal investigations, defense of
enforcement actions and civil and criminal litigation, development and documentation of
compliance programs, public policy issues, and regulatory counseling. Our information privacy
and security team includes former federal prosecutors as well as former senior officials from the
US Department of Justice, the Federal Trade Commission, the Central Intelligence Agency, the
National Security Administration, the Department of Defense, and the US federal banking
agencies.
Antitrust and Competition
Bank mergers are unique in the antitrust world. Both the process and standard of review are
different from those followed in the antitrust review of mergers in other industries. We assist
clients in analyzing potential transactions and shepherd them through the multiple agency
review process. Historically, we have had one of the leading bank mergers and acquisition
practices in the US. In this regard, for the last two decades, our team has been involved in
shaping some of the most complex divestiture proposals ever designed to cure competitive
arnoldporter.com
45. concerns. Our lawyers were instrumental in preparing the Bank Mergers and Acquisitions
Handbook, a leading reference manual devoted to this area of law. In addition, as a full-service
firm, we are also able to draw upon the resources of our consistently top-ranked antitrust and
competition practice in such instances as when a non-bank is being acquired and FTC issues are
raised.
Charter Assessment
We regularly assist clients in assessing which is the optimal charter to operate under to best
meet their business goals. We have extensive experience in advising clients on the advantages
and disadvantages of the various types of charters-----state bank charter, national bank charter,
-
federal savings bank charter, or a specialized or limited purpose charter-----and the implications
-
of a charter choice on the parent holding company. As one of the few national firms with a
separate, sophisticated thrift practice, we have been at the forefront in developing novel uses for
thrift charters, especially by securities and insurance companies, in addition to advising our bank
holding company clients on such matters. In the last several years, we have represented several
of the nation's largest insurance and securities companies in forming federal savings banks in
order to offer banking services to their customers.
Corporate Control Contests and Corporate Governance
We help financial institutions develop takeover defenses, handle unsolicited takeover attempts,
and prepare shareholders' rights plans, and we advise on corporate governance and shareholder
relations issues. We also represent acquirors in takeovers, offering special value in resolving
regulatory and antitrust issues raised by proposed transactions.
Enforcement Counseling and Defense
We assist individuals and institutions-----and their boards of directors and holding companies-----
- -
with the negotiation of consent agreements, memoranda of understanding and other written
settlements, the development of compliance programs, and the defense of enforcement actions
in administrative and judicial proceedings, and in addressing financial reporting and disclosure
issues presented by agency enforcement initiatives. We also represent officers and directors,
accountants, and other professionals in actions by receivers of insolvent financial institutions
and in shareholder suits.
We are experienced in such currently high-profile issues as subprime lending, vendor
management, privacy, nontraditional lending products and practices, money laundering, bank
secrecy, and various activities considered inconsistent with safe and sound practices. In
addition, we have substantial experience representing individuals and entities who are alleged
to have the control provisions of the Change in Bank Control Act, the Bank Holding Company Act
and the Savings and Loan Holding Company Act. Many of our attorneys have served as senior
enforcement officials or on the enforcement staffs of the federal banking agencies, adding depth
and insight to our representation of clients in enforcement matters.
Financial Products and Services
Helping financial institutions enter new lines of business and structure new products and
services is a major focus of our financial services practice. We represent clients in establishing,
acquiring, and operating lines of business, including securities underwriting and dealing;
brokerage; investment advising; mutual and hedge funds; pension servicing; credit, debit, and
Financial Services
Arnold Porter LLP 2
46. other card operations; funds and other money transmission; fiduciary and investment
management activities; insurance; and leasing.
Broker-Dealer and Investment Advisers. We represent broker-dealers and investment
advisers on regulatory matters related to their creation, expansion, services, and
operations.
Private Investment and Private Banking. We represent numerous clients in the creation,
operation, and offering of private investment funds, in establishing and structuring the
management companies that operate private equity and venture capital funds, and in
connection with portfolio investment transactions by the funds. We advise clients on new
fund development and structuring, required documentation, and compliance with state
and federal securities and banking laws. We are also familiar with issues relating to
specialized investment funds, such as SBICs, business development companies, collective
investment funds, and employee securities companies. Drawing on the resources of our
trust and estates, ERISA, and tax attorneys, our financial services team also represents
clients in the bank regulatory and fiduciary law aspects of running a trust department.
Special Purpose Institutions. Our lawyers have helped create special purpose
institutions designed to take advantage of favorable regulatory treatment and exploit
niche markets. For example, we assist clients in establishing non-depository banks and
thrifts created to offer trust services on a nationwide basis, as well as credit card and
other limited purpose institutions.
Credit Card/Debit Card/Stored Value and Payments Systems. We assist clients in the
card area with litigation, product development, and regulatory policy, and in negotiations
of their processing, co-branding, and other agreements. Our clients include
representatives of all parts of the credit and debit card industry, including one of the
major credit card associations, card issuers, diversified financial services companies
offering card products, merchant processors, merchants, and ATM and POS operators.
We represent clients that operate other types of payment systems, as well. Clients in this
area include funds and other money transmitting companies, a major government-
sponsored enterprise, and merchants in a variety of online businesses. Our work for these
organizations has included product development, assistance with mergers and
acquisitions, advice on compliance with a variety of regulations, development and
documentation of internal policies and procedures, documentation of system rules and
policies for users, and various commercial, litigation, and regulatory matters.
Financial Regulatory Reform
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and
Consumer Protection Act, HR4173/Public Law 111-203, the most sweeping overhaul of the US
financial sector since the Great Depression. The legislation will affect the manner in which many
financial services companies are supervised and, in some cases, structured. For example, the
legislation contemplates the creation of a new systemic risk council to monitor macroeconomic
threats to US financial stability. This council also will have the authority to impose heightened
supervision on entities and activities presenting such risks. The legislation also gives special
attention to consumer financial products and services, by providing for the creation of a new
consumer protection authority responsible for reviewing the terms and conditions and
disclosures surrounding consumer financial products.
Financial Services
Arnold Porter LLP 3