March 2018: Dismissal of $4 Billion Claims Against Len Blavatnik and Access Industries Affirmed by Southern District of New York
The firm recently achieved an appellate victory in the Southern District of New York for long-time clients Len Blavatnik and Access Industries. On January 24, 2018, U.S. District Judge Denise Cote overwhelmingly affirmed the trial decision of U.S. Bankruptcy Judge Martin Glenn in Weisfelner v. Blavatnik. There, the plaintiff, Edward Weisfelner, the Litigation Trustee of the LBI Litigation Trust, sought over $4 billion in damages relating to claims arising out of the merger of Lyondell Chemical Company and Basell B.V. in December of 2007, and the bankruptcy of the combined company—LyondellBasell Industries, Inc. —in 2009.
The Trustee filed its lawsuit in 2009, asserting dozens of claims against numerous defendants. The Trustee amended his complaint several times, and the case included claims for fraudulent transfer, violations of Luxembourg law, avoidable preference, and breach of contract, among others.
After years of litigation, the case culminated with a 14- day trial, which included 21 live witnesses, 40 witnesses by deposition, and more than 600 exhibits. After trial, the Bankruptcy Court dismissed all but one of the Trustee’s claims, awarding the Trustee a mere $7 million in damages. The Bankruptcy Court found that the merger of Lyondell and Basell was supported by strong industrial logic and that the Trustee had failed to prove that LyondellBasell was insolvent, a threshold element of his claims. In the process, the Bankruptcy Court discredited the Trustee’s baseless theories that our clients intended to defraud Lyondell’s creditors through the merger.
The Trustee then appealed two of his largest claims. First, the Trustee asserted errors relating to the claim for an alleged $300 million preference claim based on the company’s draw and repayment of a short-term loan provided by Access Industries in October of 2008. Second, the Trustee challenged the Bankruptcy Court’s decision, on a motion to dismiss, to enforce a damages limitation provision in the company’s loan documents.
Judge Cote affirmed the Bankruptcy Court’s decision in virtually every respect—agreeing that dismissal of the preference claim was proper and holding that the damages limitation provision is enforceable—but increased the Trustee’s recovery by approximately $5 million (from $7
to $12 million) on account of an offset to restitutionary damages awarded by the Bankruptcy Court.
While the Trustee still has the option to appeal to the Second Circuit, the decision reinforces Quinn Emanuel’s complete victory for its clients and brings them yet another step closer to an overwhelmingly favorable resolution of the nine-year old Lyondell/Basell saga.