Wednesday, March 16, 2016

It’s (Risky) Business Time: Lending or Paying (and Repercussions)




"Skadden Work For Aviation Exec 'Incestuous,' Lenders Say" --
  • "Creditors for bankrupt Evergreen International Aviation Inc. accused Skadden Arps Slate Meagher & Flom LLP on Monday of having an “incestuous relationship” in which it represented both some of Evergreen's entities and their late founder, and they asked a Delaware judge to make the bankruptcy trustee hand over documents from the firm."
  • "The creditors contend Skadden has a conflict of interest in representing both Evergreen debtors and Delford Smith. They claim the law firm facilitated ‘potentially fraudulent’ transfers ahead of the bankruptcy filing that benefited Smith and Skadden but allegedly lost creditors more than $30 million."
  • "The creditors told the judge in their March 7 motion that they have taken matters into their own hands and started investigating Skadden's work with Evergreen via publicly available sources and by interviewing former Evergreen executives."
  • "Counsel for the trustee and a representative for Skadden did not reply to requests for comment on Monday, and counsel for the creditors declined to comment."
"Sheppard Mullin's Bid To Buy Waiver Emerges In Fee Row" --
  • "A payout offer from Sheppard Mullin Richter & Hampton LLP to a California utility raising a conflict objection that ultimately led to the loss of millions of dollars in fees reveals an ethically murky area of behind-the-scenes deals in which BigLaw firms seek to quell disqualification bids, experts said."
  • " Even if wheeling and dealing over conflicts is deemed within professional conduct rules and benefits clients, experts said, lawyers also realize that the optics of offering money in exchange for conflict waivers aren’t necessarily positive."
  • "'There is a real underbelly to how conflict waivers are negotiated, and it can be like making sausage,' said bar discipline specialist James Ham of Pansky Markle Ham LLP in South Pasadena, California. 'I wouldn’t call what they did unprofessional, but I do think they made a very pragmatic business decision, probably based on the belief that it wasn’t going to harm the client.'"
  • "California legal ethics expert Diane Karpman of Karpman & Associates called the Sheppard Mullin offer unsurprising, as major firms turn to 'all existing paradigms' in an effort to head off potentially expensive conflict problems. 'Although [cash for waivers deals] are not often reported, I'm certain they occur,' Karpman said."

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