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Always a bridesmaid, never a bride — that’s the usual fate for in-house attorneys when it comes time to decide who will represent their companies in court. Richard Chesley is the exception. The staff lawyer with Chicago investment bank Houlihan Lokey Howard & Zukin is the winning advocate behind one of the biggest bankruptcy rulings in many months. In January, in the bankruptcy of United Artists Theatre Company, the U.S. Court of Appeals for the Third Circuit held that a debtor can agree to indemnify its bankers against claims of negligence. It was the first time a federal appellate court had ruled on the issue. Chesley concedes that it is “odd” that he was the lead lawyer on the case. “You don’t see a lot of in-house counsel arguing cases in courts of appeals.” But given his history with the United Artists bankruptcy, Chesley says it made sense that he would handle the appeal. No Bankers’ Indemnity In Bankruptcy? When United Artists hired Houlihan as a financial adviser at the outset of its Chapter 11 case in 2000, the theater chain agreed to indemnify the bank against future claims of negligence. Outside of bankruptcy, corporations have long secured their bankers against liability for faulty advice. Banks have sought similar protection in bankruptcy, but some courts have refused to grant it. In particular, the U.S. Trustee Program (a division of the U.S. Department of Justice that helps administer bankruptcy cases) has made it a priority in the last few years to challenge bankers’ indemnity agreements. After the U.S. trustee in Delaware took aim at the agreement between United Artists and Houlihan, the bank hired Chesley, a litigation and bankruptcy partner at Jones Day, to lead its defense. The bankruptcy court approved the indemnity agreement with Houlihan, and the reorganization plan for United Artists was confirmed in early 2001. But the U.S. trustee appealed the district court judge’s approval of the indemnity. Chesley, meanwhile, left Jones Day in 2001 to become restructuring counsel at Houlihan. Once in-house, he retained the lead on defending the indemnity agreement. In January, more than a year after hearing oral arguments on the issue, the Third Circuit finally approved the indemnity. The trustee program is noncommittal about its next move. “We’re reviewing the decision and determining an appropriate course of action,” says Joseph Guzinski, the program’s general counsel. The Third Circuit’s decision is more than a victory for Houlihan, Chesley says — it establishes an important precedent. “This is a very significant case,” he explains. “It stands for the broad proposition that [financial] professionals . . . can be retained on the same conditions [in bankruptcy] that they are retained outside of bankruptcy.” Chesley doesn’t plan to let his advocacy skills gather dust. “There are some cases where I’ll [continue to] take the laboring oar and lead the litigation.” Given his record so far, his employer should be happy to let him do so.

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