Thank you for sharing!

Your article was successfully shared with the contacts you provided.
NEW YORK � A federal judge in Manhattan has thrown out a lawsuit filed against Paul, Weiss, Rifkind, Wharton & Garrison by the onetime private banker to former WorldCom Inc. chief executive officer Bernard Ebbers. David Trautenberg, the former co-head of Citigroup’s private wealth management group, sued Paul, Weiss in December for breach of fiduciary duty, claiming the law firm used against him in severance negotiations confidences it gained while jointly representing him and Citigroup in WorldCom-related matters. The ex-banker received a $5 million severance package that he claimed would have been $25 million without Paul, Weiss’ interference. But Southern District Judge George Daniels said Trautenberg had failed to show that “but for” Paul, Weiss’ actions, he would have received more money. The judge noted that Trautenberg had not alleged in his complaint that Citigroup had ever offered or considered offering a $25 million severance package. The banker’s belief that he was owed that amount based on the book of business he left at Citigroup was “purely speculative,” Judge Daniels said. “These allegation cannot support a conclusion that Paul, Weiss’ conduct prevented plaintiff from receiving what he could have reasonably anticipated would have been a $25 million severance payment, if Citigroup had access to the same information but was represented by different lawyers,” he wrote in Trautenberg v. Paul, Weiss, 06 Civ. 14211.
The private banker was a significant figure in litigation against Citigroup arising from WorldCom’s collapse.

Ebbers was a major part of Trautenberg’s book of business at Citigroup, and the private banker was a significant figure in litigation against the bank arising from WorldCom’s collapse. Trautenberg’s orchestration of massive loans for Ebbers’ private account was cited in shareholder and government litigation as a perk Citigroup offered, along with favorable research coverage by analyst Jack Grubman, to guarantee a steady flow of investment banking work from WorldCom. In his complaint, Trautenberg had noted that Grubman had received a $30 million severance package despite having “no valuable book of business.” Citigroup ultimately paid almost $3 billion to settle WorldCom litigation. Ebbers was sentenced in 2005 to 25 years in prison over the accounting fraud that led to WorldCom’s collapse. Paul, Weiss represented Citigroup in most litigation arising out of WorldCom’s 2002 bankruptcy filing. Trautenberg initially had separate counsel but Paul, Weiss requested a joint representation. Trautenberg claimed he agreed because Paul, Weiss partner Brad Karp assured him the firm would not act against his interest. Trautenberg alleged Paul, Weiss then used privileged information it learned in the course of the joint representation in the adverse employment proceedings leading to his 2004 departure from Citigroup. But Judge Daniels said Trautenberg failed to “articulate what or how privileged information was misused by Paul, Weiss,” the judge said. “He alleges no information that would not already have been known by or accessible to Citigroup, plaintiff’s employer,” the judge wrote. “Nor does he allege that there was any legitimate expectation that any information provided to Paul, Weiss during the joint representation would not have been disclosed to Citigroup, irrespective of who served as its attorneys during the employment negotiations.” In negotiations over his departure, Trautenberg was represented by lawyers from two firms, Wechsler & Cohen and the former Kronish Lieb Weiner & Hellman. Judge Daniels said the banker’s solid representation by counsel and the time line of the negotiation, which went on for a year before Trautenberg accepted the $5 million payment, undermined his claims of being deceived by Paul, Weiss. Anthony Lin is a reporter with the New York Law Journal, a Recorder affiliate.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.