Connecticut newsprint magnate and art collector Peter Brant is suing the law firm that handled one of his many business dealings, claiming the lawyers cost Brant tens of millions of dollars by failing to warn him that a company he was selling had an underfunded pension plan.
In the lawsuit filed in Superior Court in Stamford, the Greenwich resident is seeking an unspecified amount in damages from Shearman & Sterling, which is based in New York City. The professional malpractice lawsuit also names Douglas P. Bartner, a Shearman & Sterling partner, as a defendant.
Brant is the owner of White Birch Paper Co., which along with his SP Newsprint company, filed for bankruptcy protection in 2010. Before the companies sought protection from creditors, Brant was a billionaire, though he no longer appears on the Forbes magazine list of the richest Americans. He is also married to the former supermodel Stephanie Seymour.
According to court documents, in 2009 White Birch Paper Co. faced financial difficulties as the result of the overall decline of the world economy and reduced demand for newsprint. Meanwhile, SP Newsprint had just sustained operating losses of $74 million over a two-year period. Brant retained the Shearman firm to represent him in a transaction to form a new company, which would combine the two companies and acquire $94.5 million of White Birch assets out of bankruptcy.
For many years, Brant had been involved in investment partnerships with Aby Rosen and Michael Fuchs. Along with Brant, the two investors owned stakes in White Birch as well as the Seagram Building, a Manhattan skyscraper. However, about the same time as the bankruptcy filing, according to media accounts and court documents, the relationship between Brant, Rosen and Fuchs began to unravel. The two other men said they no longer wanted to make any further capital investments in Brant’s paper companies.
The three agreed to a parting of the ways, and Rosen and Fuchs bought Brant’s 39 percent stake in the Seagram skyscraper for $160 million. At that point, Brant moved forward with the debt restructuring on his own, and purchased from Rosen and Fuchs the stakes they had owned in his paper companies.
Before the bankruptcy, Brant had owned 75 percent of the interests in both companies. To accomplish the restructuring plan, he bought the remaining 25 percent stakes in both for $16.9 million. He then entered into a deal to sell SP Newsprint’s assets to one of its creditors, GE Capital, for about $145 million.
In doing so, Brant became liable for SP Newsprint’s underfunded pension plan.
As a result, the lawsuit says, Brant was forced to provide the $76 million shortfall for the pension plan, which had to be funded from Brant Industry Inc. The Shearman & Sterling firm "knew or should have known" that the pension plan of the company was underfunded and that the sale would expose Brant to the liability, according to the malpractice lawsuit.
The firm "failed to advise plaintiff fully of the risks associated with the Sale of Interests Agreement as a result of SP Newsprint’s underfunded employee defined pension plans," the lawsuit says. "They failed to utilize the care, skill and diligence employed by attorneys specializing in complex commercial transactions, corporate reorganizations and bankruptcy."
The Shearman firm did not immediately respond to a call seeking comment.•