Amid a yearslong legal malpractice suit against Wachtell, Lipton, Rosen & Katz, lawyers for the storied New York firm and CVR Energy Inc., a Sugar Land, Texas-based company controlled by Carl Icahn, are now asking a federal judge to settle a heated deposition dispute in which the famed corporate raider bristled at Wachtell’s questioning, leading to its abrupt end.
“I don’t think you have a right to come in and ask me questions. Why don’t you say how are you getting along with your wife, and we can discuss that now?” Icahn told Wachtell’s counsel in the deposition, according to a letter filed in federal court. Icahn was responding to a Wachtell question about a controversial topic for the activist investor—renewable energy policy—which CVR’s counsel charged was ”completely irrelevant” to the suit and invoked in bad faith.
The testy exchange occurred in the long-running malpractice case filed by CVR, a refining and fertilizer business, against Wachtell. U.S. District Judge Richard Sullivan, whom President Donald Trump nominated for the U.S. Court of Appeals for the Second Circuit in April, ordered the parties to appear for an Aug. 9 conference over the deposition dispute.
Nearly five years ago, CVR sued Wachtell and two partners, Benjamin Roth and Andrew Brownstein, for malpractice, alleging the firm failed to advise that CVR would face claims by Deutsche Bank AG and The Goldman Sachs Group Inc. for $36 million under the terms of engagement letters with the banks. CVR hired the banks as financial advisers in an unsuccessful attempt to fend off a 2012 acquisition by Icahn.
CVR is also alleging in the Southern District of New York suit that the U.S. Securities and Exchange Commission initiated an investigation of the company about certain disclosures that Wachtell negligently prepared. In all, CVR is seeking $45 million in damages against Wachtell, according to court records. The parties this year faced several discovery deadlines.
In an Aug. 1 joint letter, the parties laid out their latest discovery dispute to Sullivan about the recent deposition of Icahn that occurred on July 18 and 19.
CVR’s lawyer, Herbert Beigel, wrote that Wachtell’s lawyers from Holwell Shuster & Goldberg, a New York-based boutique, began questioning Icahn during the deposition about renewable energy standard regulations that require refiners to either blend renewable fuels into their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending.
“The RINs obviously have nothing at all to do with this action,” Beigel wrote in the Aug. 1 letter. “The irrelevant RINs issue does not involve Wachtell at all and is not a historic one—quite to the contrary, it involves a highly sensitive ongoing issue that is the subject of much public speculation concerning CVR and Mr. Icahn, as well as the focus of certain members of Congress and other politicians.”
Icahn, CVR and Environmental Policy
Icahn, formerly a special adviser to Trump, has argued for overhauling an Environmental Protection Agency program that requires refiners to blend biofuels into fossil fuels. Icahn maintains that the program is unfair to merchant refiners such as CVR Refining LP, an affiliate of CVR, which does not have the capacity to blend biofuels and must buy RINs from rivals that do, according to news reports.
Last year, eight U.S. senators reportedly called for a federal investigation into whether Icahn violated insider trading laws and engaged in market manipulation. The legislators suggested that CVR, thanks to its politically connected benefactor, timed its buying and selling of credits based on information that Icahn had about coming policy changes.
According to press reports citing SEC disclosures, Icahn was subpoenaed by Southern District prosecutors over his role advising Trump on the federal biofuels program.
In the Aug. 1 letter to Sullivan, a lawyer for Wachtell, Holwell Shuster name partner Michael Shuster, said Icahn was simply asked at the deposition, “What is the Renewable Fuel Standard,” the first question relating to RINs. After Beigel objected, Shuster said Wachtell’s counsel asked the question again, and Icahn responded, “It’s a hard question to answer. It’s a law, I think.” After Wachtell’s lawyers asked Icahn to describe the process in layman’s terms, Icahn said, “It’s really becoming ridiculous now. Why do I have to explain to you what I believe the renewable fuel standard is?” Shuster recalled.
Shuster recounted that Icahn further protested, saying, “Why don’t you say how are you getting along with your wife?” The parties then took a break. Afterward, Beigel and Icahn declared that they were terminating the deposition because the subject of RINs was irrelevant to the proceedings, Shuster said.
The parties also disagreed over the relevance of Wachtell’s questions about a 2010 dispute involving the Lions Gate film company. Icahn’s argument that he should not have to answer questions related to his failed take over of Lions Gate was groundless, Shuster contended, adding that Lions Gate, just like CVR, was once represented by Wachtell and investigated by the SEC in connection with Icahn’s takeover attempt.
‘A form of harassment’
In the letter to Sullivan, Beigel said he was seeking to terminate or limit the deposition of Icahn, arguing it was conducted in bad faith and was meant to “unreasonably annoy, embarrass or oppress” Icahn.
Beigel told Sullivan that as Icahn himself noted during the deposition, “asking him about RINs is no more appropriate than asking about his wife and a form of harassment.”
“Any knowledge or efforts by him on CVR’s behalf concerning the RINs, five years after Wachtell’s alleged malpractice, has nothing whatsoever to do with the present action,” Beigel wrote.
But Shuster asked Sullivan to order Icahn to complete his deposition, rejecting that the questioning was irrelevant. While Shuster did not specify a direct link between RINs and the malpractice case against Wachtell, he appeared to link them through CVR’s allegations that the firm’s conduct led to an SEC investigation of CVR.
Shuster wrote that the RIN subject “relates to CVR’s dealings with federal regulators regarding its activities, including activities regulated by the SEC, while CVR was under Icahn’s control and during the SEC’s investigation of CVR.”
That investigation was resolved by early 2017.
“Icahn’s contention that Wachtell Lipton is seeking to ask about matters or a time period irrelevant to this action is thus incorrect,” Shuster said.
But Beigel told Sullivan that any questions about whatever dealings Icahn may have had with the EPA or any other federal regulatory agency, including the SEC, on other matters or filings, have nothing to do with the SEC’s investigation of CVR.
Shuster declined to comment on the letter. In a brief interview Friday, Beigel said it was “unfortunate” the parties couldn’t resolve the dispute and had to ask the court for assistance.
When asked about the chance of a settlement in the case, which was revived after a New York appellate court ruling in 2016 and has provided a glimpse into Wachtell’s mysterious billing structure, Beigel said, “I have no idea.”