After an appeals court last year revived a malpractice claim against Wachtell, Lipton, Rosen & Katz, it’s back to dual lawsuits in the firm’s long-running litigation against Carl Icahn-controlled CVR Energy Inc.
As neither party wants to give any ground, the litigation is proceeding once more in state and federal court. While the case once looked bleak for CVR, a judge this summer reopened its federal malpractice case against Wachtell and, in the last week, set discovery deadlines far into 2018.
“We believe in the merits of the complaint and intend to pursue the claim until its conclusion,” Herbert Beigel, CVR’s counsel, said Sept. 22.
The litigation started nearly four year ago, when CVR sued Wachtell in federal court for professional malpractice, alleging the law firm failed to advise it of $36 million in fees from two banks, Goldman Sachs and Deutsche Bank. CVR had the banks hired as financial advisers in an unsuccessful attempt to fend off a 2012 acquisition by Icahn.
After CVR filed the federal suit, Wachtell lodged a declaratory judgment action in New York state court against CVR and Icahn, asking for a ruling that the firm hadn’t engaged in malpractice. CVR then asserted malpractice counterclaims in state court.
Wachtell won an initial round of rulings in both state and federal court.
But the state’s Appellate Division, First Department, dismissed Wachtell’s declaratory judgment claim and reinstated CVR’s malpractice counterclaim last October.
And in May, the First Department denied Wachtell’s request for leave to appeal that decision to the top court in New York.
While U.S. District Judge Richard Sullivan of the Southern District of New York had earlier dismissed CVR’s federal malpractice case due to earlier rulings in state court, the First Department’s ruling in October prompted him to restore it.
Wachtell, meanwhile, is not giving up on its own lawsuit in state court. The firm says it has other claims it wants to litigate there, according to a court letter from Wachtell’s lawyer, John Gleeson, partner at Debevoise & Plimpton and former federal judge.
Wachtell intends to pursue its remaining claims in the state court lawsuit, Gleeson’s letter said. Those include breach of protective order, alleging CVR disclosed confidential documents to draft its malpractice complaint, and abuse of process, alleging CVR has used the judicial process to harass Wachtell.
Meanwhile, CVR wants its malpractice claim to proceed in federal court, notifying Wachtell that it will drop the malpractice counterclaim in state court, according to Gleeson’s letter.
Federal court has “always been our choice” and where the client felt appropriate to bring the case, Beigel said.
While the case appears to be far from resolving, Beigel said it’s not starting from scratch because there’s been considerable discovery in the state lawsuit.
And under a scheduling order Sullivan signed Sept. 19, documents produced in the state case can be used in the federal suit. The parties agreed to finish discovery by May 2018 and to meet again in court in June.
While no trial date has been set, Wachtell and CVR have said any trial would last a week.
Whether the case will get that far is anyone’s guess.
Beigel and Wachtell’s lawyers, including Gleeson and Holwell Shuster & Goldberg partner Vincent Levy, declined to comment about whether they have entertained settlement talks this year.