September 28, 2018 / 9:16 PM / 2 months ago

Icahn, CVR lose malpractice case against Wachtell Lipton law firm

NEW YORK (Reuters) - A federal judge in Manhattan on Friday dismissed an unusual lawsuit in which billionaire investor Carl Icahn accused the law firm Wachtell, Lipton, Rosen & Katz of malpractice related to his 2012 hostile takeover of CVR Energy Inc (CVI.N).

Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York, U.S. on February 11, 2014. REUTERS/Brendan McDermid/File Photo

U.S. District Judge Richard Sullivan said CVR failed to show that Wachtell and two of its partners, Benjamin Roth and Andrew Brownstein, should have disclosed that two banks helping CVR defend against the takeover stood to earn much higher fees if Icahn’s bid succeeded than if it failed.

By suing, CVR, and thus Icahn, were essentially claiming they overpaid for the process that left the activist investor with an 82 percent stake in the petroleum refiner and nitrogen fertilizer manufacturer.

Icahn’s tender offer valued the Sugar Land, Texas-based company at $2.6 billion (1.99 billion pounds).

Sullivan said CVR’s contracts with Goldman Sachs Group Inc (GS.N) and Deutsche Bank AG DBKGn.DE> entitled the banks to $18 million if CVR stayed independent, but more than $36 million if it were sold, based on a percentage of the sale price.

While that looked strange, Sullivan said the contracts were “plain on their face,” and a plaintiff could not allege malpractice when its “sole allegation is that his attorney did not explain an otherwise-unambiguous legal document.”

The judge also said CVR could not hold Wachtell liable for having told CVR’s chief financial officer, Frank Pici, it was “OK to sign” the contracts unless it knew he misunderstood them.

“Of course, defendants were not required to read Pici’s mind at the risk of a malpractice claim,” Sullivan wrote.

Sullivan said CVR could file an amended complaint only as to its claim that Wachtell committed malpractice by describing the fee terms as “customary” in regulatory filings.

“Obviously we’re disappointed with the court’s decision,” Icahn’s lawyer, Herbert Beigel, said in a phone interview. “Suffice it to say we don’t intend to abandon any claims that were dismissed. We’ll obviously have to appeal the dismissal.”

Icahn is worth $17.5 billion, Forbes magazine said.

Neither Wachtell nor its outside law firm immediately responded to requests for comment.

Wachtell is still pursuing related litigation against CVR and Icahn in a New York state court in Manhattan.

Icahn had pressed the malpractice claim there as well, but dropped it last October, leaving the federal case.

The case is CVR Energy Inc v Wachtell, Lipton, Rosen & Katz et al, U.S. District Court, Southern District of New York, No. 14-06566.

Reporting by Jonathan Stempel in New York; editing by Jonathan Oatis

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