Legal News

Is Cravath One Step Closer to Getting Out of Conflicts Lawsuit?

By Ashby Jones

New York heavyweight law firm Cravath, Swaine & Moore got a bit of breathing room Tuesday afternoon in this dustup involving Air Products’ attempted takeover of competitor Airgas. Philadelphia Court of Common Please judge Albert Sheppard denied Airgas’s request to keep Cravath from representing Air Products in its $5.1 billion hostile bid for Airgas.

The law firm isn’t out of the woods yet: Sheppard set a hearing for next Tuesday to evaluate whether Cravath should be permanently enjoined from working on the deal. Click here for our post Tuesday on the situation; here here for the Bloomberg story; here for the report from the American Lawyer’s Litigation Daily (which — take note BigLaw litigators — has recently gone subscription only).

Another development in the Airgas/Air Products/Cravath saga: on Tuesday, the Airgas board of directors rejected Air Products’ bid, saying it “very significantly undervalues Airgas and its future prospects and is not in the best interest of Airgas stockholders.”

The backstory is laid out well by AmLaw’s Alison Frankel:

Cravath’s M&A lawyers are representing Air Products in the company’s attempted bid to acquire Airgas. Airgas, however, claims that Cravath has a conflict in representing Air Products because the firm has represented Airgas in the past. Airgas alleges that Cravath dropped Airgas as a client and chose to represent Air Products in its hostile bid–over Airgas’s explicit objection–because Cravath considered Air Products a more lucrative client. Airgas not only wants the firm knocked out of the takeover battle, but also wants compensatory and punitive damages against its onetime lawyers.

Airgas alleges that Cravath has breached its fiduciary duty to Airgas by taking on the Air Products work. "Cravath knew everything," said Airgas lawyer Jonathan Weil of Cozen O’Connor at a recent hearing. "They were so entrenched at Airgas."

But this isn’t the story Cravath is telling. Click here for the firm’s motion to oppose Airgas’s motion for a TRO and preliminary injunction, filed on Tuesday.

Cravath also filed a whole host of affidavits from lawyers who worked with Airgas. Writes Cravath partner Ronald Cami, who was the relationship partner with Airgas, in his affidavit:

Cravath first represented Airgas in 2001. Cravath’s work for Airgas was essentially confined to a defined, narrow area — debt financing execution . . . That the representations were so limited was not an accident. When Airgas first retained Cravath to assist on a debt financing matter, Airgas bluntly told us that the relationship would not go beyond executing debt financing. Airgas’s Chief Executive Officer (a former lawyer) and then-General Counsel, we were told, maintained deep personal relationships at other law firms. As such, there was little chance of the company changing counsel for the large majority of the company’s legal work.”

Full post as published by Law Blog - WSJ.com on February 10, 2010 (boomark / email).