Banking Law, Federal Government, Mergers and Acquisitions, Wall Street

Is Wachtell in Trouble For Being Good Lawyers?

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The general public really doesn’t understand what top-flight counsel does for their corporate clients. If they did, the pitchforks and torches crowd would be as angry at Wall Street lawyers as they are at Wall Street bankers.
Friday’s “revelation” about the advice given to Bank of America by Wachtell Lipton illustrates the point. Am Law Daily reports:

Amid the piles and piles of formerly privileged documents related to the Bank of America-Merrill Lynch merger, there are a few notes and e-mails from mid-December 2008 showing that BofA’s lawyers at Wachtell, Lipton, Rosen & Katz were saying very different things to their client and to federal regulators.

What dastardly double talk did Wachtell Lipton allegedly engage in? Corporate Counsel reports:

The e-mails show that early on the morning of December 19 [Wachtell litigation partner Eric Roth] advised the bank’s chief executive, Ken Lewis, and its interim general counsel, Brian Moynihan, on how difficult and financially risky it would be to try to invoke a so-called MAC — or material adverse change — clause, which would allow the bank to get out of the merger with Merrill.

But another e-mail from associate general counsel Teresa Brenner to Moynihan, sent several hours later and on the same day as Roth’s e-mail, says, “Eric made a very strong case as to why there was a MAC” during a conference call with some officials from the Federal Reserve.

J’accuse!
Pitchforks on parade after the jump.


Essentially, the emails show that Wachtell lawyers leveraged the threat of having Bank of America bail on the Merrill merger to get additional funds from the government. And it worked.
Put another way: Wachtell 1, Treasury Department 0. ‘Twas always thus.
Certainly you didn’t expect Wachtell lawyers to provide ineffective counsel? When you pay whatever the hell Wachtell is charging these days for corporate counsel, you are looking for a lot more than a bunch of people that can regurgitate a statute. Instead, you’re looking for strategic advice. It seems that in this case, Wachtell earned their fees.
The question I have is why the Treasury Department didn’t call BofA / Wachtell’s bluff? Corporate Counsel reports that Bank of America’s inability to get out of the Merrill deal was somewhat obvious:

The e-mail says any attempt to invoke the MAC would certainly cause Merrill to file suit. Roth then lists a half dozen reasons why Merrill’s arguments could prevail in court. It lists no argument in Bank of America’s favor. But perhaps the most compelling fact on the list was this one: The merger deal is governed by Delaware law and “no Delaware court has ever found that a MAC occurred permitting an acquiror to terminate a merger agreement.” …
[Former Treasury Secretary Hank Paulson] has testified that he told Lewis “that it would be unthinkable for Bank of America to take this destructive action for which there was no reasonable legal basis.”
But the government blinked first, and agreed to give the bank more than $20 billion in extra bailout funds after it closed the merger on January 1.

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If the public wants to get angry about something, it seems like they should be pissed at the Treasury Department’s spineless inability to stand up to Bank of America.
Maybe the Treasury Department should just hire better lawyers? Apparently there are a few good ones working at Wachtell.
What Was BofA Lawyer’s Advice on Merrill? It Depended on the Audience [Corporate Counsel]
Wachtell Under Fire [Am Law Daily]

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