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Trial Victory Secures Leverage in Negotiation with Opponents Involving a $100 Million Portfolio of Assets

Bankruptcy Litigation / 2017
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Client industry: Financial services
Type of case: Bankruptcy litigation
Court: U.S. Bankruptcy Court, Arkansas, Eastern District
Amount in dispute: $10+ million
Result: Verdict for client

Our client, the asset manager of Limited Partner, with interests of 99.99 percent in a $100,000,000 portfolio of low-income tax credit partnerships throughout the country, was engaged in buy-out negotiations with the manager of the General Partner's interests of .01 percent in the portfolio.

In an attempt to gain leverage in the negotiation, the General Partner placed one asset of the portfolio in bankruptcy over the objections of the Limited Partners. The General Partner's actions threatened the viability of the entity, but more importantly, it threatened the tax credits delivered to the Limited Partners over the prior ten years. The Firm was engaged to dismiss the bankruptcy, regain leverage in the negotiations, and avoid recapture of tax credits.

The Motion to Dismiss was set for trial in bankruptcy court, and parties flew in from different parts of the country to serve as witnesses. During the trial, the firm presented its case, and then cross-examined the first of the General Partner's witnesses. Given the presentation at that point, the General Partner opted not to present additional witnesses it had identified and flown in for testimony. The Court thereafter granted the Motion to Dismiss the bankruptcy.

The General Partner appealed to the district court, where the district court affirmed the decision in all respects. Thereafter, the Limited Partner reengaged the General Partner in negotiations regarding disposition of the portfolio, and the negotiations were concluded to the benefit of our client.

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