Skadden has a long history of successfully representing clients in crisis situations — immediately assembling a closely coordinated, multidisciplinary, highly experienced team. Our attorneys take the lead in responding to “bet-the-company” legal crises for our clients. Unexpected events — a hostile takeover bid, a publicly announced criminal indictment, reports of product defects, a corporate governance or compliance failure, the discovery of financial statement errors, a catastrophic event, just to name a few — can quickly destabilize a company. Instantaneous and sustained response is crucial, especially when media scrutiny is immediate and intense. Together with our clients, we develop and execute targeted strategies for responding to government agencies, consumers, shareholders, the investment community and the media.
Our strength in corporate crisis management is predicated on some very specific characteristics of the firm, including:
Seasoned leadership. Effective crisis management requires seasoned leadership from the outset and throughout. Our attorneys have extensive experience managing corporate crises. One or more of our partners, as the specific situation requires, will lead the Skadden team and provide highly responsive strategic and tactical guidance and judgment.
Key practice areas. While every corporate crisis is unique, all have a great deal in common. Corporate governance and director responsibility issues become a significant focus in almost every case. Inquiries and claims from Congress, federal and state government agencies, and private parties frequently follow a crisis-inducing event. As a result, certain of our practices often have been quite important to crisis management response efforts, even though the triggering circumstance did not arise in those areas. In particular, our extensive experience in corporate governance, white collar defense, SEC and other government agency enforcement defense, legislative proceedings and investigations, securities litigation defense and insurance coverage (including director/officer issues and business claims) are called upon often to deal with — and in many cases are central to managing — corporate crises.
Integrated team approach. As a firm, most of what we do involves multidisciplinary, multioffice interaction. This approach is truly second nature to the way we serve our clients and is key to effective crisis management representation. Skadden has more than 50 well-established practices across regions, many of which have been crucial to the firm’s successful resolution of numerous crisis situations. This includes where the primary crisis event has centered on allegations involving securities fraud, tax fraud, a Foreign Corrupt Practices Act violation, a threatened loss of a regulatory license, product defects and related potential liability, a sudden distressed financial condition raising bankruptcy issues, a private or government antitrust lawsuit, an infringement claim against use of a key patent or a threatened legislative action affecting a company’s ability to do business.
Understanding disclosure and communications. By their nature, corporate crises raise crucial and urgent disclosure and communications issues. Understanding the need to communicate effectively the key messages, and the proper means for doing so, can be the linchpin of success or failure in maintaining stability and minimizing the damage that can flow from corporate crises. At Skadden, we are highly attuned to this need, and we both guide and assist in this critical area, including in communicating with key constituencies.
Ongoing commitment. Successfully managing a crisis is not only about the quick and effective response on day one. It almost always is an extensive, long-term effort. Because multiple concurrent challenges often arise from a crisis, a company must be aware of and cross-check decisions on all fronts to ensure it is following a global strategy rather than undermining its goals with isolated actions in one arena. We have the resources and demonstrated commitment — including a critical emphasis on team integration and communication — to stay the course.
Skadden’s experience successfully handling crisis situations includes representations in the following areas, among others:
When target boards are unreceptive, a friendly offer quickly can turn hostile, creating adverse effects throughout an organization. Skadden has been involved in contested takeovers and proxy contests since the firm’s earliest years. We are recognized as a leader in the area, and we are experienced at guiding a company through the effects a hostile bid can have on shareholders, management and employees. We have represented principals in many of the most notable corporate fights around the world. We advised Cephalon, Inc. in defense of an unsolicited $5.7 billion takeover bid from Valeant Pharmaceuticals International, Inc., and Yahoo! Inc. in the proposed $44.6 billion unsolicited acquisition by Microsoft Corporation. We also counseled CF Industries, Inc. in an unsolicited bid for Terra Industries, Inc. and the defense of a concurrent unsolicited bid, resulting in one of the longest-running unsolicited bids ever and a $4.7 billion merger agreement between CF Industries and Terra.
We have advised numerous clients when the public announcement of a merger results in shareholder disputes that threaten the transaction. Over the last several years our attorneys have handled deal-related litigation related to hundreds of billions of dollars. Our experience includes advising Alfa-Access-Renova in several victories in its dispute over BP’s attempt to form a $16 billion strategic alliance with Rosneft, the state-owned Russian oil company; Basell Polyolefins as defendant in two parallel shareholder lawsuits challenging Basell’s acquisition of Lyondell Chemical Company; CF Industries, Inc. in the dismissal of a putative shareholder class action alleging CF’s directors breached their fiduciary duties in connection with the rejection of Agrium’s proposal to acquire CF; and Anheuser-Busch, Inc. in the favorable settlement of shareholder litigation brought by 10 different shareholder groups against Anheuser-Busch, Inc. and its directors regarding its merger with InBev N.V.
Government Investigations and Indictments
When corporate executives, government officials or other public figures face criminal indictments, a strong defense strategy is crucial to reestablish the individual’s credibility and reputation and often to maintain the existence of the organizations they head. We have represented a broad range of individuals in criminal investigations and litigation. For example, Skadden represented William Ruehle, former CFO of Broadcom, Inc., in the successful defense of all criminal and civil securities fraud charges brought by the DOJ and the SEC. We defended Frederick Schiff, the former CFO of Bristol-Myers Squibb, in a significant victory that contemplated the dismissal of all criminal charges against Mr. Schiff through a deferred prosecution agreement. Other matters include counseling Scott Jensen, former speaker of the Wisconsin State Assembly, in the resolution of felony charges related to the alleged misuse of state resources for campaign purposes; and Dr. Wendelin Wiedeking, the former CEO of Porsche AG, in the dismissal of billions of dollars of claims brought by several dozen hedge funds alleging misrepresentations and market manipulation arising out of Porsche’s attempted takeover of Volkswagen AG.
Our securities litigation attorneys frequently advise companies on the most critical securities issues of the day. For example, Skadden obtained the complete dismissal of 28 putative class claims brought against Tremont Group Holdings, Inc. and Tremont (Bermuda) Limited by investors in two offshore hedge funds that invested substantially all of their assets with Bernard Madoff. We also secured a dismissal on behalf of the Italian bank UniCredit for $60 billion in trebled RICO claims and common law claims brought by the trustee in the Madoff liquidation, as well as a victory in a motion to withdraw from the bankruptcy court a case, also brought by the trustee, seeking $9 billion alleging that the bank (together with some 60 other defendants) aided and abetted Madoff’s fraud and breach of duty. This was a critical strategic victory in Skadden’s attempt to quickly dispose of these “bet-the-company” cases on possible dispositive motions to dismiss. In the first auction-rate securities (ARS) class action arising from the market collapse to be decided by an appellate court, Skadden won an appeal for Merrill Lynch in connection with the company’s alleged manipulative conduct related to the ARS market. This was the lead case in a multidistrict litigation arising out of that market’s collapse in 2008. We also represented Merrill Lynch & Co. Inc. in its successful defense of more than 150 shareholder actions relating to the content of certain analyst reports, including a unanimous win before the U.S. Supreme Court in Merrill Lynch v. Dabit. Additionally, we represented Société Générale (France) in the dismissal of a shareholder class action alleging that the company knowingly understated its exposure to subprime mortgages through its CDO investments and knowingly misstated the strength of its risk management controls. The court dismissed the suit in its entirety with prejudice.
We have advised on numerous matters stemming from the financial sector crisis, including in connection with troubled banks and the FDIC, and related private equity investments. We successfully guided a consortium of private equity firms, together with a management team led by former North Fork Bank CEO John Kanas, in their creation of a bank to acquire the banking franchise of BankUnited, FSB from the FDIC in 2009 — a transaction the Financial Times called “one of the most important U.S. banking deals of this year.” The acquisition became a model for numerous other failed bank transactions. We also represented BankUnited in its $900 million-plus initial public offering of common stock, the first by a new entity formed for the purpose of acquiring a U.S. depository institution that had recently collapsed. Additionally, we have counseled clients on all aspects of financial regulatory reform, including advising clients on the implementation of the Dodd-Frank Act and on transactional and compliance responses to the act.
Bankruptcies and Corporate Restructurings
A substantial aspect of our corporate restructuring practice focuses on avoiding or mitigating the adverse effects of liquidity through contingency planning and helping companies overcome a crisis while they still have alternatives to bankruptcy. Skadden attorneys pioneered the use of prepackaged bankruptcies, which result in minimal time spent in Chapter 11, avoiding millions of dollars of fees and damage to enterprise value. For example, we represented CIT Group Inc., a commercial and consumer finance company, in its prepackaged Chapter 11 reorganization in the United States Bankruptcy Court for the Southern District of New York. CIT emerged from bankruptcy only 40 days after filing, reducing its debt by approximately $10.5 billion. This filing was the largest prepackaged bankruptcy solicitation ever. We also have led our clients through some of the largest-ever Chapter 11 crises. For example, we guided Delphi Corporation through one of the most complex corporate reorganizations in U.S. history, creating a model for subsequent restructurings in the global automotive industry. Skadden navigated Delphi through the loss of equity investors and the catastrophic decline in automobile sales and production. Keeping Delphi healthy during its four-year restructuring process was an extraordinary effort. Its emergence from bankruptcy removed one of General Motors’ primary hurdles to recovery, as it kept its supply lines running.
Product Defects and Class Actions
Large-scale product liability suits not only require legal action, they also can negatively impact the public’s perception of a company. Finding the right defense can be vital to a company’s survival. Our mass torts and insurance litigation attorneys, who pioneered the national counsel model of handling mass tort litigation, successfully handled numerous state and federal individual and class action cases, as well as related MDL proceedings, often arising from a single, allegedly defective product or an event. Skadden represented Pfizer Inc. in the dismissal of 166 plaintiffs from an MDL brought by individuals alleging injuries related to their use of the anti-epilepsy medicine Neurontin. We advised Philip Morris USA Inc. in securing denial of class certification in four cigarette-related class actions; Electrolux Home Products, Inc. in defeating a bid to recall thousands of allegedly defective washing machines; Merck and Co. in winning a challenge to a Vioxx-related settlement for 50,000 claimants; and Norfolk Southern Railway Company in the class action settlement of personal injury claims resulting from exposure to chlorine following a train derailment.