Herrick is representing the Trustee for Winstar Communications in its bankruptcy case against Lucent Technologies. This is one of the hardest fought and most highly visible bankruptcy battles of this decade.
The two companies entered into a strategic partnership in 1998 to provide telecommunications equipment and services. When Winstar filed for bankruptcy in 2001, it claimed that Lucent's breach of that agreement caused the company's downfall, and sued Lucent for breach of contract. The Court appointed the Chapter 7 Trustee in early 2002, and the Trustee hired Herrick. We evaluated the case, amended the complaint to assert a preference claim and a demand for equitable subordination.
Herrick represented the Trustee for Winstar Communications in a three month bench trial in 2005. The Delaware Bankruptcy Court awarded Winstar's Trustee judgment on all claims against Lucent. The Court awarded the Trustee judgment on the contract claim, but also found Lucent to be an "insider" of Winstar, and ordered Lucent to return a $188 million payment made by Winstar four months before bankruptcy. The Court also equitably subordinated Lucent's secured claims worth $22 million.
Lucent appealed, and Winstar's Trustee again relied on Herrick. By this time, the 2005 judgment was valued at over $320 million. The District Court of Delaware affirmed the Delaware Bankruptcy Court's order against Lucent in its entirety, and left the entire judgment for the Trustee intact.
Lucent appealed a second time, and Herrick prevailed on behalf of Winstar's Trustee yet again. In a case now valued at about $340 million, we successfully argued to the US Third Circuit Court of Appeals. The Third Circuit panel, in upholding the District Court, found, among other things, that Lucent was an insider of Winstar, meaning that a $188 million payment by Winstar to Lucent, more than three months before Winstar declared bankruptcy, must be disgorged to the Winstar bankruptcy estate. In so ruling, the court also upheld the Trustee's arguments regarding earmarking, new value, core versus non-core jurisdiction and right to jury trial. This judgment is the only significant asset remaining in the estate and will allow the Winstar bankruptcy trustee to make payments to certain of Winstar's creditors.
February 5, 2009 -- Law360
David King discusses the Third Circuit's favorable finding in the WinStar bankruptcy matter.
February 4, 2009 -- Wall Street Journal Bankruptcy Blog
Stephen Rathkopf discusses what led to -- and what results from -- the Third Circuit's finding in the WinStar bankruptcy matter, a huge success for our client.
 |
 |
 |
 |