William N. Lay

A Texas federal judge has reversed parts of reorganized IT group ConvergeOne's Chapter 11 plan, saying an exclusive equity backstop opportunity given to a faction of its secured lenders violated bankruptcy's equal treatment requirements. U.S. District Judge Andrew S. Hanen in a Thursday opinion sided with a minority group of ConvergeOne's secured lenders who argued an equity pool earmarked for a majority group of secured lenders, who backstopped an equity offering under the Chapter 11 plan, violated Section 1123(a)(4) of the Bankruptcy Code, which requires equally ranked creditors to be treated the same in bankruptcy. Since the backstop equity deal wasn't open to all of ConvergeOne's first-lien lenders and was not market-tested, Judge Hanen wrote, it treated claims and creditors in the same class unequally. "The plan offered a valuable and exclusive opportunity to backstop an equity rights offering for a portion of the class of creditors, but not the remaining creditors," the judge wrote, reversing portions of a confirmation order that overruled the minority group of lenders' objections. The judge remanded the plan, which already took effect, back to the Southern District of Texas' bankruptcy court to be amended to comply with his decision. David Hillman, a Proskauer Rose attorney who represented the minority lenders, said the ruling will impact the growing practice of liability management transactions, also called LMTs, in bankruptcy. LMTs see a majority faction of syndicated lenders join forces to restructure existing secured debt. The out-of-court restructuring maneuver has gained steam in recent years and has also sparked so-called "creditor-on-creditor" violence, where lenders left out of the LMT, whose claims are effectively demoted, sue. "This decision reshapes the liability management playbook. Majority lenders have increasingly demanded exclusive backstop rights in restructuring support agreements as the price of their plan support — a tactic that boosts their recovery while sidelining minority creditors," Hillman said in a statement on Friday. "The ruling makes clear that these lucrative rights must be shared with all creditors in the same class or exposed to market competition," he continued. On remand, Hillman said the plan could be revised to comply with Section 1123(a)(4) by reallocating the reserved equity. Counsel for ConvergeOne declined to comment. Counsel for a group of lenders who intervened in the appeal in support of the plan did not immediately respond to a request for comment on Friday. ConvergeOne, an international information technology firm, filed for bankruptcy in April 2024 with $1.8 billion in secured debt. It came to court with a restructuring support agreement to quickly confirm a $1.6 billion debt-for-equity swap plan. Its Chapter 11 plan was supported by 100% of its second-lien lenders and about 81% of its first-lien lenders, who were part of the RSA. Under the plan, ConvergeOne raised $245 million in exit funding through a discounted equity rights offering. About $86 million of the discounted equity was set aside for ConvergeOne's private equity backer, as well as 81% of its first-lien lenders who were part of the RSA and agreed to backstop the new offering. A group of first-lien lenders, holding about $164 million in claims and who were not part of the RSA, objected to the plan. They argued the exclusive equity pool would give the majority lenders better recoveries on their first-lien claims, in violation of the U.S. Bankruptcy Code. U.S. Bankruptcy Judge Christopher M. Lopez in May 2024 overruled the objection and confirmed the plan. The minority lenders appealed, arguing the equity backstop opportunity should have either been market-tested or been made available to all first-lien lenders. ConvergeOne urged the district court to uphold the plan, saying while the creditors who participated in the RSA did see a higher recovery than others in the same class, the plan did not treat them differently. The creditors who backed the RSA received additional consideration for backstopping the equity offering, not for their claims, ConvergeOne argued. Judge Hanen rejected that argument on Thursday. The judge cited the U.S. Supreme Court's 1999 decision in Bank of America v. 203 North LaSalle Partnership , which overturned a bankruptcy plan that gave existing equity holders an exclusive chance to get ownership interests in a reorganized debtor if they invested new money. While that ruling concerned the absolute priority rule under the Bankruptcy Code, Judge Hanen wrote the decision showed an exclusive opportunity given to one group of creditors without a market test was a property interest deriving from a creditor's claim. The judge wrote that the minority lenders were shut out from RSA negotiations, ultimately making the backstop equity deal an exclusive opportunity for some of the creditors. He added that neither the debtors nor the RSA lenders tried to market-test the value of the backstop equity offering, rejecting ConvergeOne's position that analyses of similar offerings and the opportunity for the minority lenders to propose a different Chapter 11 plan constituted a sufficient market test. "While the minority lenders were permitted the opportunity to propose alternative plans, they were only given a few weeks to provide plans that would both satisfy the debtors' need to raise capital and convince the majority lenders to walk away from the beneficial deal they already had and vote for confirmation," Judge Hanen wrote. The judge also cited the Fifth Circuit's December 2024 decision that reversed mattress maker Serta Simmons' reorganization plan over unequal treatment of creditors in the same class. Like Serta Simmons' plan, ConvergeOne's Chapter 11 plan had an unequal effect on creditors within the same class, Judge Hanen ruled. "While debtors in this case can argue that the plan itself treats all creditors the same, Serta rejects a surface-level or overly formalistic (or simplistic) inquiry into equality," the judge wrote. ConvergeOne is represented by Bojan Guzina, Andrew F. O'Neill, Erin R. Rosenberg, Adam T. Swingle and Charles R. Koster of White & Case LLP. The majority lenders are represented by John F. Higgins, Eric M. English and James A. Keefe of Porter Hedges LLP and Scott J. Greenberg, Keith R. Martorana, C. Lee Wilson and Michelle Choi of Gibson Dunn & Crutcher LLP. The minority lenders are represented by Jason S. Brookner and William N. Drabble of Gray Reed and David M. Hillman, Michael T. Mervis and John E. Roberts of Proskauer Rose LLP. The appeal is In re: ConvergeOne Holdings Inc., case number 4:24-cv-02001, in the U.S. District Court for the Southern District of Texas. The bankruptcy case is In re: ConvergeOne Holdings Inc., case number 4:24-bk-90194, in the U.S. Bankruptcy Court for the Southern District of Texas.

Sep 26

5 min

Simpson Thacher & Bartlett LLP today announced that William N. Lay has joined the Firm’s Boston office as a Partner in the Mergers and Acquisitions Practice.~~“Will has sharp commercial judgment and a strong track record advising on complex deals, and we are excited to welcome him to Simpson Thacher,” said Eric Swedenburg, Head of Simpson Thacher’s Mergers and Acquisitions Practice. “His addition reflects the continued momentum of growth in our Boston office and our broader strategy to continue expanding Simpson Thacher’s transactional capabilities in key markets to meet clients’ demands in an increasingly dynamic deal environment.”~~Will has extensive experience advising private equity sponsors and public companies on complex M&A, carve-outs, joint ventures and other strategic transactions. His work spans numerous industries, including healthcare and life sciences, technology, retail and manufacturing. He joins Simpson Thacher from another international law firm.~~“Will is a great addition to the dynamic and growing team we are building in Boston,” said Josh Bonnie, Co-Managing Partner of the Boston office.~~“Simpson Thacher’s reputation for excellence in M&A is second to none,” said Will. “I’m excited to join a team that is not only shaping the market but that is also deeply committed to clients, collaboration and growth in Boston.”~~Since launching in 2024, Simpson Thacher’s Boston office has grown rapidly to meet client demand across transactional, regulatory and litigation matters. Repeatedly recognized around the world by Chambers, Legal 500, The American Lawyer, Law360 and many others, Simpson Thacher’s Mergers and Acquisitions Practice is an industry leader unrivaled in its reputation and unique in its breadth. The team has advised on many of the most prominent U.S. and international transactions of the past several decades as well as on deals with an aggregate value of more than $1.5 trillion from 2020—2024 alone (Bloomberg). The Firm’s clients include public and private companies, founder-owned and family-owned businesses, investors and boards. The scale and depth of Simpson Thacher’s private equity experience also gives the Firm insight into the needs of participants across the sector, making it the firm of choice for many of the world’s most sophisticated private equity firms.~~For more information, please click here.

Dec 8

2 min

Simpson Thacher represented J.P. Morgan Securities and A.G.P./Alliance Global Partners as placement agents in connection with a $130 million registered direct offering by Solid Power, Inc. (“Solid Power”) of a combination of Common Stock, Pre-Funded Warrants and Warrants. Solid Power is developing solid-state battery technology to enable the next generation of batteries for the fast-growing EV and other markets. The Simpson Thacher team included Roxane Reardon, Matt Hart and Margaret Selbe (Capital Markets); Jonathan Cantor and Andrew Wasilick (Tax); George M. Gerstein and J. Pasco Struhs (ECEB); Michael R. Isby (Environmental); Ron Ben-Yehuda, Chandler Gerard-Reimer and Tally Smitas (IP); and Jennie Getsin (Blue Sky).

Feb 2

1 min

The U.S. Supreme Court said Monday that it will not review the Fourth Circuit's decision to back the dismissal of a proposed class action accusing drugmakers of conspiring and inflating the price of a medication for Huntington's disease. The justices rejected the bid for review by several MSP Recovery business entities that own recovery rights assigned by health plans that provide Medicare benefits. They asked the justices in a petition to weigh in on an "entrenched" circuit split over civil racketeering law. The petitioners said clarity is needed on whether physicians' prescribing decisions defeat proximate cause, and on how economic injury factors into the proximate cause analysis in the civil Racketeer Influenced and Corrupt Organizations Act statute. These splits have profound implications in civil RICO actions, such as allowing drug manufacturers to exploit confusion over proximate cause to "insulate themselves from liability for defrauding federally funded health plans through sham charities and co-conspiring middlemen, such as specialty pharmacies," the entities said. MSP Recovery business entities accused Xenazine manufacturer Lundbeck LLC and specialty pharmacy TheraCom LLC of conspiring to inflate the drug's price via public misrepresentations and illegal kickbacks to patient assistance charities. The district court tossed the case. The Fourth Circuit backed the dismissal, finding the allegations were "shaky at best" and "stretch civil RICO liability beyond its limits." The judges said MSP Recovery didn't plausibly allege that the drug manufacturer proximately caused the RICO injury to assignees. The judges said the causal theories were "derailed" by intervening factors like physicians' prescribing decisions. They also said while an economic injury may have been foreseeable, the theories did not allege it was a direct result of Lundbeck and TheraCom's conduct. MSP Recovery Claims is represented by Aida M. Landa of MSP Recovery Law Firm, David Hilton Wise and William N. Evans of Wise Law Firm PLC and Shereef H. Akeel, Adam S. Akeel, Samuel R. Simkins, Daniel W. Cermak and Hayden Pendergrass of Akeel & Valentine PLC. Lundbeck LLC is represented by Kolya David Glick of Arnold & Porter Kaye Scholer LLP. TheraCom LLC is represented by Thomas H. Suddath Jr. and Raymond Cardozo of Reed Smith LLP. The case is MSP Recovery Claims, Series LLC et al., Petitioners v. Lundbeck LLC et al., case number 24-1302, in the Supreme Court of the United States.

Nov 24

2 min

Pandora Media has resolved yearslong copyright infringement litigation by Robin Williams' estate, Lewis Black, and other comedians, who alleged the streaming service owes millions for wrongfully profiting off their performances and works without licensing agreements, following a settlement conference in California federal court Friday. On Jan. 29, U.S. Magistrate Judge Maria A. Audero of the Central District of California handed down a minute order that stated the parties had conducted a settlement conference ending in a resolution to the four-year-old case in its entirety, including all member and related cases on the docket. A long-form agreement will be submitted in the coming weeks, according to the minute order. The comedians, who include Black, George Lopez, and Ron White, along with Williams' estate, sued Pandora in 2022, alleging they were owed $60 million in royalties collectively. The plaintiffs argued Pandora illegally aired their comedy acts and works without permission, in violation of the Copyright Act. Shortly after filing their separate suits, the comedians consolidated the claims against Pandora into a single action. In September 2022, Pandora hit back against Black and licensing agency Spoken Giants LLC with antitrust counterclaims, arguing they were part of a "cartel" seeking to monopolize the licensing of comedians' recorded performances. The following month, U.S. District Judge Mark C. Scarsi booted Pandora's competition counterclaims, finding the streaming giant didn't back up its licensing monopoly "conspiracy" argument with enough facts. Pandora amended its antitrust counterclaims, but Judge Scarsi dismissed them again the following year, finding it failed to adequately allege enough facts to support its claims of anticompetitive conduct. In August 2024, both sides filed dueling summary judgment bids. The comedians argued the uncontested facts clearly showed the defendant engaged in copyright infringement by airing the recordings without specific licensing deals from the comedians, while Pandora argued the entire dispute was manufactured out of nothing. Furthermore, Pandora contended it only needs to license the recordings from the record labels that made those recordings, not the comedians themselves. In September, Judge Scarsi sought a special master to review the fight and make a recommendation after holding oral arguments on both motions. Last summer, Special Master Suzanne H. Segal recommended that Judge Scarsi hand Pandora its summary judgment win, finding the comedians waited too long to sue. She found that Pandora is entitled to summary judgment on the basis of its implied license and equitable estoppel defenses due to the comedian's purported knowledge and acceptance of Pandora's use of their routines for many years without objection. Therefore, it is unnecessary to reach the other arguments raised by Pandora, the special master found. However, Judge Scarsi sent the summary judgment motions back to the special master in September for further consideration. According to his order, the comedians argued at a hearing that the first two elements are "indisputably unmet in their estimation," but Judge Scarsi said this does not shut down an implied license defense. "True, the circuit court has left this defense underdefined outside the well-trodden work-for-hire context of Effects Associates and its progeny. No binding decisions in the parties' cited authorities or in the court's independent research expressly recognize that a defense may lie outside Effects Associates' three-element test," the judge said. "Conversely, however, no binding decisions preclude one." Judge Scarsi directed the comedians and Pandora to engage in settlement conferences before U.S. Magistrate Judge Maria Audero. Judge Scarsi said the parties had "consistently represented that they have expended significant time and resources toward this litigation" and that more proceedings before the magistrate judge would cause them to incur more expenditures "given the anticipated scope of the court's instructions for further development." "We at SiriusXM and Pandora are pleased to have resolved this matter amicably, with an outcome that affirms the legality of our long-standing approach to licensing spoken-word comedy recordings. While the specific terms of the settlement are confidential, we can disclose that the companies did not take any literary work license from plaintiffs or Word Collections, nor did Pandora or SiriusXM make any payments to plaintiffs or Word Collections for the literary work rights at issue in the lawsuits. We look forward to continuing our mutually beneficial relationship with comedians, using the same licensing practices that have long been standard across streaming services, broadcasters, and other platforms that help comedians and spoken-word artists share and promote their work." Richard Steven Busch of King and Ballow Law Offices, told Law360 that the parties settled the case amicably. The plaintiffs are represented by Richard Steven Busch, Seth Davis Mumy, David M. Niemierzycki, and Andrew H. Davis of King and Ballow Law Offices, Daniel B. Asimow of Arnold & Porter Kaye Scholer LLP. Pandora is represented by Christopher Kelly, Allison Aviki, David Yolkut, John Nadolenco, Douglas A. Smith, Max W. Hirsch, Megan P. Fitzgerald, and Michael A. Calvanico of Mayer Brown LLP, and Paul M. Fakler and Jacob B. Ebin of King and Spalding LLP. The case is Yellow Rose Productions Inc. v. Pandora Media LLC, case number 2:22-cv-00809, in the U.S. District Court for the Central District of California.

Feb 2

4 min