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Home / Case News / Chemical Giant LyondellBasell Accuses Brown Rudnick of an Allegedly Preemptive Blunder Costing Trust $300 Million

Chemical Giant LyondellBasell Accuses Brown Rudnick of an Allegedly Preemptive Blunder Costing Trust $300 Million

December 13, 2019, Southern District of New York – Earlier last week, Lyondell Chemical Co. bankruptcy Trustee, Mark E. Holliday initiated an action against Defendant Brown Rudnick LLP for legal malpractice in the litigation of a preference claim under Bankruptcy Code § 547(b) in Weisfelner v. Blavatnik (In re Lyondell Chemical Co.) case before the U.S. Bankruptcy Court for the Southern District of New York. 

The Trustee accused Brown Rudnick LLP, of staggering the trust’s attempt to clawback $300 million in credit line repayments from private equity baron Leonard Blavatnik. 

In its complaint filed with the United States District Court for the Southern District of New York, the Trustee alleged that Brown Rudnick, which represented the trust in a suit against Blavatnik’s company Access Industries Holdings Inc. (“Access”), committed malpractice in the 2009 bankruptcy of LyondellBasell. According to the complaint, Brown Rudnick failed to demonstrate that a Lyondell subsidiary was insolvent when it paid back $300 million in credit to Blavatnik, just months before the Chapter 11 filing.

The Trustee argued that Brown Rudnick slipshod the insolvency analysis by valuing the wrong debtor and using financial projections from the wrong date. The Trustee added that the trust lost the preference claim because Brown Rudnick negligently failed to timely introduce evidence sufficient to maintain the statutory presumption of insolvency and to prove that Lyondell was insolvent when it made $300 million in transfers to Access in October 2008. The Trustee further alleged that the claim failed because Weisfelner and Brown Rudnick focused on the finances of holding company LyondellBasell Industries and not the subsidiary Lyondell Chemical Co. – the debtor that actually made the transfers to Access. Hence, the Trustee alleged that Brown Rudnick did not exercise due care, missed or ignored highly relevant evidence that would have established Lyondell as insolvent in October 2008.  

By way of background, Blavatnik, an American multibillionaire, bought Lyondell in 2007 and merged it with his chemicals business, Basell. On October 15, 2008, Lyondell drew $300 million from the Access Revolver. The draw was repaid almost immediately in equal installments on October 16, 17, and 20, 2008. Eventually, the merged company collapsed amidst the financial crisis and filed for bankruptcy protection in 2009. On January 6, 2009, Lyondell filed for bankruptcy. The trust was created under the Bankruptcy plan of reorganization of the LBI entities, effective April 30, 2010. Lyondell’s immediate repayments to Access, an insider of Lyondell, became the basis of the preference claim.