The rambling thoughts of a Modern Orthodox Chassid (whatever that means). Contact me at emansouth @

Friday, April 25, 2008

Email Kills

A few years ago, my old firm litigated a case involving a credit derivative. I won't bore you with too many details. Let's just agree that the case hinged on whether a "credit event" had taken place. We said it had and that, therefore, the defendant, our counterparty, owed us $4MM. The defendant said it hadn't occurred.

The question of whether a "credit event" did or did not happen is a legal question based on the facts and circumstances of the particular situation. Yet, one of our dopey credit analysts felt compelled to write an email that said, "I don't think a credit event has taken place".

This email was, of course, uncovered by the defendants during pre-trial discovery and, effectively, killed our case. There went our $4MM.

This morning I read a story about the fight going on in he Clear Channel case. The issue there is whether or not a bunch of banks committed to finance a takeover by a couple of private equity firms of the communications company, Clear Channel .

Here's part of what the article said:

Much of the hearing was consumed by an audio-visual presentation from the buyout firms’ lawyers in which they highlighted internal bank emails from bank executives. In one, a bank executive said, “let’s draft the nuclear version” of the documents. In another, a bank employee wrote of drafting “draconian” documents. These emails clearly demonstrated, argued Mr. Hansen [the lawyer for the Private Equity Firms] , a deliberate attempt by the banks to blow up the deal so they could avoid potential losses on the Clear Channel debt funding the buyout.

Mr. Struve, the banks’ lawyer, acknowledged that the banks asked the buyout firms for concessions on some of the loan’s terms, but that it was done in an effort to make the loan package more marketable to investors while at the same time trying not to make the terms less appealing for the buyout firms. And what about the banks using the terms “draconian” and “nuclear”? Mr. Struve attributed such language to the “tendency of human beings to use colorful terms.” Which is something, he added, that “we all might have been guilty of at one point or another.
You might have thought that senior executives at a major bank would know better than to use terms like "draft the nuclear version" when emailing his colleagues about a deal that was very likely headed to litigation.

The only difference between my case and this one is the number of zeroes at the end of the number.



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