US entertainment lawyer L Londell McMillan, who has represented artists such as Stevie Wonder and Prince, has been successfully sued in London in a case stemming from the collapse of law firm Dewey & LeBoeuf.
Barclays Bank took the lawsuit seeking repayment of a $540,000 loan in ongoing action by the bank seeking to recoup money from former partners of the firm.
The Financial Times reports that Barclays had $56m of outstanding loans to 220 partners of Dewey when it collapsed in 2012. More than 184 have since repaid the money.
Lawyers often take out loans towards working capital at law firms when they are elevated to partners.
If Barclays had lost the case it could have made banks more reluctant to lend to law firm partners, who are usually viewed as good credit risks.
Tony Williams, the founder of legal consultancy Jomati and a former managing partner of Clifford Chance, said: “This was a case closely watched by the banks because if Barclays had lost it could have pushed up the pricing of such loans or made them less available to law firm partners.
“These loans are low margin and quite long term, but banks like them as they are seen as a safe asset class.” he added.
Dewey filed for Chapter 11 bankruptcy protection in June 2012 with liabilities of $315m, making it one of the biggest collapses of a US law firm.
It was created in 2007 through the merger of Dewey Ballantine — a mergers and acquisitions adviser — and LeBoeuf Lamb Greene & MacRae, known for its insurance and energy work.
After the merger it expanded aggressively and lured new partners by handing out multimillion-dollar guarantees. About 100 partners were on such guarantees, according to its 2012 bankruptcy filing.
Mr McMillan joined Dewey as head of its entertainment and sports practice in 2007 and was one of four former partners to fight the case against Barclays. Three settled before the High Court trial began.
Mr McMillan had argued that he had no obligation to repay, claiming it was in fact a loan to the firm, not to him personally. He also claimed it was part of a programme whose terms were negotiated with the firm, not the individual partners.
Giving his ruling in favour of Barclays, Mr Justice Popplewell found that Mr McMillan was “unwilling to accept what was plain on the face of the documents and seemed to me to have convinced himself of a version of events which was inconsistent with the contemporaneous record”.
Source: The Financial Times