Judge Dismisses Icahn's Malpractice Suit Against Wachtell -- Update

By Liz Hoffman 

A judge dismissed Carl Icahn's malpractice lawsuit against his longtime foe, law firm Wachtell, Lipton, Rosen & Katz, dealing the billionaire investor a blow in a bitter dispute over his 2012 takeover of CVR Energy Inc.

The suit alleged that Wachtell, hired to defend the petroleum refiner from Mr. Icahn's hostile takeover attempt, never told CVR's directors that its bankers stood to be paid more if the company were sold instead.

Goldman Sachs Group Inc. and Deutsche Bank AG sought fees from the company of more than $36 million after the sale to Mr. Icahn's firm--about twice what they would have been due if the company remained independent, according to emails and copies of the banks' engagement letters made public as part of the suit.

In a ruling late Wednesday, a New York state judge said CVR's board was fully briefed on the fee arrangements and approved them, undercutting the malpractice claims against its lawyers.

Mr. Icahn couldn't immediately be reached for comment.

In January 2012, Mr. Icahn's firm took a stake in CVR and urged the company to sell itself. He later made an offer directly to shareholders, which succeeded despite the board's resistance, and now owns 82% of the company.

The takeover spawned several lawsuits between the parties. CVR is currently appealing a judge's order that it pay Goldman and Deutsche Bank their deal-advisory fees. A federal lawsuit between Wachtell and CVR remains pending, though Wednesday's ruling could give the law firm grounds to seek dismissal of that case.

Separately, the Securities and Exchange Commission is investigating whether CVR properly disclosed the bank-fee arrangements to its shareholders.

There's no love lost between Wachtell, known for full-throated defense of corporate boards, and Mr. Icahn, one of Wall Street's most feared activist investors. The two have faced off in many proxy fights, including recently at eBay Inc., and Wachtell founder Martin Lipton has publicly criticized Mr. Icahn as a short-term profiteer.

Write to Liz Hoffman at [e-mail]

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