Ruby/Archstone Arbitration

In this recent arbitration Compass Lexecon was retained by Jonathan Polkes and Caroline Zalka of Weil, Gotshal & Manges on behalf of their client Archstone to respond to allegations that Archstone breached agreements with Claimants in the course of implementing a leveraged buy-out. Prior to the buy-out, Claimants received common units of Archstone in exchange for property valued at approximately $1.8 billion. In the leveraged buy-out, Archstone gave Claimants a choice between exchanging their common units for preferred units or cash. Claimants, and two experts they retained, argued that the buy-out presented them with a Hobson’s Choice because the preferred units were inferior to their common units and they would be forced to realize capital gains if they chose cash. At the arbitration, Compass Lexecon’s President, Professor Daniel R. Fischel, strongly criticized Claimants and their experts for ignoring attributes of the preferred units that were superior to the common units and the large premium offered by the buy-out. The Panel cited Professor Fischel’s testimony favorably in concluding that Archstone had not breached the agreements because the preferred stock offered a viable, market-based alternative to Claimants’ common units. The result was a complete victory for Archstone. Professor Fischel was supported by a team in Compass Lexecon’s Chicago office including Jerry Lumer, Vince Warther, Jessica Mandel, Elizabeth Wall, Laura Sekhar and Brittany Walsh.