Derailed by Bankruptcy by Howard H. Lewis

Author:Howard H. Lewis [Lewis, Howard H.]
Language: eng
Format: epub
ISBN: 9780253018717
Published: 2015-01-14T16:00:00+00:00

7

Detailed Case Preparation

What, then, was the task that now consumed my life—what were the flesh and bone of the argument that I had to make? On the one hand, there was the government’s scrap case, with all its discounts and unfavorable adjustments, which led them to offer the sum of $32 million for the entire Reading system, including all the leased lines such as the North Penn. On the other was our argument for value as an operating railroad with respect to the Class A and B properties and as scrap for the Class C properties. I really did not have much hope for the OCLDD valuation of $230 million, as the court had made it fairly plain that this would only serve as a backup in the event that there was no other way to “fairly” value the properties. There existed limited attacks on the government’s scrap value, as described earlier, but this wasn’t going to get us very far. Therefore, it was necessary to stress the continued valuation argument with respect to the Class A and B properties.

I also engaged in another exercise: How much did we really need? After talking with Bill Dimeling and John Fowler, as well as Bill Hesse and Lock Fogg, about the value of the nonconveyed assets, we came to the tentative conclusion that $96 million, or three times the government offer, would be enough to pay off all the creditors’ principal debt plus accrued interest. This, of course, in and of itself was an enormous windfall for the long-term bondholders and creditors who would get their debt repaid on twenty-year 3 and 4 percent obligations in cash at a time when interest rates ranged from 10 to 15 percent. This solution also required the government to pay in cash, not securities.

A recovery of $96 million seemed more or less realistic. It was less than the $230 million that was the maximum we could claim for the Class A and B properties combined. Still, it was three times the government offer, and if cash was substituted for the Conrail securities, it had a value of at least $150 million. In short, it fit comfortably within the parameters between the government’s extreme lowball offer and our outrageously high demand.

Almost everyone who has ever prepared a case in litigation has a different way of doing it. Since the rail case was my first trial effort and since it was in many ways different from any other prior trial in that, for one thing, it focused on what would have happened and not on what did happen, I did not seek advice from the more seasoned trial lawyers in the firm. Instead, I began from the back and worked forward. I imagined myself in oral argument demonstrating how the values I claimed were totally irrefutable, even unquestionable. Next, I tried to block out the brief that would support that argument. Finally, I outlined the evidence I would need to justify the brief. The plan became a kind of a schematic or overlay guiding the preparation.

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