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In re Lyondell Chemical Co.

United States District Court, S.D. New York

January 31, 2014

In the Matter of LYONDELL CHEMICAL COMPANY et al., Debtor, HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff-Appellant,
v.
UBS SECURITIES, LLC, Defendant-Appellee 13 Civ. 03654 (AT)

Page 410

[Copyrighted Material Omitted]

Page 411

For Highland Capital Management, L.P., Appellant: Deborah Deitsch-Perez, Lackey Hershman, L.L.P., New York, NY.

For UBS Securities, LLC, Appellee: Daniel Joseph Stujenske, Linda Halliday Martin, Minta Justine Nester, Simpson Thacher & Bartlett LLP (NY), New York, NY.

OPINION

ANALISA TORRES, United States District Judge.

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MEMORANDUM AND ORDER

Appellant, Highland Capital Management, L.P. (" Highland" ), appeals the April 10, 2013 decision of Bankruptcy Court Judge Robert E. Gerber which dismissed Highland's complaint alleging that Appellee, UBS Securities, LLC (" UBS" ), tortiously interfered with contract and prospective economic relations by denying Highland the opportunity to participate in the exit financing of debtor Lyondell Chemical Company (" Lyondell" ). Highland Capital Mgmt., L.P. v. UBS Sec., LLC, 491 B.R. 41 (Bankr. S.D.N.Y. Apr. 10, 2013). For the reasons stated below, the Bankruptcy Court decision is AFFIRMED.

BACKGROUND

In January 2009, Lyondell filed for protection under Chapter 11 of the Bankruptcy Code. Compl. ¶ 7, Appellant's Excerpts of Record (" Appellant's ER" ) at 33, ECF No. 3, Attach. No 1. By the end of 2009, Lyondell was the world's third largest chemical company, with fifty-nine manufacturing sites in eighteen countries, and yearly revenues approaching $31 billion. Appellant's ER at 76, ECF No. 3, Attach. No. 2.

To complete its reorganization and finalize its emergence from bankruptcy, Lyondell sought exit financing, designating UBS, an investment bank, and Banc of America Securities LLC (" BOA" ), as the " Joint Lead Arrangers and Joint Bookrunners to arrange and syndicate" a $1 billion senior term loan facility (the " Term Loan" ). Id. UBS and Lyondell executed an engagement letter (the " Engagement Letter" ), which provided in relevant part:

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" The Joint Lead Arrangers, in consultation and cooperation with [Lyondell], will manage all aspects of any syndication, including decisions as to . .. which institutions will participate." Appellee's Excerpts of Record (" Appellee's ER" ) at 107, ECF No. 8, Attach. No. 1. The Engagement Letter also authorized UBS to receive and accept lender commitments and to allocate the Term Loan among selected lenders. Id. Highland, a hedge fund with a longstanding history of lending to Lyondell, had previously invested over $200 million across Lyondell's capital structure, see Highland, 491 B.R. at 45, and would have welcomed the opportunity to participate in the Term Loan.

UBS and Highland were hardly strangers. In 2009 and 2010, UBS commenced two actions against Highland in the Supreme Court, New York County, alleging that Highland committed fraud in connection with a 2008 restructure of a collateralized loan obligation facility. Id. at 48 (taking judicial notice of Complaint, UBS Sec. LLC v. Highland Capital Mgmt., L.P., 30 Misc. 3d 1230[A], 924 N.Y.S.2d 312, 2011 N.Y. Slip Op 50297[U] (N.Y. S.Ct. 2011) (Index No. 650097/2009), and Complaint, UBS Sec. LLC and UBS AG, London Branch v. Highland Capital Mgmt., L.P., Index No. 650752/2010 (N.Y. S.Ct. 2010)). The parties also found themselves on opposite sides of other lawsuits filed in that same court in 2008 and 2010, as well as in a separate action Highland initiated in Texas. Highland, 491 B.R. at 49 (taking judicial notice of SPCP Group, LLC v. UBS AG, Index No. 602418/2008 (N.Y. S.Ct. 2008) (in which Highland is a third-party defendant); UBS AG v. Highland Capital Mgmt. L.P., 29 Misc. 3d 1230[A], 920 N.Y.S.2d 245, 2010 N.Y. Slip Op 52098[U] (N.Y. S.Ct. 2010) (Index No. 650094/2010); and Highland Credit Opportunities CDO, L.P. v. UBS AG, Case No. DC-10-16004).

On March 15, 2010, Lyondell sent a " Confidential Information Memorandum for Public Investors" (the " CIM" ) to Highland, which " offered participation" in the Term Loan. Compl. ¶ 8, Appellant's ER at 34, ECF No. 3, Attach. No 1. The CIM expressly provided that its use was " solely for informational purposes." Appellant's ER at 44, ECF No. 3, Attach. No. 2. The CIM outlined the treatment of confidential information as follows:

ACCEPTANCE OF THIS CONFIDENTIAL INFORMATION MEMORANDUM CONSTITUTES AN AGREEMENT TO BE BOUND BY THE TERMS OF THIS NOTICE AND UNDERTAKING AND THE SPECIAL NOTICE SET FORTH ON THE COVER PAGE HEREOF . . . . IF THE RECIPIENT IS NOT WILLING TO ACCEPT THE CONFIDENTIAL INFORMATION MEMORANDUM . . . ON THE TERMS SET FORTH IN THIS NOTICE AND UNDERTAKING AND THE SPECIAL NOTICE, IT MUST RETURN THE CONFIDENTIAL INFORMATION MEMORANDUM AND ANY OTHER EVALUATION MATERIAL TO THE ARRANGERS IMMEDIATELY WITHOUT MAKING ANY COPIES THEREOF, EXTRACTS THERE FROM OR USE THEREOF.

Id. (uppercase in original). The CIM also stated:

[U]nless and until a definitive agreement regarding the Facility [Term Loan] between the parties thereto has been executed, the Recipient will be under no legal obligation of any kind whatsoever with respect to the Facility by virtue of this Notice and Undertaking except ...

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