A former Dewey & LeBoeuf partner who sued Barclays Bank after it demanded that he make good on what he claims is a fraudulent loan agreement is now trying to spread the blame for the loan’s creation to several of the defunct firm’s onetime leaders, including former Dewey chairman Steven Davis.
Entertainment lawyer L. Londell McMillan sued Barclays in New York federal court in February "to challenge a fraudulent scheme orchestrated and arranged" by Barclays and Dewey management. McMillan’s complaint came two months after the U.K.based bank initiated legal action against McMillan in England to recover what it says is the $540,000 loan he took out in 2010 to cover his Dewey capital contribution requirement, and seven months after Barclays first pressed him to repay the loan in a demand letter.
McMillan amended his original complaint April 3, adding Davis as a defendant, as well as Joel Sanders, Dewey’s former chief financial officer; Stephen DiCarmine, the firm’s former executive director; and former finance director Frank Canellas. Lawyers for all four characterized the claims as meritless Thursday. Attorneys with Boies, Schiller & Flexner who are representing Barclays in the matter declined to comment.
McMillan says in his 17-page amended complaint that Sanders asked him to contribute $540,000 in capital when he rejoined Dewey predecessor firm LeBoeuf, Lamb, Greene & MacRae in May 2007, a few months ahead of what would be its ill-fated merger with Dewey Ballantine. In agreeing to return to the firm, where he had started his career in 1990, McMillan says he executed a written contract that guaranteed him $1.5 million in compensation per year over the following three years, and that pegged the capital he was expected to contribute at 36 percent of the promised salary.
McMillan says in court filings that Dewey leaders presented him with the option of taking out a loan from Barclays in order to fulfill his capital obligations to the firm. As The Am Law Daily has previously reported, at different times in Dewey’s history, firm leaders worked with Barclays and Citi Private Bank to arrange capital loans at little or no interest. Without offering specifics, McMillan says in the suit that he "declined to enroll" in the program and never paid his capital.
Over the ensuing several years, McMillan claims in the complaint, Dewey failed to keep its promises to him, paying him $810,000 less than he was owed in 2008 and shortchanging him by $960,000 in 2009.
According to the suit, McMillan told DiCarmine, litigation chair Jeffrey Kessler, and an unnamed member of Dewey’s executive committee in March 2010 that he planned to withdraw from the partnership after winding down his work for the firm. McMillan claims Sanders emailed him three months later, on June 22, 2010, with an accounting of how much the firm believed it owed him for the period from 2008 through 2010. In the email, McMillan states, Sanders said that sum was $824,000, and noted that because McMillan had never made a capital contribution, that amount would be deducted from what he was owed. "Your capital has already been deducted and processed as it was way overdue and you never processed the loan documents," Sanders allegedly wrote at the time.
The suit Barclays launched against McMillan in December claims otherwise. Documents attached to the U.K. action include what appears to be a signed loan agreement [PDF] dated June 24, 2010two days after Sanders allegedly emailed McMillan to say his capital would be deducted from what the firm owed him. The five-page document names Canellas as McMillan’s power of attorney "to sign all documents and do all acts on the Borrower’s behalf in connection with drawing the Loan, paying interest on the Loan and repaying the Loan."
In its suit, Barclays offers its own timeline of the events at issue, alleging that McMillan applied for the loan March 16, 2010, received the relevant particulars on June 24, and agreed to the loan terms in writing six days later. On July 6, 2010, the full amount of the loan was allegedly drawn down. Factoring in interest, Barclays now seeks $551,138.
McMillan’s attorney, Meister Seelig & Fein partner Kevin Fritz, said Thursday that McMillan "has no recollection of signing" the Barclays loan agreement, and that if he did do so, he didn’t authorize Dewey leaders to deliver it to Barclays. Fritz says he decided to add Davis, Sanders, DiCarmine, and Canellas as defendants in the amended complaint after determining the four were partly responsible for the complaint’s allegations.
Ned Bassen, a Hughes Hubbard & Reed partner who represents Sanders and DiCarmine in the matter and other Dewey-related litigation, called the suit an "insurance grab." One insurance company responsible for covering mismanagement claims, XL Specialty Insurance, recently agreed to pay Dewey’s bankruptcy estate the $19 million left on its policy in return for a promise that the Dewey estate would not sue former firm leaders for covered claims. As part of that proposed settlement, which still requires court approval, Davis executed a $511,145 promissory note to insulate himself from future suits filed by Dewey and to cover clawback claims on money he received from the firm in 2011 and 2012. The terms of Davis’s agreement don’t require him to begin paying off that note until March 2014.
Canellas’s attorney, Ronald Minkoff at Frankfurt Kurnit Klein & Selz, says his client is disappointed to see himself named in McMillan’s suit and has petitioned the court to stay the matter pending the outcome of the U.K. litigation. Barclays counsel has also requested that the New York case be stayed.
Kirkland & Ellis partner Kevin Van Wart, who represents Davis, said via email that it "seems reasonably clear that the only reason Mr. McMillan added new defendants was to try avoid a stay of the retaliatory lawsuit he is pursuing against Barclays." (Aside from being described as Dewey’s chair, Davis is not mentioned anywhere else in the complaint).
McMillan’s suit seeks a court declaration that the Barclays letter agreement is invalid and unenforceable; that the loan should be undone because it was entered into at a time when Dewey already had enough debts to trigger default on the loan; or, in the event the loan is deemed valid, that he not be required to pay it off until the end of 2020. He has also brought breach of fiduciary duty, fraud, and negligent misrepresentation claims against the individual defendants. A status conference in the case is scheduled for Friday afternoon.
Since leaving Dewey, McMillan has pursued a variety of business and legal roles, including working with The NorthStar Group, a media, management, and marketing-focused private equity group he founded. Earlier this year he joined 50-lawyer Meister Seelig, the firm representing him in the suit, as a partner, according to Fritz.
McMillan isn’t the only lawyer suing, or being sued, over capital contribution loans following a law firm’s failure. In California, former Howrey partners Stephen O’Neal and David Buoncristiani sued Citibank over unpaid loans totaling $315,000 and $420,000, respectively, claiming the bank defrauded them by hiding the now-defunct firm’s true financial state. A state court judge in San Francisco dismissed that suit in March, ruling "the bank owed the plaintiffs no duty of disclosure."
After Dewey’s fall last May, Citi sued former Dewey partner Steven Otillar, an energy lawyer in Texas, over an unpaid $210,000 loan. Otillar countersued, claiming Citi had a legal right to tell him Dewey was in financial distress at the time he took out the loan. That case is ongoing.
