Second Circuit Sides With Citi in $4 Billion Abu Dhabi Case

, The Litigation Daily


Brad Karp of Paul Weiss
Brad Karp of Paul Weiss

Lawyers at Quinn Emanuel Urquhart & Sullivan struck out Wednesday in their latest attempt to revive a $4 billion arbitration claim against Citigroup on behalf of Abu Dhabi's sovereign wealth fund. The U.S. Court of Appeals for the Second Circuit affirmed a previous loss for the Abu Dhabi Investment Authority (ADIA) in the case, which stems from a 2007 investment deal gone sour.

The ruling is a victory for a team from Paul, Weiss, Rifkind, Wharton & Garrison including chairman Brad Karp and partner Leslie Gordon Fagen. Fagen argued for Citi at the Second Circuit earlier this month.

ADIA invested $7.5 billion in Citi in November 2007 as the global economy was beginning to sputter. According to reports at the time, Abu Dhabi's royal family hoped to take advantage of the weak U.S. dollar and market conditions, while Citi was in need of capital. The parties agreed to arbitrate any disputes before the International Center for Dispute Resolution. By 2009, ADIA's Citi shares—for which the fund was obligated to pay more than $30 per share—were trading below $4. Quinn lawyers commenced the arbitration for ADIA in December 2009, seeking to force Citi to rescind the deal or pay nearly $4 billion in damages.

Wednesday's decision marks the third time Paul Weiss has succeeded in squelching ADIA's claims. Citigroup revealed publicly in October 2011 that arbitrators had ruled in the bank's favor, prompting us to name Karp Litigator of the Week.

ADIA's lawyers at Quinn Emanuel moved to vacate the arbitration award in Manhattan federal court, arguing that the arbitration panel erred by deciding to apply New York law rather than the civil law of the United Arab Emirates. But U.S. District Judge George Daniels found the arbitration panel's choice of law analysis "thoughtful" and upheld its ruling last March.

Quinn Emanuel's continued pursuit of the choice of law argument seems to have irked at least one judge at the Second Circuit. According to Law360, Judge Gerard Lynch sparred with Quinn's David Elsberg at oral argument. "This is one of the more frivolous arguments I've seen in a long time coming from a major law firm," he said, according to the Law360 account. Wednesday's summary order lacks those fireworks, but still sides with Paul Weiss and Citi.

A spokesman for Quinn Emanuel said the firm had no comment on the decision.

For Paul Weiss, the decision caps an impressive run over the past few days. As we reported, Paul Weiss won another Second Circuit ruling for Citigroup on Tuesday, knocking out a fraud case brought by a group of Norwegian investment funds. On the dealmaking front, Paul Weiss took the lead for Comcast in the cable company's proposed $45.2 billion acquisition of Time Warner last week—the largest transaction in the firm's history. Partner Theodore Wells Jr., meanwhile, has been earning high praise for his work on Friday's independent report on the bullying scandal that rocked the National Football League's Miami Dolphins this past season.

The string of hits for Paul Weiss wasn't lost on Karp when we reached him via email on Wednesday. Said Karp: "This is one of the best weeks in the history of our firm."

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