Material Adverse Change

I spend quite a bit of time listening and helping companies fight over the definition of “Material Adverse Change” or “Material Adverse Effect” that would allow them to get out of a deal they’ve agreed to do.

Once the definition is agreed upon, and the deal is signed, there’s no room left to argue.

It would appear that the CEO of Bank of America did not understand that concept. Or, rather, he refused to listen to his lawyer when his lawyer explained that he could not call the MAC and kill the merger with Merrill Lynch.

When his lawyer explained that the losses of Merrill Lynch were insufficient reason to call the MAC — he fired his lawyer. He then told the Feds he intended to kill the deal unless he got bailout money for Bank of America.

In my first year of law school, my property professor said something that I think is a very important rule for lawyers to remember:

If someone has to go to jail, it should be the client.

It’s hard, when you are a service provider, to provide services your clients don’t want. Particularly when they have to power to fire you.

At the time, Bank of America’s former counsel was probably very frustrated with the conflict between doing the right thing and keeping his job. But now that there’s a federal investigation, I’m guessing he is even more glad that he did the right thing.

And You Thought You Had Money Problems

The allegations about the final financial shenanigans at now-defunct Heller Ehrman (a local law firm that had been around since the late 1890s) are shocking.

Many of the partners have moved on to other firms since its spectacular unraveling, but if the Bankruptcy Committee gets its way, they may be required to pay back some $106 Million in distributions made to them or on their behalf.

In terms of scale, this is nothing compared to the big banks failing. But, what’s amazing to me is that partners, who ostensibly are the owners in control of (and personally liable for) a legal business, could be receiving checks in the high hundreds of thousands of dollars or even millions without any insight into the accounting of the money they are receiving.

Apparently, one of the last distributions was put on the books as a “Shareholder Loan” but when the accountants tried to notify the shareholders (partners), they were requested not to do so.

So, basically, there are probably over 100 ex-heller partners who thought they were receiving their profit share, but actually received a “loan.”

Ouch.

Snippits

HOUSING: Monday (you know the day the S&P lost almost 9%) we made an offer on a house. They countered the next day, and we found out that a house we really liked sold for way less than it was listed and we were very disappointed that we hadn’t been the ones to successfully low-ball the sellers on that one. So, we let the counter-offer expire and we looked at another house on Wednesday. We haven’t found anything we’re in love with, so we’re still in process…

GARDEN: We’ve finished two boxes of the winter garden, and now I’m just waiting for my shipment to arrive from the Gourmet Garlic Gardens (don’t you love the Internet?) to plant the third box (which, in addition to the garlic, will be full of things to over-winter, including artichokes, red onions, and white onions). The winter garden currently looks like this:

TRAVEL: After 5 years of flying Delta back and forth between California and Atlanta, we finally *almost* had enough miles to get free flights for Christmas and New Year’s. Round-trip flights were the most expensive they’ve ever been since we started this regular trek — it would have cost $1400 for the flights we wanted. So, instead, we bought $220 worth of miles and paid the $37 per person fee and we’ll be flying to Atlanta on miles. And, we decided to spend most of the Delta miles savings on our New Year’s trip to Savannah, Georgia.

LAWYERING: Work is relatively slow for me for the first time since I started working as a lawyer, really. I’m definitely enjoying it, although, of course, I have a slight fear for the economy and hope that it doesn’t stay too slow, too long.

RUNNING: I dropped a recent race because my sister couldn’t do it with me. We got last-minute invitations to a wedding on the date of my next race, so I’ll be skipping that one too. So, it looks like I’ve got my favorite half marathon as the only remaining race I’ll be doing this year. But, my speed efforts continue to pay off, so I look forward to trying to set a PR at that one before building up distance for 2009’s spring marathon(s).

I think that covers it.