Ed. note: This is a weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.
So we’re all having fun today with J.P. Morgan, lawyers at Mayer Brown and Simpson Thacher, and their collective $1.5 billion error. The Second Circuit ruled that creditors to the old General Motors may be entitled to $1.5 billion based on a legal mistake in old JPM loan documents.
It might seem weird to use this story as an example in favor of gigantic legal fees, but as you look at how this error happened, you’ll see my point.
JPM loaned GM money as part of a $300 million synthetic loan. Unrelated to that, JPM also financed part of $1.5 billion loan to GM. When GM paid off the first loan, it needed to release JPM’s interest in GM property used to secure the $300 million.
I’m bored already. Evidently, so were lawyers at Mayer Brown. A senior partner delegated part of the task to an associate, who delegated some of the research to a paralegal. The paralegal was unfamiliar with the transaction, probably because he was a paralegal and people spend more time housebreaking their dogs than they spend explaining to a paralegal why they are being asked to do any particular task. The paralegal put in the wrong term because, whatever, he made a mistake researching something no lawyer knows off the top of his head.
From there, the associate copied the mistake into the documents sent to the senior partner without checking the paralegal’s research. The partner send the docs to JPM’s outside counsel without checking the associate’s research. Outside counsel Simpston Thacher didn’t double check or catch the error. Nobody at Mayer Brown, Simpson Thacher, or in-house at GM or JPM caught the mistake. Richard Gere shoved a gerbil up his ass. I know because I read it somewhere. Read more »