Tariq Imam

Hanover Insurance Co. must cover the maker of Arizona Iced Tea for additional audit expenses from a power surge that erased years of financial data, the Second Circuit determined Tuesday, finding that delays and additional costs were directly traced to the surge and therefore covered. A three-judge panel affirmed a New York federal judge's ruling that Arizona's audit expenses are covered under the "extra expenses" portion of the commercial insurance policy. The federal judge reasoned the expenses are covered because the policy language suggests that to be so if the audit was part of the iced tea producer's usual business operations and were incurred during the restoration period. The restoration period ended in October 2018 when Deloitte and Touche LLP concluded the audit, the Second Circuit said, upholding the lower court's finding. The appellate court rejected Hanover's argument that the "restoration period" should have ended Jan. 8, 2018, when Arizona replaced its damaged computer hardware and regained software functionality. "The plain language of the Extra Expense provision does not tie the end of the restoration period to the repair, replacement or rebuilding of 'covered equipment,'" the panel said. Instead, "restoration period" is defined in the policy as the time it reasonably takes to resume "'business' to a similar level of service starting from the date of a physical loss of or damage to property" and ending either on the date the property should be rebuilt, repaired or replaced or that business is resumed at a new permanent location, the opinion said. On Oct. 29, 2017, a power surge at Arizona's corporate headquarters in Woodbury, New York, damaged multiple disc drives, leaving the company unable to access account balances, inventory and order information. By Jan. 8, 2018, Arizona regained functionality of its present period operations but lost the data for 2016 and 2017, which was needed for its annual audit, according to court records. Since the audit expenses were thus incurred during the policy's restoration period, the Second Circuit agreed with the lower court that those expenses were covered under the extra expense provision. "Arizona incurred the costs of Deloitte's enhanced audit and paid overtime to employees assisting Deloitte with its audit only because of the power surge that resulted in the failure of Arizona's account operating system and the loss of its 2017 financial data," the panel said. Without that data, Deloitte was unable to complete the annual audit by a May 31, 2018, deadline set under the terms of a credit agreement Arizona entered into with JPMorgan Chase, according to court records. As a result, Arizona was required to pay to extend that deadline to avoid defaulting on its credit agreement. "Avoiding default clearly makes these expenses 'necessary,' and they undoubtedly were only incurred because of the damage caused by the power surge," the Second Circuit said. Representatives of Arizona and Hanover did not respond to requests for comment Tuesday. U.S. Circuit Judges Denny Chin, Susan L. Carney and Richard J. Sullivan sat on the panel for the Second Circuit. Arizona is represented by Amanda Peterson and Johnathan C. Lerner of Lerner Arnold & Winston LLP. Hanover is represented by Jeremiah L. O'Leary and Robert M. Wolf of Finazzo Cossolini O'Leary Meola & Hager LLC. The case is Arizona Beverages USA LLC v. Hanover Insurance Co., case number 23-1177, in the U.S. Court of Appeals for the Second Circuit.

Sep 2

3 min

Kirkland & Ellis advised Windjammer Capital on the close of Windjammer Capital Fund VI, which was announced on January 18, 2024. Fund VI closed at $1.3 billion in total capital commitments, which exceeded the initial target of $1 billion. The fund will focus on acquiring businesses with leading positions in niche addressable markets that provide mission-critical products or services. Target platform companies are typically between $10 million and $50 million in operating profit. Read Windjammer’s press release The Kirkland team was led by investment funds partners Steve Yoo and Justin Solomon and associates Ugo Nwasike, Kristie Kang, James Chao, Mary Ramzy and Bronty O’Leary; investment funds regulatory partner Matt Cohen and associate Leland Langston; tax partner Joel Peters-Fransen and associate Shiyu Ni; and financial services regulatory partners Reva Raghavan and Vanessa Walters and associate Vilian Mladenov.

Jan 18

1 min

Kirkland & Ellis represented private equity firm Court Square Capital Management, L.P. on the completion of a single-asset continuation fund to continue its partnership with PlayCore Group, Inc., a market leading provider of multi-brand playground equipment and recreation products. Leonard Green & Partners, L.P. (LGP), through Sage Equity Investors, L.P., acted as the sole lead investor and provided incremental capital commitments to support PlayCore’s future organic growth initiatives and M&A. The transaction offered existing investors the option to generate full or partial liquidity at an attractive return as well as the ability to roll their existing interests. PlayCore’s management team will remain a significant investor in the company. Sage is capitalized primarily by funds managed by LGP and a group of its co-investors. Read the transaction press release The Kirkland team included investment funds lawyers Társis Gonçalves, Sean Malone, John Senior, Nicholas Chan, Nathan Howe, Mack Wan, Dave Chan, Deanna Schreiber, Tiffany Wang and Zacaria Alahmad; corporate lawyers Jai Agrawal, Jessica Sicsu and Caitie Manuel; tax lawyers David Grenker and Claire Oxford; investment funds regulatory lawyers Noah Qiao and Tiffany Kwok; and debt finance lawyers Jocelyn Hirsch, Angela Hagerman, Bill Bandy and Adam Gilmore.

Nov 25

1 min

A proposed class of Michigan real estate brokers and agents have asserted that the National Association of Realtors effectively admitted to the litigants' antitrust claim when it revoked its disputed policy, which required membership in the organization to use multiple listing services. In a Nov.19 motion for leave to file supplemental authority in Michigan federal court, the agents and brokers pointed to a rule change NAR officially announced Monday. The group removed its policy that required agents and brokers be members of NAR to access databases in which properties are marketed. The Realtors organization's policy shift also left rules surrounding nonmember access to multiple listing services to local chapter officials' discretion. The move followed a comprehensive risk assessment of NAR policies by a "leading outside law firm," the organization said in a statement Monday. The litigants alleged Wednesday that NAR, "by changing its policies to avoid future antitrust litigation, is essentially admitting that its previous policy was a violation of antitrust law." The organization made a total of 18 changes to its handbook policies, each approved by a policy risk advisory board comprised of brokers, association executives, multiple listing services executives and industry partners, according to a NAR letter of MLS leaders included in the plaintiffs' filing. The changes removed language regarding membership requirements and emphasized local control. The agents and brokers urged the court to consider the revised policies when weighing a motion to dismiss that NAR brought in January. The national organization said the lawsuit fails to define the real estate market or demonstrate how the rule harmed competition in that market. In a complaint they filed in January, the agents and brokers challenged the expensive memberships needed to access their NAR-run MLS, despite the diminished value of these memberships following rule change implemented as part of a $418 million settlement with home sellers. Under the revision, MLS listings can no longer contain buyer agent commissions. But without these compensation listings, there's no reason to join local Realtor groups, the plaintiffs contended. The suit lists NAR, the Michigan Association of Realtors, the Grosse Pointe Board of Realtors, the Greater Metropolitan Association of Realtors, the North Oakland County Board of Realtors and Realcomp II LLC. The proposed class alleged illegal restraint of trade, violations of the Michigan Antitrust Reform Act, economic coercion and civil conspiracy. Counsel for the parties did not respond to requests for comment Thursday. The plaintiffs are represented by Michael S. Clawson. The National Association of Realtors and Michigan Association of Realtors are represented by Larry J. Saylor and Kimberly L. Scott of Miller Canfield Paddock & Stone. North Oakland County Board of Realtors is represented by Richard D. Linnell of Linnell & Associates PLLC. Greater Metropolitan Association of Realtors is represented by David J. DeVine and Sheldon H. Klein of Butzel Long. Grossse Point Board of Realtors is represented by Jared A. Roberts of Fraser Trebilcock Davis Dunlap & Cavanaugh PC. Realcomp is represented by Brian O'Keefe and Alexander E. Blum of Lippitt O'Keefe PLLC and Harvey R. Weingarden of Weingarden Law PLLC. The case is Hardy et al. v. National Association of Realtors et al., case number 2:24-cv-12102, in the U.S. District Court for the Eastern District of Michigan.

Nov 20

2 min

The National Association of Realtors and local realtor groups at the center of a proposed class action have urged a Michigan federal court not to allow real estate brokers and agents to bring recent NAR handbook changes before the court in their antitrust suit. The realtor groups argued that litigants misstepped when they introduced claims that the NAR effectively admitted to their antitrust claims when it revoked a policy requiring they be members of the NAR in order to access multiple listing services, databases in which properties are marketed. The plaintiffs sought to introduce the new information under the guise of a motion for leave to file supplemental authority, but such motions only allow for plaintiffs to make the court aware of relevant new legal precedent, the realtor groups argued. "Here, plaintiffs seek to introduce a fact for the court to consider in deciding the motion to dismiss: that NAR updated its MLS policy handbook," the realtor groups said. "This factual information is not legal precedent. A notice of supplemental authority is thus inappropriate here and leave should be denied." The NAR announced on Nov. 17 that it had made a total of 18 changes to its handbook policies, each approved by a policy risk advisory board comprising brokers, association executives, multiple listing services executives and industry partners, according to an NAR letter of MLS leaders included in the plaintiffs' filing. The changes removed language regarding membership requirements and emphasized local control. The proposed class told the court in a November motion that the NAR, "by changing its policies to avoid future antitrust litigation, is essentially admitting that its previous policy was a violation of antitrust law." The realtor groups added in their Wednesday filing that the court is barred from considering the NAR policy changes and may only look to facts pled in the complaint when weighing the plaintiff's motion to dismiss. And even if it were to consider the facts the agents and brokers seek to introduce, the changes would not be pertinent to the plaintiffs' claims, they alleged. "In any event, NAR's MLS policy handbook update is in no way an admission of anything," the realtor groups said. In a complaint they filed in January, the agents and brokers challenged the expensive memberships needed to access their NAR-run multiple listing service, despite the diminished value of these memberships following a rule change implemented as part of a $418 million settlement with home sellers. Under the revision, MLS listings can no longer contain buyer-agent commissions. But without these compensation listings, there is no reason to join local realtor groups, the plaintiffs contended. The suit lists the NAR, the Michigan Association of Realtors, the Grosse Pointe Board of Realtors, the Greater Metropolitan Association of Realtors, the North Oakland County Board of Realtors and Realcomp II LLC. The proposed class alleged illegal restraint of trade, violations of the Michigan Antitrust Reform Act, economic coercion and civil conspiracy. Counsel for the parties did not immediately respond to requests for comment on Thursday. The plaintiffs are represented by Michael S. Clawson. The National Association of Realtors and Michigan Association of Realtors are represented by Larry J. Saylor and Kimberly L. Scott of Miller Canfield Paddock & Stone. The North Oakland County Board of Realtors is represented by Richard D. Linnell of Linnell & Associates PLLC. The Greater Metropolitan Association of Realtors is represented by David J. DeVine and Sheldon H. Klein of Butzel Long. The Grosse Pointe Board of Realtors is represented by Jared A. Roberts of Fraser Trebilcock Davis Dunlap & Cavanaugh PC. Realcomp is represented by Brian O'Keefe and Alexander E. Blum of Lippitt O'Keefe PLLC and Harvey R. Weingarden of Weingarden Law PLLC. The case is Hardy et al. v. National Association of Realtors et al., case number 2:24-cv-12102, in the U.S. District Court for the Eastern District of Michigan.

Dec 4

3 min