Carlyle Prevails Against Liquidators' Claims Seeking $2 Billion

May 2019

On April 12, 2019, the Court of Appeal of Guernsey upheld the trial court’s judgment fully exonerating The Carlyle Group in a $2 billion action filed against it in the Royal Court of Guernsey arising out of the collapse of Carlyle Capital Corporation (CCC), a $23 billion entity sponsored by Carlyle. CCC, which invested almost exclusively in guaranteed government-backed securities, became insolvent at the peak of the 2008 financial crisis, igniting lawsuits against Carlyle on three continents.  Williams & Connolly was tasked with defending simultaneous actions in multiple jurisdictions, with claims filed or threatened to be filed in multiple locations, including Guernsey, Kuwait, the Netherlands, Massachusetts, Delaware, Washington D.C., and New York.

On September 4, 2017, after a six-month trial, the Guernsey trial court issued a comprehensive 525-page opinion finding that Carlyle and the directors of CCC acted reasonably and appropriately in the management and governance of the company.  Accordingly, the Court dismissed all 187 individual allegations of breach brought by the liquidation trustees of CCC in the largest case ever tried in Guernsey.  In affirming the lower court’s decision, the Court of Appeal held that CCC’s directors were not in breach of their duties and that Carlyle did not breach any of its contractual obligations, recognizing that “[h]owever startling the history of [CCC's] short life appears at first sight, its failure was the result of circumstances beyond the control of any board of directors."  The victory in Guernsey was the last in a string of victories across these jurisdictions. 

Reflecting on the matter, Jeffrey Ferguson, General Counsel of Carlyle, said that Carlyle had “wanted the best litigation firm we could find to see these cases through to trial, if necessary. [Bob Van Kirk and Williams & Connolly] exceeded all of our expectations.”  He added that Bob and his team provided not only “outstanding litigation advice and judgment in all the individual pieces of litigation that were filed around the world” but “extraordinary strategic advice on the coordination and resolution of the litigation issues as a whole.”  In over a dozen cases including class actions, individual investor suits, and this action by the company’s Liquidators spanning nearly a decade, Carlyle prevailed in every action filed against it. 

As the prevailing party in Guernsey, Carlyle is entitled to prevailing-party fees.  The plaintiffs already have paid Carlyle over $30 million for trial costs and will soon release an additional $1.2 million for costs incurred during the appeal.  Williams & Connolly is pursuing recovery of further sums from the plaintiffs in Guernsey and has filed claims against the litigation funder in a separate action in Delaware. 

The team representing Carlyle and its directors included Bob Van Kirk, Hack Wiegmann, Sarah Kirkpatrick, Jonathan Pahl, Sarah O’Connor, Luke McCloud, and Yifan Wang.

Click here to read the Global Legal Chronicle article.

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