Two separate and adversarial law firms are fighting in New York federal court over the right to represents reorganised Eletson Holdings following its emergence from Chapter 11 bankruptcy organisation.
The battle between Reed Smith and New York firm Togut, Segal & Segal mirrors the scenario in which representatives of Toronto-based hedge fund Murchinson and Eletson’s incumbent management separately issued competing press releases to assert control of the company.
Sanctions demanded
The two-year struggle for control of Eletson, a famous private Greek shipowning name, has been branded “hotly contested” by a judge and “incredibly acrimonious” by legal counsel for Eletson.
The latest filings – which include demands for $100,000 per day in sanctions against the legacy management and its lawyers – suggest the feud may only be getting uglier.
The warring legal appearances are being sorted by US District Judge Lewis Liman in the Southern District of New York and US bankruptcy judge John Mastando
Liman is overseeing Eletson’s attempts to confirm a 2023 award in which New York-based arbitrator Ariel Belen found in favour of Eletson and awarded $87m in compensatory and punitive damages against Murchinson affiliate Levona.
Liman has orderd further discovery into Levona’s claims of fraud by Eletson and chief executive Vassilis Kertsikoff, ruling that the shipowner withheld four key documents from the evidentiary process that could have changed Belen’s decision.
Eletson has denied the Murchinson allegations.
As that dispute grinds on, Mastando ruled the Murchinson-backed plan was confirmable and Eletson’s was not. The financier’s plan offered the highest return to creditors and received the most votes, he found.
Despite the bankruptcy court’s confirmation order, the back-and-forth in New York courts continues as the law firms jockey for position.
Togut Segal, which previously has represnted Murchinson’s interests, on 19 November filed an appearance indicating it now represents reorganised Eletson Holdings.
But Reed Smith filed a letter to Liman the following day asserting that it continues to represent Eletson.
“We wish to apprise the Court that the purported new shareholders of Holdings (a Liberian corporation with its principal place of business and center of main interests in Greece) have made no showing that they have taken the steps necessary under Liberian and Greek law to confirm their capacity to act on behalf of Holdings in this or any other forum.”
The arguments mirror language in a 21 November press release from the incumbent Eletson officers, who argued that a Greek court had appointed a provisional board of directors with the authority to run the company.
This is pending a hearing scheduled for February 2025, “at which time the management of the company will be addressed”.
The dispute escalated further 25 November in a 448-page document filed by Togut.
It is asking for an emergency order to force the legacy Eletson officers/shareholders and Reed Smith to recognise and comply with the bankruptcy confirmation.
The Eletson parties to date have failed to cooperate in even helping to change documents with the Liberian International Ship & Corporate Registry that would reflect the new ownership of Eletson Holdings, lawyers charged.
They are asking the court to find the Eletson parties in contempt of court and impose sanctions starting at $100,000 per day until cooperation is forthcoming, citing “a mockery of this Court and the Bankruptcy Code.”
Arguments on the issue have been scheduled for 16 December.
Eletson was founded in 1966 by Vassilis G Hadjieleftheriadis with his two sons and two sons-in-law.
It bought its first tanker in 1969 and was the first to place high-yield shipping bonds in the US in the early 1990s.
