Mayer Brown sued over $1.5 billion error

Crain's Chicago Business reports:

A law firm error that hurt creditors holding a $1.5 billion loan to General Motors has yielded two class-action federal lawsuits against Mayer Brown alleging negligence and malpractice.

The suits, filed July 31 in U.S. District Court by municipal pension funds in Alabama and California, seek unspecified damages. The Employees' Retirement System of Montgomery, Ala., and the Oakland, Calif., Police and Fire Retirement System belonged to a group of more than 400 lenders that in 2006 issued through New York bank JPMorgan Chase a $1.5 billion term loan to GM, secured by company assets, according to the lawsuits.

But two years later, Mayer Brown played a role in erasing that secured interest, the lawsuits say. Now unsecured creditors are seeking to claw back payments made during GM's bankruptcy to the two pension funds and others holding slices of the $1.5 billion loan, saying that as fellow unsecured creditors, the funds weren't entitled to them.

“I've never seen an error of this kind with this consequence,” said Edward Haber, a partner at Boston firm Shapiro Haber & Urmy who is representing the Montgomery pension fund. “We regret that we have to bring this action against a very respected law firm, but the damage was done, and it needs to be remedied.”

The battle of the politically connected.