Levona Holdings Ltd. has petitioned a Manhattan federal court to vacate a $102 million arbitral award granted to Eletson Holdings Inc., alleging that newly disclosed documents reveal fraudulent conduct by Eletson and its former legal counsel, Reed Smith LLP, during the arbitration proceedings.
The dispute centers on a series of charter party agreements for transporting liquefied petroleum gas. Levona contends that Eletson, with Reed Smith’s assistance, misled the arbitration panel by withholding critical documents and presenting false testimony. These actions, Levona argues, resulted in an unjust award against them.
In a recent development, Judge Lewis J. Liman of the Southern District of New York conducted an in camera review of documents over which Eletson had claimed attorney-client privilege. The judge determined that there was probable cause to believe that Eletson committed fraud by withholding documents and presenting perjured testimony during arbitration. This finding led to the application of the crime-fraud exception, allowing the disclosure of certain privileged communications. ([jdsupra.com](https://www.jdsupra.com/legalnews/sdny-finds-evidence-that-law-firm-was-8475768/?utm_source=openai))
Reed Smith has faced multiple legal challenges in this matter. The firm sought to continue representing Eletson’s former owners in the ongoing litigation, but Judge Liman rejected this effort, stating that Reed Smith cannot represent the holding company post-bankruptcy “by repeated incantation.” ([law360.co.uk](https://www.law360.co.uk/articles/2412775/reed-smith-can-t-represent-eletson-by-repeated-incantation?utm_source=openai))
Additionally, Reed Smith’s attempt to impose sanctions related to document disputes was denied by the court. Judge Liman ordered the new owner of Eletson to turn over documents requested by Levona, while ruling that Reed Smith’s threat of sanctions was unfounded. ([law360.com](https://www.law360.com/articles/2381463/judge-rejects-reed-smith-s-sanctions-bid-in-doc-feud?utm_source=openai))
Levona’s motion to vacate the arbitral award is based on the assertion that the award was procured through fraudulent means, including the concealment of documents and presentation of false testimony. The court’s findings regarding the crime-fraud exception and the disclosure of privileged communications are central to Levona’s argument.
As the case progresses, the legal community is closely monitoring the implications for attorney-client privilege, the crime-fraud exception, and the responsibilities of legal counsel in arbitration proceedings. The outcome may set significant precedents for future disputes involving allegations of fraud in arbitration.