Photo: Courtesy of CVR Energy

A long-running suit by Wachtell, Lipton, Rosen & Katz that accused Carl Icahn and his company CVR Energy of misusing confidential information to gin up a legal malpractice suit against Wachtell has been dismissed.

Manhattan Supreme Court Justice O. Peter Sherwood called some of Wachtell's evidence in the suit "vague" and "self-serving."

Wachtell had claimed that CVR's lawyer Herbert Beigel violated a protective order when he shared documents that it had labeled "PRIVILEGED AND CONFIDENTIAL" with Icahn's organization, which Wachtell has repeatedly clashed with over the years. The law firm claims Icahn used the materials as fodder for a since-dismissed malpractice lawsuit against it.

But Sherwood said in a Jan. 30 decision that Beigel wasn't expressly instructed to keep the documents secret. Many of them were clearly documents to which CVR, as a former Wachtell client, would be entitled to, the judge noted, and only "vague, self-serving" testimony from Wachtell suggested there was some unwritten deal to keep them confidential, he wrote.

"At the point the documents were received by Beigel, they were not yet part of any production governed by the protective order and Wachtell did not treat them as such," the judge wrote. "Nothing in the body of the cover email gave the reader any hint that Wachtell wanted special handling to protect its own confidentiality interests as distinct from those of its former client."

"The documents undisputedly related to the representation and barring a 'substantial showing' by Wachtell of good cause to refuse client access, CVR was 'entitled to inspect and copy [the] work product materials, for the creation of which paid during the course of the firm's  representation,'" the judge wrote, citing Sage Realty v. Proskaurer Rose Goetz Mendelsohn.

CVR said it originally hired Wachtell to help it defend against a takeover effort by Icahn and only later learned that the firm had a "Kafkaesque" compensation agreement that would result in greater compensation for the lawyers if Icahn prevailed. After Icahn took control of CVR, the Sugarland, Texas, company refused to pay the investment bankers their fee and CVR sued Wachtell for malpractice.

The protective order referred to in the Jan. 30 decision was part of a lawsuit that the banks filed against CVR, a Texas-based petroleum refining and marketing company. Wachtell wasn't a party to that suit and produced the disputed documents in response to a subpoena.

Wachtell, which was represented at oral argument by Michael Shuster of Holwell Shuster & Goldberg, and CVR, which was represented by Beigel, have now litigated themselves to a draw, with the suit each filed against the other having been dismissed. CVR appealed the dismissal of its malpractice suit against Wachtell to the U.S. Court of Appeals for the Second Circuit, however.

Wachtell litigation partner Kevin Schwartz declined to comment on behalf of the firm. Beigel, who runs his own small firm, reacted positively to the news.

"There's always the possibility of an appeal by Wachtell, but at the present time, CVR and the other defendants don't have to spend time and money" continuing to litigate, he said.