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On September 28, 2006, the Oklahoma Court of Civil Appeals affirmed summary judgment in favor of JPMSI in an action brought against it by Commercial Financial Services, Inc. (“CFS”). CFS is the former high-flying collections firm that was said to have revolutionized the business of collecting on bad debt, specifically charged off credit card receivables. CFS financed its purchases from banks that issued credit cards to consumers using lines of credit and asset-backed securitizations. CFS collapsed into bankruptcy after an anonymous letter exposed a massive fraud at CFS.

CFS’s bankruptcy estate sued JPMSI and its other professionals, seeking $1.3 billion in damages based on a theory of “deepening insolvency” arising from alleged professional negligence and breach of fiduciary duty. Although CFS acknowledged that it became insolvent prior to entering into a relationship with JPMSI, CFS claimed that the alleged professional negligence and breach of fiduciary duty caused it to become more insolvent. In a case of first impression, the Oklahoma Court of Civil Appeals rejected CFS’s theory and held that deepening insolvency is not a recognized measure of damages in Oklahoma. The appellate court also affirmed an award of over $1 million in attorneys’ fees to JPMSI.

The Simpson Thacher team included Tom Rice, Joe Wayland, Mark Thompson, Linda Martin, Christine Ford, Tinu Awe, Nicole Friedlander, Bill Ferullo, Charlie Divine, Ryan Kane, Matt Katz, Jeremy Saks and paralegals Doug Henderson, Joe Law and Tracy Williams.