The Los Angeles Blow Up

Century Plaza

Century Plaza Hotel,  Los Angeles, Luis Nogales Headquarters

For some time, it had been the view of Nogales and Kenny that the time had come for Ruhe and Geissler to either sell UPI or send it into bankruptcy court for a restructuring. Now Nogales was making the argument directly to both owners. Recognizing that in either event, they would likely not only lose operational control, but would also walk away with nothing further to gain financially, this was the last thing Ruhe and Geissler wanted to hear. Ruhe had concluded now that he had to get rid of Nogales. In parallel, Nogales had concluded Ruhe and Geissler had to be removed from operational control of the company if it was ever going to recover from the current crisis.

With the owners now at loggerheads with the top managers of UPI, the two factions agreed to meet at the Los Angeles airport on Sunday, February 24, 1985. Foothill had summoned Nogales to be briefed on UPI’s financial status and recovery plan the next day. With primary lender Foothill, UPI’s senior management, creditors, and newspaper subscribers all having lost faith in reign of Ruhe and Geissler, Nogales hoped that they would come around in their thinking given the inability to meet the next payroll coming due. Not to be. Ruhe and Geissler still thought they would somehow muddle through.

John Nickoll, Foothill

When Nogales and UPI’s outside financial advisor Ray Wechsler met with Foothill the next day, things didn’t go well. Foothill executive John Nicholl told them:

“You’d better get the owners back out here. We’re at a crucial point. You guys don’t own the company. You’re managers not owners. Owners need to make the decisions.”

Ruhe and Geissler might ignore Nogales, Wechsler. or Kenny, but they couldn’t have UPI’s prime lender going wobbly on them. When Ruhe and Geissler turned up on Wednesday, they got the following blast from Foothill executives:

“We don’t have confidence you can turn it around. We’re not going to fund the company with its present ownership. Often, in situations like these, management takes over. If you want to work out an agreement where management takes over, we’ll work with you.”

For Ruhe and Geissler that meant giving up any further dismemberment of UPI and swapping their UPI stock in return for creditors forgiving their debts. After dickering Thursday with Nogales and Wechsler, Ruhe and Geissler agreed to the basic outlines of a plan and shook hands on it.

While all this had been going on, I had been in Brentwood and was unaware of the details of what had been going on in Los Angeles. However, as they flew back to Nashville for Los Angeles, Ruhe and Geissler were already cooking up a new Plan B for Nogales.

Down to the Wire records the next chapter in the Los Angeles blow up.

As Ruhe and Geissler headed home, Wechsler phoned Kenny in Nashville and told him to hop a plane to Los Angeles. Kenny, in turn, called new General Counsel Bill Bowe and excitedly broke the news. “I’ve made reservations for you to fly to Los Angeles,” he told Bowe. “An agreement has been reached that will result in a change of control, a sale of the company, and a working out of the creditor problem.” Bowe’s assignment was to put into ironclad writing, for presentation to Foothill Sunday night, the agreement removing the owners from control of the company. Nogales should have known it wouldn’t have been that easy. Although they had shaken hands on the deal, Ruhe and Geissler were bitter that the men they had hired had just dictated the terms of their surrender. Flying back to Nashville, they craftily plotted strategy.

Back in Nashville Saturday, March 2, Ruhe had decided to welch on the deal and fire Nogales.

I had immediately flown to Los Angeles and hired local lawyer Lisa Greer and her law firm Lawlor, Felix to provide legal assistance and office support for me all Saturday and Sunday.

Lisa Greer Quateman

I was trying to understand and document the agreement for the change in control of the company. Usually this wouldn’t be any different than documenting any other arrangement between parties. The parties on both sides of an agreement are usually represented by separate counsel. With Linda Neal recently leaving her role as UPI’s General Counsel as she prepared to marry, I had succeeded her as General Counsel. This happened to occur at a time when ownership and management were no longer aligned. In fact, they were at each other’s throats. With management of the UPI about to shift from Ruhe and Geissler to Nogales, I was still reporting to the former, but about to the follow directions from the latter. This is a very uncomfortable position for a lawyer to be in because of the expectation on both sides of the equation that you will document an agreement in their favor.

As I increasingly recognized being caught in the vise of these conflicting pressures, I began to ask myself who my client really was. My sympathies were completely with Nogales as I had seen Ruhe and Geissler were rank amateurs recklessly pursuing their own self- interest as they sluiced cash and assets out of UPI. Nogales on the other hand was smart, professional and a born leader. He was likely to have success in leading UPI into an inevitable bankruptcy proceeding and out. Although you don’t normally have to think about who you client is as a corporate lawyer, in this case I had to. And the answer was simple. I was now General Counsel of UPI, and UPI was my client. My client was not one or the other of the feuding parties, my client was UPI. My loyalty and duty were to the enterprise and its current and future welfare, and my role was to simply to assist it in any way I could in surviving a crisis that could kill it.

The earlier verbal agreement between Ruhe and Geissler and Nogales had been short on substance and I spent a fair amount of time Saturday trying to understand what Nogales thought the agreement was. On Sunday, I called Ruhe back in Nashville to make sure his understanding matched up with what I’d learned from Nogales. Ruhe abruptly told me there was no agreement and he wouldn’t be signing anything.

With everything coming to a head, I would be leaving the Century Plaza Hotel with Nogales that Sunday night to meet Foothill officials for a briefing at the home of Foothill executive John Nickoll’s Beverly Hills home. The stage was set. Foothill would learn Ruhe and Geissler would not be stepping aside, they would pull the plug on its loan to UPI, and shortly the checks going out to its 1,000 plus employees, including me, would bounce.

Nogales, Wechsler, UPI financial advisors from Bear Stearns, myself and Lisa Greer of the Lawlor, Felix law firm represented UPI when we met that evening in the home of Nickoll. Besides Nicholl, several other Foothill executives were present. When the news of Ruhe and Geissler’s about face was discussed, there really wasn’t much anyone could say. Everyone knew UPI would go down the tubes. It was now merely a question of how and when.

Ann Landwirth Nickoll

Then the phone rang. Nickoll’s wife Ann answered the call in a bedroom and said it was for Nogales. When Nogales got to the phone, it was Doug Ruhe. The conversation was a short one on Ruhe’s side, “Luis, you’re fired!” He then told Nogales he wanted to speak with Ray Wechsler. Nogales returned to the group and reported on his conversation with Ruhe. Wechsler said, “Luis, just tell Doug I’m too busy, I’m in a meeting right now. What do I want to talk to him for and get fired?”

Everybody had a good laugh except me. I did my unwelcome duty as General Counsel and went into the bedroom and picked up the phone. Ruhe immediately shouted, “Go in there and fire Wechsler, fire Lawlor Felix, fire Bear Stearns, fire Levine!” Levine was Boston bankruptcy attorney Rick Levine. Though not present, he had been advising me on the finer points of a possible bankruptcy proceeding.

John Nickoll and the others sat quietly as I returned from the bedroom. Though I took a stab at it, it’s hard to publicly fire half the people in a large room with any degree of dignity. Based on accounts of those present, the reporting in Down to the Wire records the scene this way:

Watching Bowe uncomfortably playing the role of angel of death, John Nickoll feared for both his company’s substantial investment and the fate of UPI. Nogales’s leadership had inspired confidence among the very employees and clients Ruhe had so badly alienated…. Nickoll was simply not going to stand still while Foothill’s investment was in jeopardy. He went to the bedroom and picked up the phone. Ruhe was still on the line. “Doug, you’ve got to be crazy! UPI has no management. Foothill has nobody to deal with. You’d better get out here immediately and talk to Nogales and come to some sort of agreement.”