Reuters-

On Monday, former New York governors Mario Cuomo and George Pataki wrote an unusual joint opinion piece in The Wall Street Journal, calling on New York Attorney General Eric Schneiderman to drop threats that he will continue to seek injunctive relief against former AIG chief Hank Greenberg, even though the AG has already had to abandon damages claims because Greenberg reached a private settlement with investors in a securities class action. As my Reuters colleague Karen Freifeld explained in a really smart analysis last Friday, Schneiderman is constrained by a 2008 ruling that limits the AG’s right to recovery in the name of investors who have already settled a federal-court class action. Freifeld said that the same holding, Spitzer v. Applied Card, may ultimately force the AG to drop claims for money damages against Bank of America in connection with its merger with Merrill Lynch and against Ernst & Young for its audit of Lehman Brothers, even though both suits were brought under New York’s powerful Martin Act, which permits the state to bring securities claims on behalf of supposedly defrauded investors.

I’ve written a lot about the tension between class action lawyers and state regulators with parallel claims. The battle to recover damages on behalf of misled investors (and the right to claim credit for the recovery) is part of that interplay: In New York, whoever makes a deal first wins.

[REUTERS]

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