Ordinarily, there’s not much reason to get excited about a state intermediate appeals court upholding a procedural ruling by a trial court judge. But in the litigation between bond insurers and mortgage-backed securities issuers, decisions are not only magnified by the tens of billions of dollars at stake, but also by the paucity of precedent. Almost every ruling is groundbreaking, which means that decisions have an impact far beyond a single case.
With that in mind, there are two reasons why a ruling Thursday by the New York Appellate Division, First Department, is a setback for Bank of America: timing and authority.
Without much comment, the state appeals court affirmed two rulings by New York State Supreme Court Justice Eileen Bransten, who last fall denied motions by Bank of America to sever and consolidate successor liability claims against the bank in four bond insurer cases against Countrywide. “The court properly exercised its discretion in denying defendant’s motion to sever plaintiffs’ successor liability claims from the primary claims and to consolidate them, for purposes of discovery, in a single action,” the appellate decision said. “The successor liability actions are at completely different stages of discovery, and consolidation would result in undue delay.”
Countrywide Home Loans, Inc.,et al., Defendants, Bank of America Corp., Defendant-Appellant.
Syncora Guarantee, Inc., Plaintiff-Respondent,
v
Countrywide Home Loans, Inc.,et al., Defendants, Bank of America Corp., Defendant-Appellant.
O’Melveny & Myers LLP, New York (Jonathan Rosenberg of counsel), for appellant. Patterson Belknap Webb & Tyler LLP, New York (Robert P. LoBue of counsel), for Ambac Assurance Corp. and The Segregated Account of Ambac Assurance Corporation, respondents. Quinn Emanuel Urquhart & Sullivan, LLP, New York (Peter E. Calamari of counsel), for MBIA Insurance Corporation, respondent. Kutak Rock LLP, New York (Robert A. Jaffe of counsel), for Financial Guaranty Insurance Co., respondent. Allegaert Berger & Vogel LLP, New York (David A. Berger of counsel), for Syncora Guarantee, Inc., respondent.
Orders, Supreme Court, New York County (Eileen Bransten, J.), entered October 31, 2011 and November 2, 2011, which, among other things, denied defendant Bank of America Corp.’s motions to sever and consolidate plaintiffs’ successor liability claims for purposes of discovery, and held in abeyance defendant’s motion to consolidate the successor liability claims for purposes of trial, unanimously affirmed, with costs.
This is a consolidated appeal involving four related but separate claims by monoline insurers for primary liability against the Countrywide defendants in connection with financial guarantee insurance covering mortgage-backed securities. The actions also involve successor liability against defendant Bank of America. The court properly exercised its discretion in denying defendant’s motion to sever plaintiffs’ successor liability claims from the primary claims and to consolidate them, for purposes of discovery, in a single action. The successor liability actions are at completely different stages of discovery, and consolidation would result in undue delay (see Barnes v Cathers & Dembrosky, 5 AD3d 122 [2004]).
M-664 –Syncora Guarantee Inc. v Countrywide Home Loans, Inc., et al. and Bank of America Corp.
M-665 –MBIA Insurance Corporation v Countrywide Home Loans, Inc., et al. and Bank of America Corp.
M-745 –MBIA Insurance Corporation, et al. v Countrywide Home Loans, Inc., [*2]et al. and Bank of America Corp.
Motions to supplement the record on appeal (M-664, M-665) granted; cross motion to strike the supplemental record and reply brief, or for leave to supplement the record in the event the motion (M-665) is granted (M-745), granted to the extent of granting leave to supplement the record.
THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
The Principal – Agent Problem: Part I – RMBS Data Integrity
Back near the dawn of time when I was in business school, and the faculty was hard-pressed to find topics to fill up the curriculum, they introduced the Principal – Agent Problem. As future corporate managers and agents of the stockholders, I suppose they wanted to explain to us that our economic interests were not identical to those of the owners. This wasn’t exactly the most shocking news we had ever received, but that was all that was said about the issue, back then.
Of course, there is considerably more to this multi-faceted problem. According to Wikipedia, “The principal–agent problem arises when a principal compensates an agent for performing certain acts that are useful to the principal and costly to the agent, and where there are elements of the performance that are costly to observe,” primarily due to asymmetric information, uncertainty and risk.
Let’s look at the relationship between the RMBS bondholder…
JPMorgan Chase & Co. (JPM) received a subpoena from the U.S. Securities and Exchange Commission over failed mortgages, a person familiar with the investigation said, as the agency probes banks including Credit Suisse Group AG (CS) for allegedly failing to share refunds from sellers of faulty debt.
“Credit Suisse is now the subject of an investigation by the Securities and Exchange Commission, which issued a subpoena this week seeking the same types of documents as MBIA seeks with this motion,” the bond insurance unit of Armonk, New York-based MBIA Inc. (MBI), said in the filing in New York State Supreme Court. The document, dated April 29, was filed today.
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