In a footnote at the end of his October 14 ruling granting Southern Peru shareholders $1.3 billion from majority stockholder Grupo Mexico, Delaware Chancery Court Chancellor Leo Strine Jr. had cautionary words for the plaintiffs’ firms that won the extraordinary recovery. Prickett, Jones & Elliott and Kessler Topaz Meltzer & Check, the judge said, had been too slow to prosecute the derivative suit when it was filed back in 2005. He instructed the firms to confer with defense counsel from Milbank, Tweed, Hadley & McCloy (for Grupo Mexico) and Ashby & Geddes (for Southern Peru, now Southern Copper) to see if they could agree on a “reasonable” fee request, “with the plaintiff’s counsel taking into account the reality [that] their own delays affected the remedy awarded and are a basis for conservatism in any fee award.”
For the last three years, since the housing bubble burst, the Securities and Exchange Commission has been investigating the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac). Fannie and Freddie, after all, were the biggest players in the mortgage lending and securitization business, and there’s a lot of sentiment that they deserve a hefty share of blame for encouraging the financial industry’s voracious appetite for mortgage loans, no matter how deficiently underwritten. The problem for regulators hoping to hold Fannie and Freddie accountable, though, is that the previously quasi-private agencies went into public receivership conservatorship in 2008. Any SEC suit against Fannie and Freddie would essentially be one wing of the U.S. government seeking damages against another.
The folks who follow every development in the mega-billions poker match between Bank of America and the bond insurer MBIA have last week been buzzing even more loudly than usual about the prospect of a global deal. Tuesday’s settlement between MBIA and Morgan Stanley leaves BofA as the most important remaining member of the dwindling bank group challenging MBIA’s 2009 restructuring. There’s a de facto deadline of Dec. 30 for settlements in that case, since that’s the day New York’s top financial regulator, Benjamin Lawsky of the Department of Financial Services, has to file a key response to the banks’ allegations. Both Lawsky and MBIA execs have been very clear: they want resolution. So the pressure is on BofA to make a deal.
Bloomberg LP’s lawyers at Willkie Farr & Gallagher got more than they asked for this week from U.S. District Judge Alvin Hellerstein of Manhattan federal court. The lawyers had asked Hellerstein to wait until they’d developed a fact record before ruling whether the financial-news agency infringed Swatch’s purported copyright on a recording of its February 2011 earnings call with a select group of analysts. Instead, Hellerstein reversed his own reasoning from a ruling in August and granted Bloomberg a preliminary judgment on the pleadings. (Hat tip: Jeff John Roberts at paidContent.)
In 2006, Bear Stearns entered a $250 million settlement of Securities and Exchange Commission allegations that its traders engaged in illicit market timing for certain preferred customers. Like scores of SEC defendants concerned with liability in related civil litigation, Bear insisted on the language that’s become boilerplate in SEC settlements. So “without admitting or denying” the SEC’s findings, the bank agreed to disgorge $160 million and pay a $90 million penalty.
Just before midnight on Monday, Weil, Gotshal & Manges filed the seventh amended plan of reorganization for Washington Mutual Inc, the bankrupt onetime parent of WaMu Bank. The seventh time may just be the charm for WMI — according to the accompanying disclosure statement, everyone is now on the reorganization bandwagon, including, for the first time in this three-year case, the equity holders. As you may recall, WMI equity holders and their lawyers at Susman Godfrey have until now stood staunchly in the way of WMI’s reorganization. In the new plan, equity holders will receive an additional $75 million, which WMI senior and subordinated bondholders are kicking into the company that will emerge from Chapter 11 and will be owned by shareholders of the old WMI.
There was a very interesting paragraph near the end of Burford Capital’s announcement Monday that it has acquired a British litigation insurance provider. Burford, you may recall, is the litigation-finance company that in November 2010 made a controversial $4 million investment in the Ecuadorean litigation accusing Chevron of despoiling the Lago Agrio region of the Amazonian rainforest. Burford put up the money to pay the plaintiffs’ new lawyers at Patton Boggs after Chevron’s counsel at Gibson, Dunn & Crutcher succeeded in driving their longtime lawyer, Steven Donziger, out of the litigation.
My colleague Karen Freifeld was in Manhattan State Supreme Court Thursday when Bank of America counsel Theodore Mirvis of Wachtell, Lipton, Rosen & Katz stood up to argue for the dismissal of Walnut Place’s suit demanding millions of dollars in put-backs in two Countrywide mortgage-backed securities trusts. Everyone who follows MBS litigation knows that Walnut, represented by Grais & Ellsworth, is the leading objector to BofA’s embattled $8.5 billion settlement with Countrywide MBS investors. But Freifeld was the first journalist to pick up Mirvis’s big disclosure: Walnut Place, he told Justice Barbara Kapnick, is actually the distressed debt hedge fund Baupost.
The Justice Department’s case seeking to block AT&T’s $39 billion acquisition of Deutsche Telekom’s T-Mobile is rocketing toward a Feb. 13 trial date. AT&T has everything riding on either a win at trial or a settlement that satisfies DOJ’s concerns about the combined entity’s dominance in nationwide wireless markets; as On the Case has reported, AT&T withdrew its application for Federal Communications Commission approval of the merger after the FCC announced it wanted an administrative law judge to consider the agency’s problems with the proposed deal. AT&T and T-Mobile are apparently betting that they’ll be able to come back to the FCC with a stronger case after they’ve appeased (or vanquished) the Justice Department.
Late Tuesday, U.S. District Judge Barbara Jones of Manhattan federal court denied Bank of America’s motion to disqualify Quinn Emanuel Urquhart & Sullivan from representing AIG in its $10 billion mortgage-backed securities case against BofA, Merrill, and other bank subsidiaries. BofA’s lawyers at Munger, Tolles & Olson had argued that a former Munger partner, Marc Becker, acquired confidential information about Merrill’s MBS litigation strategy before departing to join Quinn Emanuel in 2008, then proceeded to work on AIG’s case against BofA and Merrill. The judge faulted Quinn’s screening process for failing to identify Becker’s potential conflict. But she said Becker had performed only non-substantive editorial work on AIG’s complaint and remand motion, didn’t share any confidences, and took steps to segregate himself from the AIG case as soon as he was reminded of his previous work for Merrill Lynch and its former mortgage unit. “There is no meaningful showing here that the trial process will be tainted,” Jones wrote. “The court finds that it would be unduly prejudicial to disqualify Quinn.”