No major investor in private-label mortgage-backed securities has been more stalwart about standing up for its contractual rights than the asset manager BlackRock. Along with Pimco, BlackRock has been the backbone of the MBS investor coalition that reached the proposed $8.5 billion breach-of-contract (or put-back) settlement with Bank of America last year and the $8.7 billion allowed-claim deal with Residential Capital last month. The coalition, represented by the law firm Gibbs & Bruns, has also served put-back demands on trustees for more than $100 billion in mortgage-backed offerings by JPMorgan, Morgan Stanley and Wells Fargo. So there’s no one better qualified than BlackRock Managing Director Randy Robertson, who heads the firm’s securitized asset investment team, to judge the impact of put-back litigation on the future of residential mortgage-backed securitizations.
It’s no secret that the judges of Delaware Chancery Court don’t much like the forum fights that have become an inevitable blight on shareholder derivative and M&A litigation. In those cases, unlike federal securities fraud class actions, there’s no formal mechanism for picking lead counsel. So, as Vice-Chancellor Travis Laster wrote Monday in a monumental and must-read ruling in the Allergan derivative litigation, shareholder firms – or, as Laster calls them, “rational economic actors” – have a powerful incentive to stake a claim to a promising derivative case by rushing to court with a bare-bones complaint. And given the low cost of bringing a suit without conducting any independent investigation, there’s every reason for plaintiffs’ firms to file outside of Delaware, hoping for a piece of the lead counsel action wherever the case proceeds.
Are the high seas the legal equivalent of foreign soil?
According to a new U.S. Supreme Court brief by the victims of alleged state-sponsored violence on an oil rig in Nigeria, they are indeed. The brief, filed in a case that will determine the role of the United States in international human rights litigation, argues that the very first Congress enacted the Alien Tort Statute in 1789 to establish federal-court jurisdiction over piracy cases. The sort of robbery on the high seas that Congress had in mind, the brief said, clearly took place off the shores of the United States. So it doesn’t make sense to presume, more than 200 years later, that Congress intended the Alien Tort Statute to apply only to alleged wrongdoing inside U.S. borders, especially because in all those intervening years Congress has never redefined the scope of the statute.
When you hear the story of Edith Windsor, the constitutional consideration that comes to mind is the Equal Protection Clause of the 14th Amendment. Windsor, an IBM systems consultant, met Thea Spyer, a clinical psychologist, at a restaurant in New York in 1963. They fell in love and moved in together in New York City. In 1993, as soon as the city permitted it, they registered as domestic partners, and in 2007, as Spyer’s multiple sclerosis advanced, she and Windsor were married in Canada. Spyer died in 2009, leaving her entire estate to Windsor, who was recognized as her wife in New York. But because of the 1996 federal law known as the Defense of Marriage Act, Windsor was denied the unlimited marital tax deduction that she would have received had Spyer been a man. Instead, she was hit with a $363,000 tax bill on Spyer’s estate.
After Citigroup shareholders voted against a board-approved $15 million pay package for CEO Vikram Pandit in April, there was a lot of talk about a shareholder spring, with speculation that shareholders at a lot of other companies would seize the opportunity of advisory say-on-pay votes to express irritation with unresponsive boards. But according to a study by Davis Polk & Wardwell that was published on Thursday at the Harvard Corporate Governance and Financial Regulation Forum, shareholders have been slower to storm the barricades than the Citi vote suggested. “The proxy season,” said the study’s lead author, Richard Sandler, “hasn’t been as exciting as people thought it might be.”
If you stopped reading at page 21 of the 28-page summary judgment ruling that U.S. District Judge James Robart issued Wednesday in Microsoft’s contract case against Motorola, you’d figure Microsoft had won the all-important dispute over Motorola’s standard-essential patents. But this is an opinion you have to read all the way to the end.
Former Bank of America CEO Kenneth Lewis has a simple argument for why he’s not liable to shareholders who claim they were defrauded into supporting BofA’s 2008 acquisition of Merrill Lynch: It’s the lawyers’ fault. In a summary judgment brief filed Sunday night in the shareholder class action, Lewis’s counsel at Debevoise & Plimpton asserted that as Merrill Lynch’s fourth-quarter projected losses ballooned from the $5 billion BofA had estimated in November to more than $10 billion by Dec. 3, Lewis asked BofA’s then-CFO, Joe Price, whether those losses had to be disclosed to shareholders. He was informed that the CFO had “consulted with legal counsel” and had concluded that interim projections didn’t need to be made public.
There’s a good reason the exchange of information in civil litigation is called discovery. If you want an example of the kind of powerful facts shareholders can obtain once they’re finally allowed to take depositions from securities class-action defendants – and remember, they only get there after surviving defense motions to dismiss – look no further than the motion for summary judgment that plaintiffs’ lawyers filed Sunday against Bank of America in the securities class action over the Merrill Lynch merger. There’s nothing like a former CEO’s admission that insiders withheld dire predictions from shareholders to boost the class’s case.