Alison Frankel

Are mortgage-backed securities bonds or equity? 2nd Circuit to decide

By Alison Frankel
May 8, 2013

I’m ready to make a bold declaration: We’ve reached the beginning of the end of private litigation over deficient mortgage-backed securities. Think about it. The bond insurers that pioneered MBS cases are reaching settlements right and left with the banks that sponsored notes. MBIA’s $1.7 billion deal with Bank of America is the most dramatic, but Assured Guaranty reached a $358 million settlement with UBS on the same day. MBS class actions are in their end stages, now that the U.S. Supreme Court has signaled disinterest in MBS class standing. New securities fraud complaints by individual MBS investors have tailed off, and though I continue to see new breach-of-contract filings by trustees suing at the direction of noteholders with the requisite voting rights, time is running out on those suits even under New York’s generous statute of limitations. I don’t think it’s a coincidence that Kathy Patrick of Gibbs & Bruns, who has spent the last few years deep in talks with big banks over the put-back claims of her enormous institutional investor clients, told my Reuters colleague Karen Freifeld that she’s looking ahead to Libor securities litigation. Or that Quinn Emanuel Urquhart & Sullivan, which began preparing to represent plaintiffs in MBS cases all the way back in early 2008, is now investing heavily in products liability litigation.

Who won the $1.7 bln settlement between BofA and MBIA?

By Alison Frankel
May 7, 2013

On Monday, after word leaked that Bank of America and MBIA had resolved their epic five-year, multidimensional litigation against one another, investors in both companies judged the deal. Shares in MBIA, whose structured finance arm had been widely considered to be on the brink of a regulatory takeover, closed 45 percent higher at $14.29, adding about a billion dollars to the market capitalization of the insurer’s holding company. Bank of America’s shares went up as well. They didn’t rise as dramatically as MBIA’s, closing up 5 percent at $12.88. But that added $6.9 billion to BofA’s market cap – three times as much as the $1.6 billion in cash that the bank agreed to pay to MBIA as part of the settlement.

How to woo a judge (when $8.5 bln is at stake)

By Alison Frankel
May 6, 2013

With the gigantic news Monday that Bank of America has reached a global settlement with the bond insurer MBIA - agreeing to pay MBIA $1.7 billion and acquiring five-year warrants on about 10 million shares of the insurer’s holding company – the bank’s most pressing piece of litigation has become its proposed $8.5 billion settlement with investors in Countrywide mortgage-backed securities. Friday was the deadline for noteholders who have previously intervened in the special proceeding to evaluate the deal to announce where they stand.

Kiobel’s first casualty: Turkcell drops ATS bribery case

By Alison Frankel
May 2, 2013

Last April, when the Turkish cellular services company Turkcell filed an Alien Tort Statute suit against South Africa’s MTN Group in federal district court in Washington, I was skeptical. Sure, Turkcell raised salacious allegations about how MTN wrested away its contract to provide cell services in Iran, including supposedly illegal arms deals and vote-peddling at the United Nations. But I said at the time that allegations of corporate corruption aren’t usually the stuff of ATS suits, and, moreover, that the U.S. Supreme Court had already agreed to take up the issue of the statute’s reach beyond U.S. borders in Kiobel v. Royal Dutch Petroleum. I predicted that Turkcell’s case – which was so explosive that MTN’s stock fell 6 percent when it was disclosed – would not survive in American courts.

Libor litigation lives! Schwab refiles fraud claims in state court

By Alison Frankel
April 30, 2013

A month ago – right after U.S. District Judge Naomi Reice Buchwald of Manhattan issued a stunning decision that dismissed antitrust and racketeering class action claims against the global banks involved in the process of setting the benchmark London Interbank Offered Rate – I told you that individual investors might be able to rise from the wreckage with common-law fraud and federal securities suits, so long as they could show that they were deceived by the banks’ misrepresentations about Libor’s legitimacy and held enough Libor-pegged securities to justify the expense of litigating claims on their own. On Monday, Charles Schwab filed a new complaint in San Francisco County Superior Court asserting that it meets both of those conditions: Schwab entities supposedly purchased billions of dollars of Libor-based financial instruments based on false assurances that the benchmark was set honestly.

Will CDO investors’ deal boost litigation against rating agencies?

By Alison Frankel
April 29, 2013

This is a rare sentiment, but thank goodness for Congress. Were it not for reports issued in 2011 by theFinancial Crisis Inquiry Commission (an expert panel created by federal statute) and the Senate Subcommittee on Investigations, we’d have precious little public-record testimony about the role that the credit rating agencies Standard & Poor’s, Moody’s and Fitch played in the near collapse of the economy. With Friday’s settlement between S&P, Moody’s and two groups of investors in collateralized debt obligations known as Cheyne and Rhinebridge, we’ve lost one of our last remaining chances to see the rating agencies answer to private investors.

Microsoft win in rate-setting case vs Motorola is call to litigation

By Alison Frankel
April 26, 2013

For the first time ever, a federal district judge has decided what constitutes a reasonable license rate for a portfolio of standard-essential patents. U.S. District Judge James Robart ruled late Thursday that Motorola is entitled to royalties of a half cent per unit for Microsoft’s use of standard-essential video compression patents and 3.5 cents per unit for Motorola’s wireless communication patents. According to Microsoft, those terms would require it to pay Motorola a grand total of about $1.8 million a year in royalties – a far cry indeed from the billions Motorola requested in a royalty demand to Microsoft in 2010. It’s still to be determined at a trial this summer whether Motorola breached its obligation to license its essential technology to Microsoft on reasonable terms. But make no mistake: Robart’s ruling on reasonable royalties is a dreadful outcome for Motorola and its parent, Google.

NFL profits from violence, so is it liable to brain-injured retirees?

By Alison Frankel
April 25, 2013

On Thursday night, professional football teams will hold their annual draft of college players. For the young men who are selected, the draft will be a dream realized, the culmination of years of hard work and hard knocks. But before they sign their million-dollar contracts, they might want to have a look at a photo taken earlier this month. It’s of Mary Ann Easterling, the widow of former Atlanta Falcons safety Ray Easterling, who shot himself last year after a long struggle with dementia. Easterling’s widow broke down earlier this month, at a press conference following a crucial hearing before the federal judge overseeing consolidated litigation against the National Football League by about 4,500 retired players who claim that the NFL deceived them about the risk of traumatic brain injury. According to the players, their NFL dream ended in the tragedy of depression, dementia, and, for 40 of them, death.

News Corp deal: a new way to police corporate political spending?

By Alison Frankel
April 22, 2013

On Monday, the directors and officers of Rupert Murdoch’s News Corp agreed to settle a derivative suit accusing them of breaching their duty to shareholders by failing to avert the phone-hacking scandal at the company’s British newspapers. News Corp’s insurers will pay $139 million, in what shareholder lawyers atGrant & Eisenhofer called the largest-ever cash settlement of derivative claims in Delaware Chancery Court. The settlement, which comes as News Corp prepares to split its news and entertainment branches into two publicly traded companies, was produced after several months of mediation that took place while the company’s motion to dismiss was pending before Vice Chancellor John Noble.

Virginia Supreme Court revives epic suit against Massey Coal

By Alison Frankel
April 19, 2013

If Hugh Caperton’s litigation against Massey Coal were a cat, it would now be entering its sixth or seventh life, thanks to a ruling Thursday by the Supreme Court of Virginia.