Archives: Noteworthy Cases

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Government Preparing to Rest Its Case in $2 Billion Mozambican Loan Fraud Trial

Prosecutors are nearing the end of their case after over three weeks of trial for Privinvest Group executive Jean Boustani, who is accused of conspiring to defraud investors in loans made by Credit Suisse and Russian bank VTB to Mozambican state-backed special-purpose vehicles (SPVs). The government alleges that Boustani structured the deals so that the … Continue Reading

Capital One Affiliates Seek Dismissal of Usury Putative Class Action

In the latest development in one of two federal cases examining whether New York usury laws can limit the interest rates charged on credit card debts that are securitized, the Capital One affiliate defendants have moved to dismiss the action brought by plaintiff credit card holders. The plaintiffs alleged that their interest rates, ranging from … Continue Reading

Second Circuit Gives Green Light to Foreign Litigants Seeking Discovery in the U.S.

As cross-border business continues to grow, litigation too is increasingly crossing borders. In a recent decision addressing several issues of first impression, the U.S. Court of Appeals for the Second Circuit opted to aid international litigants, interpreting Section 1782 of Chapter 28 of the United States Code to allow discovery in aid of foreign proceedings … Continue Reading

Syndicated Loans: Have They Been Securities All Along?

In a case pending in federal court in New York, Kirschner v. JPMorgan Chase Bank, N.A., No. 17-cv-06334-PGG (S.D.N.Y.), a bankruptcy trustee may upend what has long been accepted wisdom on Wall Street: securities laws apply to stocks, bonds, equity options, and the like – but not to syndicated loans. Kirschner is brought by the … Continue Reading

New York Legislature Extends Statute of Limitations for Martin Act Claims

Last week, Governor Cuomo signed into law a bill to amend the New York Civil Practice Law and Rules (“CPLR”) to extend the statute of limitations to six years for financial fraud claims brought under the Martin Act.  One of the strongest blue sky laws in the country, New York’s Martin Act gives wide latitude … Continue Reading

CLO Litigation Update

In December 2014, the credit risk retention rule, 79 Fed. Reg. 77,601 (the credit risk retention rule), was adopted pursuant to Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The credit risk retention rule requires any “securitizer” of asset-backed securities (or other related parties) to acquire and retain either (i) … Continue Reading

Supreme Court Gives Some Defrauded Investors More Time To Seek Recovery

In the past few years, institutional investors and others seeking to enforce their rights in court have been hit with several negative legal decisions concerning statutes of limitation issues. In 2015, the New York Court of Appeals held in ACE Securities that a claim for breaches of representations and warranties in an RMBS contract accrues when … Continue Reading

Federal Court Reinstates Trustee’s Failure to Notify Claim in $306 Million RMBS Suit

Last week, U.S. District Judge Katherine B. Forrest of the Southern District of New York reinstated a failure-to-notify claim brought by plaintiff Deutsche Bank National Trust Company (the trustee) against defendant Morgan Stanley Mortgage Capital Holdings LLC (“Morgan Stanley”). This notification claim is distinct from the trustee’s claim for breach of contract—based on Morgan Stanley’s … Continue Reading

RMBS Cases Seeking $3.7 Billion Dismissed for Lack of Standing

On Wednesday, April 12, Justice Ramos of the Commercial Division of the New York Supreme Court dismissed with prejudice four lawsuits filed by Royal Park Investments SA/NV (“Royal Park”).  The lawsuits alleged fraud and negligent misrepresentation with respect to residential mortgage-backed securities (“RMBS”) sold to Fortis NV/SA (“Fortis”) – formerly an independent Belgian bank that … Continue Reading

Appellate Decision on Loss Causation Is a Warning to RMBS Fraud Plaintiffs

Investment advisor TCW Asset Management Company (“TCW”) scored a major victory last week when an appellate court dismissed a $128 million RMBS fraud suit that was filed against it by two Australian-based Cayman Island hedge funds: Basis Pac-Rim Opportunity Fund (Master) and Basis Yield Alpha Fund (Master) (together, “Basis”).  Basis sued TCW for alleged fraud … Continue Reading

$500 Million Suit Against UBS Dismissed on Jurisdictional Grounds

On December 7, New York Supreme Court Justice Eileen Bransten dismissed a $500 million lawsuit against UBS AG (“UBS”) brought by Ace Decade Holdings Limited (“Ace Decade”), a British Virgin Islands company, for lack of personal jurisdiction and forum non conveniens.  Ace Decade alleged that UBS fraudulently induced it to invest in shares of a … Continue Reading

National Credit Union Administration Succeeds in RMBS Appeal to Ninth Circuit

The U.S. Court of Appeals for the Ninth Circuit recently reversed a trial court’s dismissal of the National Credit Union Administration’s (NCUA’s) residential mortgage-backed securities (RMBS) fraud claims against Nomura Home Equity Loan Inc.  The appellate court held that the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) extended all applicable deadlines for … Continue Reading

PwC Fails in Bid to Terminate MF Global $1B Malpractice Suit

On August 5, U.S. Southern District Judge Victor Marrero denied PricewaterhouseCoopers’ (PwC) motion for summary judgment with respect to a $1 billion professional malpractice suit filed by the plan administrator for the now-defunct MF Global Holdings Ltd. (MF Global). The suit accuses PwC of dispensing negligent accounting advice to MF Global on how to handle … Continue Reading

Shareholder Suits Against Volkswagen Advance in German Courts

Last week, a German regional court in Braunschweig ordered that shareholder litigation against Volkswagen AG proceed to a German court of appeals.  The 170 separate shareholder suits allege that Volkswagen defrauded investors when it concealed that the company falsified emissions data in 11 million of its diesel vehicles.   Together, the suits bring claims of nearly … Continue Reading

Second Circuit Affirms Insurance Coverage Available for Lawsuits Alleging Intentional Misconduct

Financial services companies and their directors and officers are frequently the target of lawsuits alleging dishonest or fraudulent conduct.  Additionally, federal and state agencies increasingly target directors and officers for misconduct in the management of corporations and are devoting significant resources to investigating companies in the finance sector. When properly structured, insurance provides one way … Continue Reading

LIBOR Antitrust Suit Revived

On May 23, 2016, the Second Circuit Court of Appeals vacated a judgment which dismissed antitrust claims against 16 big banks.  The plaintiffs’ claims arose from the alleged manipulation of what has been called “the world’s most important number”—the London InterBank Offered Rate (“LIBOR”), a primary benchmark for global short-term interest rates.  According to the … Continue Reading

Personal Jurisdiction for Multinationals Receives Attention

Multinational companies face difficult interactions with the US Court system – and vice versa.  Professor Verity Winship has a piece at CLS BlueSky Blog covering this issue, including the application of personal jurisdiction to multinationals in light of Daimler v. Bauman.   Amiad Kushner and Richard Bodnar previously covered Daimler and some progeny in the Westlaw … Continue Reading

Volkswagen AG Faces $3.6 Billion Suit

On March 14, almost six months after Volkswagen AG (“VW”) admitted to installing software in its diesel vehicles to cheat emissions testing, VW was hit with a $3.6 billion lawsuit in Germany.  The case was filed in Braunschweig on behalf of 278 institutional investors, including investors from Australia, Austria, Canada, Denmark, France, Italy, Japan, Luxembourg, … Continue Reading

Winning Is Half the Battle: Accessing Shares to Satisfy Judgment

On March 11, 2016, a New Jersey Appellate Court affirmed the lower court’s finding that four hedge funds could not reach American Oriental Bioengineering Inc.’s shares in Aoxing Pharmaceutical Co. Inc., another drug company, to satisfy the funds’ $21 million default judgment. The court ruled that “actual seizure of certificated shares is required before a … Continue Reading

The Professional Services Exclusion and Investment Management: Are You Purchasing Potentially Illusory Coverage?

Companies engaged in the capital markets are at risk of claims and lawsuits alleging investment mismanagement and other misconduct.  For this reason, they typically purchase directors and officers liability (“D&O”) insurance policies to provide a defense against, and indemnification for, allegations of wrongful acts in the course of their delivery of financial services.  To ensure … Continue Reading

Second Circuit Affirms Dismissal of Commerzbank AG’s Fraud Claims Concerning Collapsed SIV

The Second Circuit affirmed dismissal of Commerzbank AG’s fraud claims concerning a collapsed structured investment vehicle against Morgan Stanley on February 23.  Commonwealth of Pennsylvania Pub. Sch. Employees’ Ret. Sys. v. Morgan Stanley & Co., No. 13-2095-CV (2d Cir. Feb. 23, 2016). The case has had a rather convoluted procedural history.  Commerzbank brought the action … Continue Reading

When Can a Bond Trader Lie? Second Circuit Litvak Decision Leaves the Door Open

In March 2014, Jefferies bond trader Jesse Litvak was convicted for committing a fraud on the United States of America by lying to his customers’ asset managers, who were hired by the government to deploy billions of dollars of TARP funds intended to bail out the banks that were “too big to fail.”  In December … Continue Reading
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