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Even Investors Are Having Difficulty In Litigation Against The Banks – It’s A Work In Progress!

July 24, 2012

DISCLAIMER: THE CONTENT IN THIS BLOG IS FOR INFORMATION PURPOSES ONLY AND IS NOT TO BE MISCONSTRUED AS LEGAL ADVICE! Anthony Martinez is a Discovery Expert, Consultant and Strategist.  Neither Anthony Martinez nor his firm AMA engage in the practice of law and only provide Legal Process Outsourcing Services (“LPO”) to licensed practicing attorneys.  AMA will provide public information only and will not provide any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.

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COMMENTS: People think this is easy stuff.  It it was everyone would be doing it.  This aspect of litigation is a work in progress, we fail, we learn, we adapt and move forward.  It will take time to undo and change the tide.  It’s like slowing down the rotation of the earth, put it in reverse, fix the problems and change the rotation back.  It will take time people!  The truth is, until thousands of lawyers begin to jump on the offensive and begin filing lawsuit after lawsuit the banksters will continue to win. 

I’ve seen a case where the complaint was filed, the opposition filed a motion to dismiss and before hearing, moved for attorney fees.  The attorney fees were $15,380.00.  Think about that for a second.  For filing a pleading, the big boy power firm charged a bankster $15, 380.00 for a motion to dismiss.  Do you know why?  Because the banksters don;t turn to fraudclosure mills for $1,500 flat fee to defend them when they get sued.  They hire the big boys like Skadden Arps, Greenberg Traurig and the top AMLAW 100 firms who bill out at $450.00 plus an hour for their associates.  So when the complaint filed mentioned mortgage fraud and unfair and deceptive trade practices based on a note passed off as negotiable when they knew it was non-negotiable for the purpose of securing a mortgage amongst other causes of action, they took it serious enough to charge $15,380.00.  Now imagine 10,000 such complaints across the country being met with a motion to dismiss for $15k.  That’s about 150 million just for the motion to dismiss stage.  Now imagine the cost for the discovery stage.  That’s not peanuts if you really want to effect change in this fight.  We’re talking about serious money people.  Banksters know money so hitting their pockets on a wider scale is where the fight’s at.

Now we have the case at hand with Walnut against Bank of America who challenged the 8.5 billion dollar MBS settlement deal BofA was offering and the dismissal of Walnut’s breach-of-contract suit against Countrywide, Bank of America and Countrywide’s mortgage-backed securitization trustee, Bank of New York Mellon. Here a critical statement in the article by Allison Frankel: 

“the hedge fund appears to have decided not to continue to spend money on litigation with little chance of a return. And given that the dismissal of Walnut’s suit makes it very difficult for the hedge fund — or any other MBS investor — to recover on put-back claims outside of the global settlement, Walnut apparently determined that it wasn’t economically rational to continue its challenge to the $8.5 billion deal.”

Filing actions against the banksters can and will most likely result in full-blown litigation.  Parties who think a quiet tittle action won’t turn into a full-scale litigation are sadly mistaken.  Be prepared to run the 25 mile marathon – not the 5 mile race.

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Repost

BofA catches big break: Walnut drops challenge to $8.5 bln MBS deal

7/23/2012

 Late last month, without any fanfare, a New York appeals court issued a terse, one-page ruling that upheld the dismissal of Walnut Place’s breach-of-contract suit against Countrywide, Bank of America and Countrywide’s mortgage-backed securitization trustee, Bank of New York Mellon. It was an abrupt end for what was once a promising attempt at vindication for an MBS investor. It was also a huge setback for Walnut, its lawyers at Grais & Ellsworth and all the other Countrywide MBS investors who were counting on litigation against BofA as an alternative to the bank’s proposed $8.5 billion global settlement of breach-of-contract, or put-back, claims.

That one-page appellate ruling reverberated powerfully on Monday, when Walnut — otherwise known as the Boston hedge fund Baupost — filed a request to withdraw from the special New York proceeding to evaluate BofA’s MBS settlement. Framed as a letter to New York State Supreme Court Justice Barbara Kapnick from Grais partner Owen Cyrulnik, the request offered no explanation for Walnut’s withdrawal; Cyrulnik and Baupost spokeswoman Elaine Mann declined to comment.

But Baupost was facing an imminent decision about whether to request leave to appeal the dismissal of its case against BofA to New York’s highest court. Given the unlikely prospect that the Court of Appeals would agree to take the case, the hedge fund appears to have decided not to continue to spend money on litigation with little chance of a return. And given that the dismissal of Walnut’s suit makes it very difficult for the hedge fund — or any other MBS investor — to recover on put-back claims outside of the global settlement, Walnut apparently determined that it wasn’t economically rational to continue its challenge to the $8.5 billion deal. (From what I’ve heard, Bank of America did not pay Walnut anything in exchange for the hedge fund’s withdrawal; a Bank of America spokesman declined to comment to my Reuters colleague Karen Freifeld.)

In fact, according to the International Financing Review, which checked a trading database of securitized debt run by Empirasign Strategies, Walnut Place has teed up several of its Countrywide notes to be sold into the secondary MBS market Tuesday. The fund seems to have decided to cut its losses and move on.

That’s very good news for Bank of America, BNY Mellon and the major institutional investors pushing for approval of the $8.5 billion settlement. Walnut wasn’t the only intervenor challenging the deal, and AIG counsel Daniel Reilly of Reilly Pozner said Monday that the other members of the intervenors’ steering committee — Keller Rohrback on behalf of three Federal Home Loan Banks and Miller & Wrubel for the Triaxx collateralized debt vehicle — intend to continue to pursue discovery on how the deal was put together and whether it’s adequate. Both the New York and Delaware attorneys general have also intervened in the case.

But Walnut was the first Countrywide MBS investor to challenge the settlement, and its lawyers deployed some of the tactics that have caused BofA and BNY the most trouble. It was Walnut, for instance, that removed the special proceeding to federal court, where the banks spent months litigating in front of an unfriendly judge before the U.S. Court of Appeals for the 2nd Circuit sent the proposed settlement back to state court. Walnut was also one of the first investors to assert that BNY Mellon was too conflicted to represent the interests of Countrywide MBS noteholders because of a side letter specifying its indemnification agreement with Bank of America. Baupost chief Seth Klarman, moreover, is known as one of the savviest investors in the business. With Walnut out of the case, BofA loses a sophisticated, well-funded and well-advised opponent.

AIG counsel Reilly has been leading the charge since the case returned to Kapnick in state court. That creates an interesting opportunity for supporters of the settlement. Unlike Walnut Place, which was counting on its individual put-back case against BofA and BNY Mellon, AIG has sued BofA for securities law violations. The insurer is claiming $10 billion in damages for alleged deficiencies in mortgage-backed securities issued by Countrywide, BofA, Merrill Lynch and other related entities.Kathy Patrick of Gibbs & Bruns, who represents the investors supporting the settlement, has already questioned whether AIG is using its intervention in the global deal as leverage in its own securities suits. Expect Patrick and lawyers for BNY Mellon,Mayer Brown and Dechert to argue that AIG is holding up payment to thousands of Countrywide investors in order to improve its litigation posture in AIG cases against BofA.

The next development in the litigation over the settlement is an Aug. 2 hearing before Kapnick, at which the banks have said they will request a formal discovery settlement. That should provide some clues about whether the judge regards Walnut’s departure as a turning point.

Not long after Walnut filed its request to withdraw from the litigation, the 2nd Circuit issued an order that’s a fitting coda on Walnut’s experience in this case. The appeals court ordered the hedge fund to pay BNY Mellon’s filing fee in its appeal of the removal of the litigation to federal court. The total? $761.60. It’s not nearly enough to hurt, but just enough to rankle.

(Reporting by Alison Frankel)

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