$8.5 Billion Countrywide RMBS Settlement with Bank of America
With lead partner Kathy Patrick, prosecuting Countrywide residential mortgage-backed security (RMBS) representation and warrant claims on behalf of our institutional investor clients.
In 2010, Gibbs & Bruns was engaged by 22 of the largest institutional investors, including financial giants PIMCO, BlackRock, MetLife and others, as well as the Federal Reserve Bank of New York and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), to assert claims against Countrywide and its corporate parent Bank of America relating to representation and warranty violations (“put-backs”) and mortgage servicing claims at issue in 530 Countrywide residential mortgage securitization trusts. Our clients engaged us to enforce their rights, through the governing agreements, to compel the repurchase of ineligible mortgages that do not conform to the representations and warranties concerning the collateral in the RMBS trusts.
On June 29, 2011 we announced that the firm, on behalf of its clients, had reached an $8.5 billion settlement with Bank of America resolving all mortgage put-back and servicing claims relating to the 530 trusts. The settlement provides not only the $8.5 billion cash payment to the trusts, but also requires Bank of America to make mortgage servicing improvements that will streamline the servicing of the 770,000 mortgages at issue in the trusts, improvements that various market sources suggest provide as much as several billion dollars of additional value to the trusts. The settlement also requires Bank of America to cure certain mortgage document issues, and provides the 530 trusts (and consequently the investors in those trusts, including our clients), with a full indemnity for any value lost in connection with mortgages in the trusts as a result of certain mortgage documentation deficiencies.
The settlement received worldwide top billing in the financial press. On June 29, 2011, The New York Times reported it as “likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.” The Wall Street Journal labeled the deal a “mammoth settlement” by a group of “high-profile investors” and as the “turning point in Wall Street’s epic struggle with the fallout from the financial crisis.” An analyst for Credit Agricole, quoted in The New York Times, stated that the settlement is “the most significant step since the financial crisis that helps” in “improving the economy.” Gibbs & Bruns is currently prosecuting the court approval of the settlement.
Crane v. JP Morgan Chase & Co, et al.
This lawsuit arose out of the purchase by Plaintiff, an individual investor, of approximately $35 million of asset backed sewer revenue securities from defendant JPMorgan. When the value of the securities suffered a significant drop in value, Plaintiff filed suit against JPMorgan alleging violations of the Texas Securities Act. Specifically, Plaintiff alleged that JPMorgan was selected as the underwriter and swap provider for the securities, by means of unlawful payments, which JPMorgan failed to disclose. Plaintiff alleged that, because JPMorgan had sold the securities by means of materially false statements and omissions, Plaintiff was entitled to rescission under the Texas Securities Act. On December 17, 2010, the trial court denied JPMorgan’s motions for summary judgment on Plaintiff’s claims. The case proceeded to trial in January 2011 in Harris County, Texas before the Honorable Mike Engelhart. Two days into trial, the parties entered into a confidential settlement which was favorable to our client.
National Century Financial Enterprises Securities Litigation
This litigation took place in Ohio and Arizona federal courts. We represented a post-bankruptcy litigation trust and the institutional holders of over $1.5 billion of asset-backed notes. The suit included claims against underwriters, trustees, and auditors. Settlements for our clients exceed $1 billion. Bob had primary responsibility for: (i) conducting the bankruptcy investigation of the bankrupt company, its owners, and the professionals retained by it; (ii) asserting claims on behalf of a litigation trust created out of the bankruptcy, (iii) asserting claims against one of the trustees and the underwriter for the asset backed securities issuers.
Greenfield Energy, Inc. et al. vl EOG Resources, Inc., et al.
We represented a Canadian start-up company that had secured an agreement with a group of Trinidadian oil companies to share in the development of an offshore oil field against the Trinidadian companies and a Houston-based international energy company. We asserted claims for breach of contract, fraud, and tortious interference on behalf of our clients. Bob was primarily responsible for responding to the Houston oil company’s motion for summary judgment, which was denied. Thereafter, the oil company agreed to a multi-million dollar settlement with Greenfield.
Jack Washburn, PC v. Felco AutoLease, et al.
We represented a nationwide class of consumers (our clients) who had leased automobiles from FELCO (Franklin Equity Auto Leasing Co.), an indirect subsidiary of the Japanese conglomerate Itochu Corp. The suit arose out of FELCO’s practices with respect to charging its lessees for as valorem taxes at the termination of their lease. Bob was primarily responsible for investigating the claims of the class, preparing its pleading, and arguing for certification of the class. After a contested hearing, the United States District Court for the Southern District of Texas certified a nation-wide RICO mail and wire fraud class for all FELCO lessees who had allegedly been overcharged. Shortly thereafter, the suit was settled with FELCO agreeing to pay each of the class members a sum equaling 85% of the alleged overcharge attributable to them.
Enron Securities Litigation
We represented Enron’s outside directors in claims arising from Enron’s collapse. Bob was involved in the initial phases of the litigation and played a significant role in defending our clients from ERISA claims, protecting them from attempts to seize their assets, as well as obtaining a court order permitting their access to insurance proceeds to fund their defense.
Mid-American Waste Securities Litigation
We represented a group of mutual funds managed by Merrill Lynch, suing underwriters and accountants in New Jersey federal court. The claims arose out of notes issued by an Ohio landfill company, then one of the largest in the country. After prevailing on Defendants’ motions to dismiss, the claims were settled favorably during discovery.
Smith v. Kemper
We represented a broker-dealer and its financial adviser in a suit commenced by a customer claiming fraud and breach of fiduciary duty. The plaintiff claimed that the adviser had carried out unauthorized trades in his account and misappropriated assets from his account. We not only defended our clients against these claims but also asserted a counterclaim for defamation against the plaintiff for repeating his accusations to others in the industry. After a two week arbitration, all claims against our clients were dismissed. In addition, the plaintiff was found liable for defamation and ordered to pay a substantial sum to the financial adviser that he had publicly defamed.
Texas Jail Bond Litigation
We were counsel for nine mutual funds managed by Merrill Lynch Asset Management, Franklin Advisers, Inc., and other mutual fund Plaintiffs in a suit alleging violations of federal and state securities laws arising out of the issuance and sale of $73 million in mortgage revenue bonds used to develop six private prisons in Texas. The case resulted in an $84 million verdict for the Plaintiffs.