Justia Securities Law Opinion SummariesArticles Posted in New York Court of Appeals
J.P. Morgan Securities Inc. v. Vigilant Insurance Co.
The Court of Appeals reversed the decision of the Appellate Division reversing Supreme Court's order granting summary judgment to Bear, Stearns & Co. Inc. and Bear Stearns Securities Corp. (collectively, Bear Stearns) in this action brought by Bear Stearns' successor companies alleging that its insurers (Insurers) had breached insurance contracts, holding that the $140 million disgorgement for which Bear Stearns sought coverage was not a "payment" within the meaning of the relevant policy.When the Securities and Exchange Commission (SEC) censured Bear Stearns for securities law violations, Bear Stearns agreed to a $160 million disgorgement payment and a $90 million payment for civil money penalties. Both payments were to be deposited in a fund to compensate mutual fund investors allegedly harmed by Bear Stearns' improper trading practices. Bear Stearns transferred the payments to the SEC. Plaintiffs then brought this action against Insurers seeking coverage under a "wrongful act" liability for the disgorged funds. Supreme Court granted summary judgment to Bear Stearns. The Appellate Division reversed, concluding that Bear Stearns was not entitled to coverage for the SEC disgorgement payment. The Court of Appeals reversed, holding that Insurers failed to establish that the $140 million disgorgement payment clearly and unambiguously fell within the policy exclusion for "penalties imposed by law." View "J.P. Morgan Securities Inc. v. Vigilant Insurance Co." on Justia Law
CNH Diversified Opportunities Master Account, L.P. v Cleveland Unlimited, Inc.
In this lawsuit brought by Plaintiffs, the holders of a minority in principal amount of senior secured debt, against the debtor and its guarantors to recover payment of principal and interest after the issuer defaulted, the Court of Appeals held that Plaintiffs' right to sue for payment on the notes survived a strict foreclosure undertaken by the trustee at the direction of a group of majority bondholders over Plaintiffs' objection that purported to cancel the notes.Supreme Court granted summary judgment to Defendants and denied Plaintiffs' motion for partial summary judgment. The Appellate Division affirmed. The Appellate Division affirmed. The Court of Appeals modified the order of the Appellate Division by reversing the grant of summary judgment to Defendants and granting partial summary to Plaintiffs, holding that Plaintiffs' payment rights were not extinguished by the strict foreclosure, which purportedly cancelled their notes, because the purported cancellation of the notes without the dissenting minority note holders' consent violated the provisions of the indenture agreement. View "CNH Diversified Opportunities Master Account, L.P. v Cleveland Unlimited, Inc." on Justia Law
Deutsche Bank National Trust Co. v. Barclays Bank PLC
In these appeals stemming from two residential mortgage-back securities (RMBS) transactions the Court of Appeals affirmed the order of the Appellate Division reversing the judgment of Supreme Court and granting Defendants' motions to dismiss the complaints alleging breaches of representations and warranties made in underlying mortgage loans, holding that Plaintiff's causes of action accrued in California, and Plaintiff's actions were untimely pursuant to N.Y. C.P.L.R. 202.Defendants moved to dismiss Plaintiff's actions, contending that pursuant to section 202 Plaintiff's causes of action accrued in California and were therefore untimely. Plaintiff conceded that it was a resident of California but argued that the court should apply a multi-factor analysis to determine where the cause of action accrued. Supreme Court denied Defendants' motions to dismiss, noting that the parties had chosen New York substantive law to govern their rights. The Appellate Division reversed. The Court of Appeals affirmed, holding (1) this Court declines to apply the multi-factor test urged by Plaintiff and instead relies on the general rule that when an economic injury has occurred the place of injury is usually where the plaintiff residents; and (2) where Plaintiff is a resident of California, to satisfy section 202 Plaintiff's actions must be timely under California's statute of limitations. View "Deutsche Bank National Trust Co. v. Barclays Bank PLC" on Justia Law
U.S. Bank National Ass’n v. DLJ Mortgage Capital, Inc.
The Court of Appeals affirmed the order of the Appellate Court affirming the judgment of Supreme Court dismissing this action filed by the trustee (Trustee) of three residential mortgage-backed securities (RMBS) alleging violations of representations and warranties regarding the quality of loans contained in the respective securitization trust instruments, holding that the Trustee’s untimely-filed complaint cannot relate back under N.Y. C.P.L.R. 203(f) to a certificate holder’s previously filed action.Defendant served as seller and sponsor of three RMBS securitization trusts, each governed by a separate pooling and servicing agreement. A certificate holder later filed a notice claiming violations of the representations and warranties for each of the trusts. After the limitations period elapsed, the Trustee filed this complaint. Supreme Court dismissed the action with prejudice. The Appellate Division affirmed, concluding that the complaint was time-barred and that the Trustee could not rely on the prior action because the certificate holder lacked standing to sues. The Court of Appeals affirmed, holding that the certificate holder’s action was subject to dismissal, and there was no valid pre-existing action to which a claim in a subsequent amended pleading may relate back. View "U.S. Bank National Ass’n v. DLJ Mortgage Capital, Inc." on Justia Law
U.S. Bank National Ass’n v DLJ Mortgage Capital, Inc.
The Court of Appeals affirmed the order of the Appellate Division affirming Supreme Court’s dismissal of the complaint filed by the trustee (Trustee) of the ABSHE 2006 residential mortgage-backed securities (RMBS) trust, without prejudice to refiling, holding that N.Y. C.P.L.R. 205(a) applies to an RMBS trustee’s second action when its timely first action is dismissed for failure to comply with a contractual condition precedent.The Trustee first filed an action against Defendant, the sponsor and seller of the trust securitization, and the action was dismissed for failure to comply with a contractual condition precedent, without prejudice to refiling. The Trustee then filed this action against Defendant claiming violations of representations and warranties regarding the quality of the loans contained in the trust. On appeal, Defendant argued that the first action should have been dismissed with prejudice. The Court of Appeals disagreed, holding that the Trustee’s failure to comply with a contractual condition precedent did not foreclose refiling of its action for alleged breach of RMBS representations and warranties pursuant to N.Y. C.P.L.R. 205(a). View "U.S. Bank National Ass’n v DLJ Mortgage Capital, Inc." on Justia Law
People v. Credit Suisse Securities (USA) LLC
Claims brought under the Martin Act, N.Y. Gen. Bus. Law 23-A, 352 et seq., are governed by the three-year statute of limitations in N.Y. C.P.L.R. 214(2) rather than the six-year limitations period in either N.Y. C.P.L.R. 213(1) or 213(8).The Attorney General commenced this action asserting that the issuance of residential mortgage-backed securities by Defendants violated the Martin Act. Defendants moved to dismiss the complaint, arguing that the action was time-barred because the operative statute of limitations was the three-year period found in N.Y. C.P.L.R. 214(2), which covers actions to recover upon a liability, penalty or forfeiture created or imposed by statute. Supreme Court denied the motion to dismiss, concluding that the six-year limitations period in N.Y. C.P.L.R. 213 applied because Plaintiff sought to impose liability on Defendants based on the common-law tort of investor fraud. The Appellate Division affirmed. The Court of Appeals reversed, holding that because the Martin Act expands liability for fraudulent practices beyond that recognized under the common law, section 214(2) controls. View "People v. Credit Suisse Securities (USA) LLC" on Justia Law
Justinian Capital SPC v. WestLB AG
New York’s champerty law prohibits the purchase of notes, securities, or other instruments or claims with the intent and for the primary purpose of bringing a lawsuit. Appellant brought this action against Respondents alleging that Respondents’ fraud and malfeasance in managing two investment vehicles caused a significant decline in the value of notes purchased by a nonparty, from whom Plaintiff acquired the notes days before it commenced this action. Respondents raised the affirmative defense of champerty, arguing that Plaintiff’s acquisition of the Notes was champertous under Judiciary Law 489. Supreme Court dismissed the complaint, concluding that Plaintiff’s acquisition of the notes from the nonparty was champertous and that Plaintiff was not entitled to the protection of the champerty safe harbor of Judiciary Law 489(2). The Court of Appeals affirmed, holding (1) Plaintiff’s acquisition of the notes was champertous; and (2) Plaintiff was not entitled to the proaction of the safe harbor provision. View "Justinian Capital SPC v. WestLB AG" on Justia Law