Complex Financial Products Litigation
Kasowitz is at the forefront of representing clients in litigation relating to complex financial products, including derivatives, collateralized debt obligations, auction rate securities, credit default swaps, securitized notes, and other financial instruments. The firm represents corporations and financial institutions that offered or structured these instruments, as well as corporations, hedge funds and individuals who invested in these types of instruments, in litigation and arbitrations throughout the country.
Some of the firm’s high-profile representations concerning complex financial products include:
- MBIA Inc., the world’s largest monoline insurer, in defense of four separate state and federal actions brought by 19 of the world’s largest financial institutions, bondholders and a putative nationwide class represented by several hedge funds – all arising from MBIA’s $5 billion corporate restructuring in 2009. In March 2013, following a four-week hearing, the New York State Supreme Court ruled in favor of MBIA Inc., finding that the NY State Insurance Department’s approval of MBIA’s restructuring was not in error.
- Bayerische Hypo- und Vereinsbank AG (“HVB”), the second-largest private German financial institution and second-largest German retail bank, in defense of individual and class actions in state and federal courts throughout the country alleging fraud and RICO claims stemming from certain tax shelter transactions. The firm also represents HVB in actions against (i) AIG, Inc. and AIG Matched Funding Corporation concerning collateralization obligations under leveraged lease transactions, and (ii) a Colorado government entity in a litigation involving the termination of an interest-rate swap tied to a $500 million municipal bond offering.
- TSL (USA), Inc., an affiliate of National Australia Bank, in two separate actions against Oppenheimer and its affiliates relating to defendants’ misconduct as administrators of two structured finance vehicles, alleging damages of more than $600 million.
- Royal Park Investments SA/NV, an entity created in connection with the Belgian State’s sale of Fortis Bank SA/NV to BNP Paribas S.A. for the purpose of purchasing and managing certain of Fortis Bank’s structured credit risks not assumed by BNP Paribas, in an action against Oppenheimer and its affiliates relating to defendants’ misconduct as administrators of a structured finance vehicle, alleging damages of more than $400 million.
- Residential Mortgage-Backed Securities (“RMBS”) Trusts, on behalf and at the direction of the holders of certificates in these Trusts, in their actions for breach of contract against the mortgage originators and/or the sponsors of the securitizations (i.e., those entities who sold the mortgage loans to the Trusts). These “put-back” actions seek, among other things, specific performance of the originators’ or sponsors’ commitment to repurchase mortgage loans that breach the representations and warranties, which were made by the originators or sponsors as a guarantee of the quality of the mortgage loan being sold to the Trusts. Kasowitz commenced and is currently litigating multiple put-back actions.
- UniCredit Bank AG in an action filed in the United States District Court for the Southern District of New York against Textron Business Services, Inc. and TBS Insurance Agency Services, Inc., the servicer and backup master agent servicer, respectively, for a securitized note program in which notes securitized by insurance agency franchise loans were sold to investors, including UniCredit. UniCredit alleged that the defendants had failed to properly monitor the subservicer of the notes, which ultimately collapsed after its fraudulent conduct was revealed. After the depositions of several employees of the defendants, Kasowitz reached a settlement of the case.
- Chicago Fundamental Investment Partners LLC and CFIP Master Fund Ltd., a billion-dollar hedge fund, in a breach of contract action arising from a $45 million portfolio credit default swap implemented through a credit-linked note trust structure. The defendants included Citibank N.A., Citigroup Global Markets Inc., and Citigroup Global Markets Ltd. (together, the Citi Defendants). The case presented several novel issues regarding the interpretation of standard ISDA language employed throughout the CDS market and which parties have standing in a credit-linked note structure. On the eve of trial, the Citi defendants settled.
- Caxton International Limited, one of the largest investment funds in the country, in a derivative action against Reserve Management Company relating to a Reserve money market fund that “broke the buck.” The firm successfully obtained a court order appointing a receiver, and acted as liaison counsel for other hedge fund and corporate investors in reaching a global settlement with the Reserve.
- Royal Bank of Canada in the securities fraud putative class actions instituted as a result of Enron's demise, alleging that RBC participated in Enron's fraud and assisted Enron in misusing various complicated transactions and financial structures so as to overstate Enron's earnings and financial health, including the Newby class action. The firm successfully obtained the dismissal of all claims against RBC.
Kasowitz represents various institutions in litigations stemming from the financial crisis including court actions and arbitrations involving collateral debt obligations, residential mortgage backed securities, structured notes, credit default swaps, interest rate swaps, total return swaps, financial guaranties, and other structured products and derivatives.