Foreclosure Home For Sale Real Estate Sign in Front of New House.
Residential mortgage backed securities are the gift that keeps on giving—to lawyers, that is.
Ten years ago today—October 15, 2008—the Dow plunged 733 points. In a not-so-special commemoration, a mega-trial kicks off in Minneapolis between two companies that were caught in the thick of the financial crisis.
On the plaintiff’s side, a team from Quinn Emanuel Urquhart & Sullivan led by Isaac Nesser represents Residential Funding Company—now ResCap Liquidating Trust—a middleman that would buy loans from mortgage lenders, package them and resell them as securities to investors.
They face off against Williams & Connolly lawyers including partners Jesse Smallwood, R. Hackney Wiegmann and Matthew V. Johnson on behalf of Home Loan Center, previously a subsidiary of Lending Tree.
The allegations are a variation on a familiar theme: Loosey-goosey mortgages and shoddy underwriting led to mass defaults and foreclosures.
What’s left is a tangled set of claims with hundreds of millions of dollars on the line.
As a middleman, Residential Funding Company, or RFC, was in a particularly unenviable spot when things fell apart.
It was hammered by lawsuits from Deutsche Bank, Bank of New York Mellon, U.S. Bank, HSBC Bank and Wells Fargo Bank, plus an assortment of insurers for breach of representation and warranty, fraud, and servicing-related claims arising from its sale of the allegedly defective mortgage loans.
In 2013, RFC settled the bank trustee claims for $7.091 billion, plus another $2 billion for the insurers, and then (as contemplated by the settlement) filed for Chapter 11 bankruptcy.
But that wasn’t the end of the story. Now, RFC is going after the mortgage lenders that sold it the loans in the first place.
Beginning in December of 2013, RFC filed individual suits against nearly 100 of these mortgage lenders in what the Quinn lawyers believe may be the largest collection of private litigations emerging from the financial crisis.
RFC argues that the originating lenders “were responsible for . . . underwriting prudently and ensuring that the loan met all of RFC’s contractual and underwriting requirements.” Further, RFC says that under the terms of their contracts, the originating lenders agreed to assume liability for any misrepresentations or breaches, regardless of their knowledge or RFC’s knowledge.
Most of the cases have settled, and the Quinn lawyers say RFC has already recovered billions for breach of contract and indemnification claims. But a handful of cases have not. The suit against Home Loan Center is the first to go to trial. (Two more trials, against Standard Pacific and UAMC, are scheduled for January.)
The proceedings before U.S. District Judge Susan Richard Nelson in Minneapolis are expected to last for 1.5 months.
And the New White House Counsel Is…
News broke over the weekend that President Donald Trump will tap Washington litigator Pat Cipollone to replace Donald McGahn as White House counsel.
A name partner at 23-lawyer Stein Mitchell Cipollone Beato & Missner in Washington, D.C., Cipollone previously spent more than a decade as a litigation partner at Kirkland & Ellis. He also worked at the Justice Department during the George H.W. Bush administration under Attorney General William Barr.
Cipollone has a wide-ranging commercial litigation practice—in my prior overage, he’s turned up on the losing end of False Claims Act suit against Abbott Laboratories, and on top as co-counsel to Johnny Depp in a malpractice suit against the actor’s former lawyer, Jake Bloom. But he’s got no prior White House experience.
Former Williams & Connolly partner Emmet Flood, who is now representing Trump in the Russia probe, had been viewed as the likely pick for White House counsel after the president announced in an August tweet that McGahn was leaving.
But a source told Axios, which broke the news of Cipollone’s selection, that Flood did not especially want the job. "It seemed to be he would do it, more as a chore than as an aspiration," the source said.
Cipollone, on the other hand, is said to be “a true believer…He's a big Trump supporter."
He’s also got the support of Trump lawyer Jay Sekulow, who told Axios, “Pat is a brilliant lawyer, strategist and has a deep knowledge of the workings of government.”
Say Ouch: No Payout for Woman Who Sought $36M for Foot Injury
No doubt it hurt like the dickens when a 7.25 pound bottle of liquid dishwasher detergent at Costco fell on Elizabeth A. Chako’s foot.
But $36 million worth of hurt?
Chako sued Costco and Sun Products, the company that manufactured the bottles and dishwasher gel, alleging that she developed Complex Regional Pain Syndrome as a result of the bottle injuring her foot, and that she currently suffers from severe, incurable pain to her upper and lower extremities.
The two bottles of dishwasher gel were yoked together by what is known as a “dog bone” or twin-pack handle at the neck of each bottle. One of the bottles came loose and fell on her foot. Chako alleged that the product’s design was defective.
She wanted $6 million for a future life care plan, as well as past and future general damages of $30 million.
Following an eight-day trial in Los Angeles County Superior Court, the jury last week awarded her nothing.
Sun Products was represented by Tyson & Mendes partner Kevin Place and senior counsel Marsha Yasuda
“Ultimately, we appealed to the jury’s common sense and reason that plaintiff failed to meet their burden of proof that the plastic handle was defective,” Yasuda said in a press release. “Further, we provided evidence that the plaintiff’s Complex Regional Pain Syndrome diagnosis was questionable in light of her pre-existing medical conditions.”
What I’m Reading
Atlanta Lawyer Convicted on All Counts $26M Embezzlement Case
The federal jury rejected Atlanta lawyer Nathan Hardwick IV’s defense that the $26 million he took from his now-bankrupt residential real estate closing firm were funds he thought legitimately due to him as the majority owner.
High-Powered Legal Factions Gear Up for Harvard Admissions Trial
Bartlit Beck’s Adam Mortara will give opening statements for the plaintiff, Students for Fair Admissions, while William Lee of WilmerHale in Boston is expected to present Harvard’s opening argument in the affirmative action trial kicking off Monday.
Boies Schiller Cleared to Keep Billionaire Ex-Client's File Amid Fee Dispute
The firm can keep the client file—at least for now—as leverage to collect nearly $1 million in unpaid legal fees it says Russian-Canadian billionaire Alex Shnaider still owes.
In LaCroix’s False Branding Lawsuit, Risk Management Lessons for Corporate Law
The flavored sparkling water maker was hit with a class action for allegedly falsely branding its product’s ingredients as “natural” when the U.S. Food and Drug Administration has classified them as “synthetic.”
Kaepernick's Trademark Application for Face, Hair Is 'Ambitious,' IP Lawyer Says
Colin Kaepernick, the former quarterback for the San Francisco 49ers and the face of Nike’s current advertising campaign, applied to the U.S. Patent and Trademark Office last week seeking trademark rights to a black-and-white image of his face and hair.
DOJ Antitrust Chief Claims Time Warner Lawyer Issued Threats in Merger Meeting
“Mr. Cappuccio stood up from his seat at the conference table, wagged his finger at me, and said that if the Antitrust Division goes through with this, the case will be ‘a sh*tshow like you’ve never seen,’” Makan Delrahim stated. (Wait, was that a threat or more of a prediction?)
In case you missed it…
Litigators of the Week: Opening a New Door in Private Antitrust Enforcement
No private merger challenge has gone to before a jury—until now. And no judge in such a private action has ordered a divestiture as a remedy to restore competition—until now.