On May 24, 2016, Chancellor Carol L. McCoy of the Chancery Court for Davidson County, Tennessee, declined to dismiss claims brought by the Tennessee Consolidated Retirement System (“TCRS”) against several large financial institutions related to $164 million in alleged losses on mortgage-backed securities. The banks argued that the case was barred by the three-year statute of limitation for common law fraud claims in Tennessee and the two-year limit for claims under the Tennessee Securities Act. Invoking the doctrine of nullum tempus occurit regni (“no time runs against the king”), however, the court held that limitations periods do not apply to the state or its political arms, such as TCRS. The court also held that TCRS adequately alleged the elements of its fraud, constructive fraud, negligent misrepresentation, and Tennessee Securities Act claims. Order.
Tom Kidera helps navigate companies through crisis. Whether handling sensitive investigations or litigating billion-dollar cases, Tom brings a creative approach and dogged dedication to his clients and their needs. As a partner in the firm's Complex Litigation and Dispute Resolution group, Tom represents auditing firms, financial institutions, and the Firm's infrastructure clients in complex commercial litigation and regulatory enforcement proceedings.
He is particularly knowledgeable about issues of force majeure and catastrophic market disruption, having served on a team of Orrick lawyers whose force majeure-related victory on behalf of long-time client, Hemlock Semiconductor LLC, was declared a Top 10 Business Case of 2010-2019 by the Michigan Bar Journal.
Tom represents audit firms and accountants in regulatory proceedings commenced by the SEC and the PCAOB as well as civil litigations. He has experience managing and conducting large scale internal investigations, liaising with regulators, remediating problems, and managing risk and liability in delicate circumstances.
Tom also has litigated structured finance issues for his entire career, representing securitization sponsors and mortgage loan servicers in an array of litigations from securities fraud and loan repurchase disputes to ERISA and consumer class actions, also consulting and advising on the interpretation of securitization documents and events of default.
In addition, Tom advises the Firm's energy and infrastructure clients on litigation matters, previously having served as a member of the Orrick team representing Hemlock Semiconductor (a leading producer of solar-grade polycrystalline silicon) in commercial proceedings throughout the U.S. and around the globe.
Tom maintains an active pro bono practice representing asylum seekers and U.S. veterans seeking discharge status upgrades. Tom is also active in firm recruiting and retention efforts, serving on the hiring and summer program committees in New York, as well as the Professional Development Committee. He was a summer associate in the firm’s New York office in 2009.
Posts by: Thomas Kidera
HSBC Sues Merrill Lynch and Bank of America for $420 Million Relating to RMBS Deal
On May 24, 2016, HSBC Bank USA, N.A., in its capacity as Trustee of Merrill Lynch Alternative Note Asset Trust, Series 2007-0AR5 (“the Trust”), served a summons with notice on Merrill Lynch Mortgage Lending, Inc. (“Merrill”), Countrywide Home Loans, Inc. (“Countrywide”), and Bank of America, N.A. (“BofA”), in their respective capacities as sponsor, originator, and servicer of the Trust, alleging that the three Defendants discovered that mortgage loans securitized in the Trust breached certain representations and warranties and failed to notify the Trustee in accord with their contractual obligations. Specifically, HSBC alleges that Merrill, Countrywide, and BofA discovered the breaches through (i) the performance of their respective roles as issuer, originator, and servicer; and (ii) through their participation in multiple government investigations related to the origination, securitization, and servicing or mortgage loans. The summons with notice seeks $420 million in damages. Summons with Notice.
Second Circuit Overturns Fraud Judgment against Bank of America and Former Countrywide Executive
On May 23, 2016, a three-judge panel of the Second Circuit Court of Appeals overturned a judgment of fraud against Bank of America, Countrywide, and former Countrywide executive Rebecca Mairone in U.S. v Countrywide Home Loans, Inc. In reversing the District Court and ruling for the Defendants, the Second Circuit vacated a $1.27 billion judgment against Bank of America and a $1 million judgment against Ms. Mairone. The Second Circuit panel held that the evidence at trial showed at most an intentional breach of contract, which is insufficient as a matter of law to constitute fraud under the federal mail and wire fraud statutes. Instead, to support a claim, the government was required, but failed, to prove that defendants’ intent at the time of contracting was not to comply with their contractual obligations. Orrick represented Ms. Mairone in connection with the appeal. Opinion.
Federal Appellate Court Reinstates RMBS Action Against Moody’s
On May 2, 2016, the First Circuit Court of Appeals reinstated a $5.9B suit brought by the Federal Home Loan Bank of Boston (“FHLBB”), alleging that Moody’s Corp and Moody’s Investor’s Service, Inc. (together, “Moody’s”) knowingly provided false ratings on certain Residential Mortgage-Backed Securities purchased by FHLBB. The case had been dismissed for lack of personal jurisdiction by Judge George A. O’Toole Jr. of the District of Massachusetts, who also held that the court could not transfer the case to another federal court where jurisdiction would be proper because 28 U.S.C. §1631 only permitted the transfer of cases dismissed for lack of subject matter jurisdiction, rather than personal jurisdiction.
The First Circuit vacated that decision, concluding that the plain language of 28 U.S.C. §1631, the statute’s legislative history, and case law from other Circuits all weighed in favor of a ruling that the statute also permits transfer where the claims at issue were dismissed on either personal or subject matter jurisdiction grounds. Accordingly, the First Circuit remanded the case to the district court to determine whether transfer was “in the interests of justice,” in accord with the statutory requirement for transfer under 28 U.S.C. §1631. Decision.
Bank of America Settles RMBS Actions for $190 Million
On April 25, 2016, the Federal Home Loan Bank of Seattle (“FHLBS”) agreed to a $190 million settlement with Bank of America in connection with multiple lawsuits filed in 2010 stemming from the sale of hundreds of millions of dollars of RMBS. FHLBS alleged that Bank of America made misstatements or omissions in connection with the issuance of the RMBS in violation of the Washington State Securities Act. Additional details of the settlement are not publicly available.
Goldman Sachs Set to Pay $5.1 Billion in RMBS Settlement
On April 11, Goldman Sachs agreed to pay roughly $5.1 billion in a settlement with federal and state officials regarding the marketing and sale of RMBS during the years leading up to the financial crisis. The settlement is divided into a $2.4 billion civil penalty, $1.8 billion for consumer relief and $875 million in cash. Cash payments will primarily be divided among the National Credit Union Administration, the Federal Home Loan Banks and the States of California, Illinois and New York. Goldman Settlement.
Bank of New York Mellon’s Motion to Dismiss Denied in Part in Trustee RMBS Suit by Royal Park Investments
On March 2, Judge Gregory H. Woods of the United States District Court for the Southern District of New York issued an Opinion and Order denying in part and granting in part the Bank of New York Mellon’s (“BNYM”) motion to dismiss an action brought by Royal Park Investments SA/NV (“Royal Park”) claiming damages of $1.12 billion arising from failures by BNYM, in its capacity as trustee, to protect the interests of investors in certain RMBS trusts. Judge Woods denied arguments by BNYM that Royal Park had failed to plausibly allege BNYM’s discovery and knowledge of (i) breaches of representations and warranties in securitized loans; and (ii) events of defaults committed by servicers of the relevant trusts. Judge Woods did, however, dismiss Royal Park’s claims against the bank for breach of trust, a violation of section 315(a) of the Trust Indenture Act, and the Streit Act. Opinion and Order.
Claims Against RMBS Trustee U.S. Bank Partially Dismissed
On February 26, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York denied U.S. Bank N.A.’s (“U.S. Bank”) motion to dismiss claims for breach of contract and violation of the Trust Indenture Act (“TIA”) with regard to the 27 trusts that remain before the Court after it previously declined to exercise supplemental jurisdiction over claims arising from an additional 810 trusts. Orrick covered that decision here. The Court dismissed plaintiffs’ claims for breach of fiduciary duty and extra-contractual duties under the economic loss doctrine, but did not dismiss plaintiffs’ TIA-based claim, holding that the statute provides plaintiffs with a private right of action. Judge Forrest also held that the Indentures’ no-action clauses have no effect in suits against RMBS trustees, rejecting U.S. Bank’s attempt to dismiss all claims against it on the basis of plaintiffs’ non-compliance with those provisions. Opinion and Order.
National Credit Union Administration Board Accepts UBS Securities LLC Offer of Judgment
On February 25, the National Credit Union Administration Board (“NCUA”) accepted an offer of judgment tendered by UBS Securities LLC (“UBS”) in the amount of $33,014,285 plus prejudgment interest, which will be calculated by the court. NCUA and UBS will attempt to agree on costs and fees also to be paid by UBS. Acting as the liquidating agent for Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union, NCUA’s complaint alleged that UBS made material misstatements in connection with the sale of 20 RMBS certificates, alleging more than $918 million in actual gross losses. UBS specified in the offer of judgment that its offer should not be construed as an admission of liability. Offer of Judgment. Complaint.
Morgan Stanley Agrees to Settlement with DOJ and NYAG Totaling $3.15 Billion
On February 11, the U.S. Department of Justice and the Attorney General of State of New York announced dual settlement agreements with Morgan Stanley providing for the payment of $3.2 billion. The settlements relate to Morgan Stanley’s marketing, underwriting, and issuance of RMBS from 2005-2007.
In its agreement with the U.S. Department of Justice, Morgan Stanley acknowledged that it had failed to disclose that certain securitized loans did not comply with applicable underwriting guidelines, and that Morgan Stanley’s due diligence practices did not conform to those described in presentations to RMBS investors. Morgan Stanley will pay $2.6 billion to the U.S. Department of Justice, $150 million to the State of New York, and an additional $400 million in relief directly to consumers. Payment to the U.S. Department of Justice releases Morgan Stanley from any civil claim brought under FIRREA. DOJ Settlement Agreement. State of New York Settlement Agreement.