Professional Documents
Culture Documents
Plaintiff,
-against-
Defendants.
Index # 602825/08
HEARING
60 Centre Street
New York, New York 10007
December 9, 2009
BEFORE:
Justice.
APPEARANCES:
AW
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8 GOODWIN PROCTER
The New York Times Building
620 Eighth Avenue
New York, New York 10018-1405
BY: DAVID J. APFEL, ESQ.
LARKIN M. MORTON, ESa.
MARK HOLLAND, ESQ.
Attorneys for Defendants
20
21
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14 first complaint.
25 Honor. She is not here today. I'm not sure she needs
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2 We, at least on the defense side, we would have no
14 argument as well.
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2 that the corporation complaint is not cognizable on the
3 motion to dismiss. That's the only thing that I am
4 referring that we think ought to be redacted. We don't
s think there should have been a motion in the first
6 place.
23 right.
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2 something that we can discuss in open court.
3 MR. APFEL: Okay. As I understand, Mr.
4 Selendy mentioned that there is only one exhibit that
s he has any reservations about, and that's a particular
6 e-mail. And, you know, when and if I mention e-mail in
7 the course of my argument today, I will alert the Court
8 that that's the particular exhibit that we are about to
9 discuss.
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2 effect in the a First Department.
3 THE COURT: After I make a decision on the
9 Selendy's appeal.
io MR . SELENDY: Correct .
12 July 8th opinion that Your Honor crafted was the law of
13 the case as of July 8th, but the case has changed since
14 July 8th and has changed because plaintiff has amended
15 its complaint. And the amendment of the complaint
16 means that it has really shift~d ground in various
17 ways. It has changed the nature of the case, and it
18 means that it's really incumbent upon us to move to
19 dismiss once again with respect to various issues.
20 There are three material ways in which the amended
2~ complaint alters the original complaint, in ways that
22 are material. When I say material, material for
23 purposes of our motion to dismiss.
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20 Countrywide defendants.
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2 THE COURT: Okay.
3 (Document handed to the Court.)
4 MR. APFEL: And the Court is the Central
7 argument today.
8 Then, the third way in which the plaintiff has
9 significantly or materially changed their case, Your
io Honor, is with respect to the fraud claim. They have
11 added five securitizations that they had previously
12 designated as benchmark securitizations. And now they
13 are claiming that these five additional securitizations
~4 were also part of the underlying fraud.
15 THE COURT: Where do they get the impression
16 that before this amendment we had 15 securitizations
18 additional.
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22 induced?
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2 principal and, therefore, potential exposure for MBIA.
3 Now, the reason that I think that this is material
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2 these later securitizations, these securitizations that
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2 misrepresentation, the Bank of America Corporation
3 claim, the causation argument, which is brand new. And
4 time permitting, and if Your Honor is still willing to
5 indulge me a few more moments, what I would also like
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8 record than you had the first time around and with the
io by --
is jurists.
19 misrepresentation .
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2 at Tab 4 of our appendix of unreported cases. But with
3 Your Honor's permission, I will hand up a copy for the
4 Court for ease of reference. And the copy I'm handing
s up, just so plaintiff knows, is the Slip Opinion rather
6 than the soon-to-be reported opinion, largely because
7 all of my notes are the Slip Opinion. So, I know the
8 pages in the Slip Opinion.
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5 difference.
11 balances.
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2 THE COURT: I will certainly look at it,
3 okay. I have taken this under consideration. Let's
move on.
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2 That's not the case. That's not the case here.
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2 THE COURT: Isn't one of the issues raised in
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26 the level of work that they put into these deals before
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5 last one that they entered into, so, after they had
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12 the deal four deals earlier, but they did the next one,
13 and the next one, and the next one. This was not a
22 should have had at that time. But they were not going
23 into this blind.
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7 Court's time to read that right now. But you will see
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2 October of last year told plaintiff they couldn't have
3 asset discovery with respect to, you know, Countrywide
4 to see whether or not Countrywide would be able to make
5 good on a money judgment down the road. And you told
6 plaintiff at that time --
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2 claim should be dismissed.
4 The issue here is, they make a claim, and the claim is,
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17 and say they should not have had their motion to amend
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14 just not the merger that they are touting. The merger
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2 of America's business. Bank of America has already
3 done a lot of work to try to structure these
4 transactions to avoid exactly what they are talking
5 about.
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2 THE COURT: Just the fact that the SEC
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13 fraud. And it's not the fraud that cauged the losses
14 in the first place. And it's really, rather, the
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~8 plaintiff's losses.
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2 therefore, driving down the CLTV and it making it
3 appear as if it's a less risky loan than it might in
4 reality be. I'm just saying that that's the fraud.
s Likewise, with debt to income, at the loan level, they
6 are saying that the DTI's that are presented by
7 Countrywide are false. Because in some instances,
8 Countrywide had programs where they would give loans to
9 people just based on stated income. And they say --
10 THE COURT: Never verifying the income.
11 MR. APFEL: Without the necessity of
12 verification. They are saying that they should have
13 known in many instances, from looking at the files,
14 that the stated income was too high. And they either
is knew or should have known that and, therefore, they
16 were defrauding MBIA by suggesting low DTI's based on
17 artificially high incomes, whereas the incomes were
18 really low.
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2 really was, they never would have agreed to securitize
3 the securitizations involving loans of that type.
4 Assuming that's right, you know, let's say we have
5 this particular loan, we have two loans, one with the
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~3 the loss that MBIA may suffer is that the loan was made
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6 you know --
11 take back these loans if they can prove that there were
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9 the exact same grounds that I'm raising right now. And
~8 price.
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2 purposes of the motion to dismiss, it was so tight, the
3 temporal nexus was so tight between the truthful
4 disclosures and the decline in the stock price that it
5 would appear as if the cause is the falsity of the
6 earlier statements.
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6 of your argument?
13 Mr. Selendy.
20 complaint.
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2 As the New York Times reported a few months after
3 our last argument, more than any other major lending
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18 RMBS deals.
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2 analysis.
19 today.
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18 Fitzgerald v Fahnestock.
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6 designed to prevent.
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9 America itself.
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~3 Department .
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6 cites?
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4 knowledge.
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4 files and say how about it? Decide if you would like
5 to issue insurance. To the contrary, they have
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5 expressed warranties.
6 The Second Circuit also held in that case that if
13 opinion.
14 The Court stated Merrill Lynch's warranties, in
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19 breach of contract.
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as expertise.
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14 income that he or she said she has, and that the loans
25 the Rule. And to take just one example among many, the
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23 in their papers.
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9 at Page 27.
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16 Your Honor.
19 quick points.
24 for the reason that they are the most recent cases.
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~3 authority.
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18 And they will see at the end of day whether they get a
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18 is no successor liability.
23 cases.
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4 attention --
22 the issue.
25 insure, as represented.
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2 discover.
s series of 17 securitizations.
12 th ems elves, they have full rights each and every time
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2 that is incorrect.
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14 may not agree with it, but you cannot say that it
15 wasn't done with a great deal of time and effort on the
16 Court's part.
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8 record.)
~4 the board.
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8 (Recess taken.)
~1 tell you this - the other case that I had to deal with,
12 I'm doing on submission only. But that doesn't mean we
13 are going to be here until 1:00, no. We have got to go
14 quickly.
22 responding?
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19 guidelines.
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2 e-mails.
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~3 the harm here was caused by the market and not by their
24 fraud .
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6 change between the 2002 time period and the 2004 time
7 period. They may show, was there a change in who
~o loans.
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4 it.
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4 what was the basis for the claim, all right. Not just
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16 Countrywide.
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7 the past.
18 case.
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6 reinsurance.
8 on reinsurance?
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ones -
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8 that --
17 it. And I don't tell you how I'm going to come out on
23 that issue?
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25 securitizations performance."
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12 communications .
19 2008.
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4 agencies.
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~8 you are very busy, but can we at least get a trial date
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2 Apfel?
19 to go to trial in 2011?
25 Mr. Leung has been spending too much time, and it's
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8 discovery, no.
~2 keep the dates as they are. And you can then come in
13 and tell me exactly what problems you have. No, sir.
14 No. This is a 2008 case. It can't go on forever. All
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3 look at this.
9 search for.
18 tell me all the good reasons you have not been able to
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