Default and Bankruptcy Lessons From Recent Financial Litigation and - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A Lender Liability: Defending Against Attacks on Loans in Workout, Modification, Default and Bankruptcy Lessons From Recent Financial Litigation and Best Practices for Evaluating and Minimizing Claims TUESDAY, APRIL 21, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Richard Donovan, Member, Rose Law Firm , Little Rock, Ark. Zachary G. Newman, Partner, Hahn & Hessen , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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April 21, 2015 LENDER LIABILITY: DEFENDING AGAINST ATTACKS ON LOANS IN WORKOUT, MODIFICATION, DEFAULT AND BANKRUPTCY LESSONS FROM RECENT FINANCIAL LITIGATION AND BEST PRACTICES FOR EVALUATING AND MINIMIZING CLAIMS

This CLE live web seminar will analyze the most common types of lender liability claims, discuss how they are being asserted in various phases of the lending cycle and in bankruptcy, and explain lessons learned from recent financial litigation. The panel will outline best practices to minimize and avoid the risk of lender liability claims. Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A. 5

Your Moderator  Fiduciary Zachary represents national banking Litigation (contested associations, commercial lenders, leasing accountings, Prudent Investor Act companies, and hedge funds in business claims, and breach of fiduciary duty litigation throughout the United States. claims). His practice focuses on  Banking Litigation (enforcing multi- Fordham University School of Law (’ 94) million dollar credit facilities on Co-Chair of the “Banking and Lender behalf of national and regional banks Liability Litigation Subcommittee” and institutional and specialty of the American Bar Association’s lenders, securing provisional 212.478.7435 Commercial and Business Litigation remedies, and defending lender Znewman@ Committee. liability litigation); hahnhessen.com Co-Chair, Litigation Management  Commercial Litigation (litigating Subcommittee of the America Bar contract disputes, commercial Association Corporate Counsel insurance claims, aircraft lease Committee disputes, unfair competition and New York Metro Area Super Lawyers restrictive covenants, bankruptcy 2011-present disputes, and judgment enforcement); and 6

Guest Speaker Richard Donovan Best Lawyers in America - 2006-2014 Pulaski County, Arkansas, and Editions - Commercial Litigation; Bet-the- American Bar Associations; Member, Company Litigation, Litigation - Banking & American Board of Trial Advocates; Finance, and Litigation – Securities Master of the Bench, Henry Woods American Inn of Court; St. Thomas Chambers USA Leading Lawyers, 2004- More Society, Member 501.377.0325 2013, Litigation: General Commercial rdonovan@ University of Arkansas, Bachelor of roselawfirm.com Mid-South Super Lawyer Top 50 Lawyers Arts, in Arkansas, 2011-2013 University of Arkansas, Juris Doctor (honors) Member, Arkansas Law Review 7

Introduction to Our Program 8

SCORECARD  Banking, lending, financial services, and private equity have been subject to substantial criticism:  Websites ( e.g. , stopgreedybanks.com)  Courts  Borrowers  Editorials  Blogs  The current economic environment has created heightened tensions between lenders and borrowers 9

HEADLINES

ELECTED & COURT OFFICIALS ARE NOT RELUCTANT TO SPEAK THEIR MIND  Representative Barney Frank, Chair of House Financial Services Committee, recently had a “blunt” statement to Bankers:  “People really hate you, and they’re starting to hate us because we’re hanging out with you.”  http://www.politico.com/news/stories/0209/18372.html  In an Orange County mortgage modification case, Justice Catherine M. Bartlett cut off the bank lawyer who argued the proper documentation was not submitted and noted:  You, she said, are telling me lies … [The bank] got a bailout, and this is an outrage, how this man has been treated … Hard -working, middle-class Americans are trying to make it, trying to refinance with your bank … Either bank officials show up in person, or I’m going to order them here in handcuffs. 11

“HE MUST HAVE DONE IT BECAUSE THEY DID IT”  From A Recent Brief Filed By A Borrower (A Lawyer, And A Former Bank Executive):  Through its acts and omissions, [the Bank] – like so many mortgage lenders and other banks in recent years – acted in bad faith and/or negligent manner to the detriment of [us borrowers] ....  While courts in New York and elsewhere are holding lenders accountable for such conduct, [the Bank] nevertheless seeks to shield itself from the consequences of its own actions .... 12

WHY THE RISE IN CLAIMS? HERE ARE SOME CONTRIBUTING FACTORS  Rise in corporate defaults  Distressed loans  Secondary markets and assignments  Constriction of availability / deepening insolvency  Busy court dockets  Deep pockets become the focus  The plaintiff’s bar  Club deals - participations - syndicated loans  Underwriting criteria  Health of the loan documents 13

LAWYER ADVERTISING AND BORROWERS FLEXING THEIR MUSCLES  Google Answers Post:  I am looking for examples of borrowers who have (successfully) sued banks for issuing them a highly risky loan. I'd appreciate any pointers to U.S. legal precedence for action taken against a bank for giving someone a risky loan.  http://answers.google.com/answers/threadview?id=531128  Times Magazine :  Do banks, those powerful and wise institutions, sometimes behave like bullies? While quite a few borrowers would say yes, U.S. banks have long seemed virtually immune to retaliation for heavy-handed tactics. Now, however, hundreds of borrowers are taking their lenders to court and winning.  http://www.time.com/time/magazine/article/0,9171,967374,00.html 14

THE STIGMA OF AFFIRMATIVELY ACKNOWLEDGING A DEBT IS NON-EXISTENT  Danny Tarkanian, a U.S. Senate candidate, filed suit against La Jolla Bank in Las Vegas seeking to avoid a debt noting:  “It’s something happening quite a bit in this environment … Unfortunately, we’re caught in the middle of it.”  http://www.lasvegassun.com/news/2010/jan/22/tarkanian-family-sues-bank-avoid-propertys- foreclo/ 15

SERIOUS RISKS OF LENDER LIABILITY  Delay in recovery  Increased legal fees  More extensive discovery required  Imposition of counterparty legal fees  Recharacterization of debt  Equitable subordination  Cancellation of debt  Compensatory damages (lost profits – speculative)  Reputational damage (fraudulent and predatory lending claims)  Client resources (witnesses; document production; electronic discovery; in-house counsel) 16

NOT A MATTER OF WINNING VS. LOSING: MEASURE SUCCESS IN TERMS OF DELAYS TSL (USA) Inc et al v. OppenheimerFunds Inc et al , New York State Supreme Court, New York County, No. 600976/2010  On the other hand, it may be difficult for a lender to recover if they lend funds under circumstances in which they are found to have been without all material facts.  The lenders alleged that Oppenheimer breached its duty under a certain administration agreement by failing to notify them of four amortization events that occurred as a result of non-conforming securities purchases, and two additional events when expenses exceeded revenue for certain transactions .  The lenders claimed they continued lending without being told of the events, and they could have terminated funding. The judge dismissed the fraudulent inducement claim with prejudice. No damages. The portfolio is performing and the theory of recovering loans lent is simply too speculative.  Court acknowledged that the specific performance claim could be replead to permit the lenders to claim Oppenheimer is obligated to replace the non- conforming securities with conforming securities. 17

TRENDING …  Loan commitment and failing to lend  Conduct, waivers & modifications  Good-faith and fair dealing  Exercise of control  Declaring defaults & loan modifications  Dealing with collateral  And more … 18

LOAN COMMITMENTS, TERM SHEETS & THE “FAILURE TO LEND” CLAIMS 19