Presenting a live 90 ‐ minute webinar with interactive Q&A Lender Liability: Evaluating, Minimizing Lender Liability: Evaluating, Minimizing and Defending Claims Defending Against Attacks on Loans in Workouts, Defaults and Bankruptcy THURS DAY, DECEMBER 1, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Thomas J. Hall, Partner, Chadbourne & Parke , New Y ork Thomas J. McCormack, Partner, Chadbourne & Parke , New Y ork even Rivera, Partner, Chadbourne & Parke , New Y S ork 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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LENDER LIABILITY: EVALUATING, MINIMIZING AND DEFENDING MINIMIZING AND DEFENDING CLAIMS: DEFENDING AGAINST ATTACKS ON LOANS IN WORKOUTS ATTACKS ON LOANS IN WORKOUTS, DEFAULTS AND BANKRUPTCY DECEMBER 1, 2011 5
FACULTY FACULTY Thomas J. Hall Liti Litigation Partner, Chadbourne & Parke LLP ti P t Ch db & P k LLP 212-408-5487 thall@chadbourne.com He is Co-Head of the firm's Commercial Litigation Practice and has extensive experience in complex litigation matters such as banking, securities, project finance, real estate, corporate governance, partnership and contract disputes. finance, real estate, corporate governance, partnership and contract disputes. Benchmark's 2011 Guide to America's Leading Litigators recognizes him among the 75 leading commercial litigators and 25 leading bankruptcy litigators in the country. y 6
Thomas J. McCormack Litigation Partner Chadbourne & Parke LLP Litigation Partner, Chadbourne & Parke LLP 212-408-5182 tmccormack@chadbourne.com He is a trial lawyer with over 25 years of experience handling complex commercial, securities and class action litigations. During the course of his career, he has tried a wide range of cases, involving multi-billion dollar energy supply contracts, bank loans, joint venture agreements, corporate governance and securities claims, drug development projects and many others. He is listed in Chambers USA, Benchmark and other publications as a leading commercial litigator. 7
Seven Rivera Bankruptcy Partner, Chadbourne & Parke LLP p y , 212-408-5529 srivera@chadbourne.com His practice involves all aspects of bankruptcy and restructuring representing both secured and unsecured lenders, creditors, debtors and creditor committees in complex and high-profile Chapter 11 cases. He also represents buyers and sellers in sales and other asset dispositions both in and outside formal ll i l d h di i i b h i d id f l reorganization proceedings and provides bankruptcy advice concerning corporate transactions. 8
PROGRAM Part 1: Interesting Issues in 2011 Part 2: Borrowers' Defenses Part 3: Other Areas of Potential Lender Liability Part 4: Lender Liability Claims in Bankruptcy Part 5: Q & A: 15 minutes 9
PART 1: INTERESTING ISSUES IN 2011 A. Claims Against Lenders Arising from Mortgage Modification Programs B. Claims Against Madoff Banks C Lender Liability for Terrorist Acts C. Lender Liability for Terrorist Acts 10
A A. CLAIMS AGAINST LENDERS CLAIMS AGAINST LENDERS ARISING FROM MORTGAGE MODIFICATION PROGRAMS 11
Reyes v. Wells Fargo Bank, N.A., No. C-10-01667 JCS, 2011 WL 30759 (N.D. Cal. Jan. 3, 2011) Background • Homeowners filed class action suit against Wells Fargo arising from Wells Fargo's alleged mortgage practices relating to distressed residential mortgages. F ' ll d i l i di d id i l • Claimed Wells Fargo duped them into signing forbearance agreement, on which they made six monthly payments in exchange for loan modification thereafter they made six monthly payments in exchange for loan modification thereafter. After making payments, plaintiffs discovered their homes had been sold in foreclosure. • Complaint alleged Wells Fargo offered "sham" mortgage modification program to generate revenue from non-performing mortgage loans, without providing customers with the promised consideration of opportunity to retain their homes. p pp y 12
Reyes (cont'd) • Class action suit asserted causes of action for: (1) breach of contract and implied covenant of good faith and fair dealing; (2) rescission and restitution; and (3) unfair competition restitution; and (3) unfair competition • Wells Fargo moved to dismiss arguing complaint did not point to any provision of forbearance agreements it breached provision of forbearance agreements it breached. 13
Reyes (cont'd) Holding • Because plaintiffs were legally bound under their original loan agreement to make payments, payments made under forbearance agreement did not constitute legally cognizable damages. • Complaint did not point to any provision of the agreement that promised plaintiffs • Complaint did not point to any provision of the agreement that promised plaintiffs, with any degree of certainty, a meaningful opportunity to retain their homes. • Breach of contract claim cannot survive where plaintiffs do not and cannot allege p g damages. Claims for breach of contract were therefore dismissed. • Plaintiffs failed to state a claim that defendants breached the implied covenant of good faith and fair dealing by foreclosing on the homes when the agreement was d f ith d f i d li b f l i th h h th t arguably still in effect. Plaintiffs were able to remain in their homes even after the foreclosure sale and therefore could not assert damages. 14
Reyes (cont'd) • Plaintiffs not entitled to restitution as to payments made before foreclosure, because Pl i iff i l d i i d b f f l b Wells Fargo was owed this money under the original loan agreement. • Plaintiffs survived motion to dismiss as to the post-foreclosure payments as they might Plaintiffs survived motion to dismiss as to the post foreclosure payments as they might be able to prove this payment was not required under the forebearance agreement, and because it was made after Wells Fargo foreclosed on the property. 15
B. B. CLAIMS AGAINST MADOFF CLAIMS AGAINST MADOFF BANKS 16
MLSMK Inv. Co. v. JP Morgan Chase & Co., 651 F.3d 268 (2d Cir. 2011) Background • Plaintiff MLSMK allegedly invested $12.8 million with Madoff. Defendant JP Morgan Chase ("JPMC") was allegedly trading partner with Madoff's market- making business and provided banking services to Madoff's investment making business and provided banking services to Madoff s investment company. • MLSMK allegedly lost entire investment. g y • Plaintiff sued JPMC for aiding and abetting breach of fiduciary duty, commercial bad faith, and negligence. Plaintiff also asserted that JPMC had conspired with Madoff in violation of RICO, seeking treble damages. 17
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