Tuesday, January 8, 2013

A Couple Curious Tea Leaves

Justice Bransten held a hearing yesterday in which she authorized Courtroom View Network's (CVN) application to stream the arguments to be held tomorrow and Thursday regarding the motions for summary judgment (SJ) on Bank of America's (together with affiliates, BAC) successor liability for Countrywide's liabilities.

Justice Bransten is a thoughtful judge and when she addressed BAC's concern as to whether the public airing might adversely affect future jury trials involving BAC, Justice Bransten handled the concern sensibly and was convinced that no such taint would arise when CVN stated that they had about 500 regular subscribers, mostly law schools, apart from those that might buy a daily subscription ($250) to see the successor liability argument only.  So while access to the arguments will go beyond the normally-available-for-purchase court transcripts, we are talking more about an indie release than prime time when it comes to CVN.

But then the discussion turned to certain organizational matters relating to the successor liability arguments, and Justice Bransten made two interesting comments: i) even though MBIA had the burden of proof on the issue of successor liability (essentially de facto merger), she wanted BAC to argue first, and ii) she did not think she would need to read documents relating to the BAC/FNMA $10 billion settlement announced just that morning, as she thought she would be able to make her decision on the papers as presented and on the "gist" of the case, as she put it.

Now these are just tea leaves and one should not invest tea leaves with much, if any, meaning.

But I do find it curious that she wanted BAC to argue first even when it did not have the burden of proof on successor liability (indeed, MBIA counsel appeared surprised at this decision as well), which is to be argued Wednesday.  One might think that the party with the greater need to pull the oar, so to speak, would usually go first...and maybe in Justice Bransten's mind, it will.

As to the BAC/FNMA settlement papers and whether their production could be obtained on an expedited basis, when BAC counsel advised that it did not represent BAC on that matter and didn't have the papers, Justice Bransten was unconvinced that even such a large settlement by BAC of Countrywide liabilities (Justice Bransten apparently was unaware of the settlement and interrupted MBIA counsel when he said $10 billion) would affect her treatment of the implied assumption of liability argument, which is to be argued Thursday.  The papers would be produced in due course.

If I were asked what my takeaway from all this is, I would caution first that this is only tea leaf reading...but it certainly seems like it represents a signal from a judge who (having read all the papers before argument, not always the case among NY Supreme Court judges) is inclined to rule in MBIA's favor on the de facto merger prong of successor liability, and therefore need not spend much time addressing the independent implied liability assumption argument (which Justice Bransten would need to address only if she ruled against MBIA on de facto merger).

Just tea leaves, however.

NB:  this blog is not intended to be investment advice, and should not be relied upon by anyone to constitute investment advice.  Investing is a tough game, and everyone must do and "own" their own work, because you will certainly own your investments.

Disclosure: long MBI.  Follow me on twitter.


  1. I find your blog highly informative. Thank you and keep up the great work!

  2. I second that. When will this be finished and if MBIA wins how would that impact BAC?