In a significant appellate victory, the Appellate Division, First Department issued a decision on May 16, 2017 in favor of Simpson Thacher client Countrywide Home Loans, Inc. and related entities on multiple issues that have been actively litigated by RMBS issuers for many years.
In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., plaintiff, a financial guaranty insurer, brought fraud and breach of contract claims arising out of Ambac’s agreement to provide financial guaranty insurance in connection with 17 Countrywide residential mortgage-backed securitizations issued by Countrywide. Among other rulings, the First Department reversed the trial court’s determination that New York’s Insurance Law excuses insurers alleging common-law fraud from having to allege and prove justifiable reliance and loss causation. The court also agreed with Countrywide that Ambac is not entitled to compensatory damages in the form of all claims payments it made or will make under the policies, regardless of whether they arise from a breach or misrepresentation. The First Department also reversed a trial court ruling that the contractual “repurchase protocol” of cure, repurchase or substitution of defective loans is not Ambac’s “sole remedy” for alleged breaches of R&Ws. The First Department also agreed with Countrywide that the trial court misinterpreted certain R&Ws in transaction documents that are recurring subjects in RMBS litigation, including “No Default,” “No Material Monetary Default,” “Qualified Appraiser” and “Title Insurance” R&Ws.
The Simpson Thacher team includes Joe McLaughlin (Picture) (who argued the appeal), David Woll, Sarah Phillips, Shannon McGovern, Rachel Sparks Bradley, Sarah Eichenberger, Sarah Sheridan and Becky Sussman.
Involved fees earner: Joseph McLaughlin – Simpson Thacher & Bartlett; David Woll – Simpson Thacher & Bartlett; Sarah Phillips – Simpson Thacher & Bartlett; Shannon McGovern – Simpson Thacher & Bartlett; Rachel Sparks Bradley – Simpson Thacher & Bartlett; Sarah Eichenberger – Simpson Thacher & Bartlett; Sarah Sheridan – Simpson Thacher & Bartlett; Rebecca Sussman – Simpson Thacher & Bartlett;
Law Firms: Simpson Thacher & Bartlett;
Clients: Countrywide Home Loans, Inc.;