From last night report.... Syncora had 2pm meeting yesterday which lasted a while it seems:
In summary appears, that settlement talks may be closer... hard to know but Judge wants them to wrap it up
Lehman, GreenPoint Debate Proper Course of Action for Summary Judgment Motion After State Court Ruling on Assignment
Relevant Document:
Notice of Appeal
Judge Shelley Chapman held a status conference this afternoon to address how the litigation tied to claims filed by U.S. Bank and Syncora should proceed after a recent ruling by a New York state court judge holding that Lehman Brothers Bank FSB validly assigned certain repurchase rights to Lehman Brothers Holdings Inc., or LBHI. The parties had filedsupplemental briefs last month outlining their respective views on the issue.
The parties also debated the means by which Judge Chapman should decide Lehman’s pending summary judgment motion, namely whether she should decide the matter on the merits, adopt the state court’s ruling or conclude that GreenPoint is collaterally estopped from challenging the assignment at the bankruptcy court level. The state court ruling is now on appeal, and as a result, several parties addressed what effect, if any, the pending appeal has on the matter going forward.
Todd Cosenza of Willkie Farr & Gallagher, counsel for LBHI and Structured Asset Securities Corp., reiterated Lehman’s position that the Syncora and U.S. Bank claims against LBHI serve as “insurance policies” to the extent the claimants cannot recover against GreenPoint. Cosenza stressed Lehman’s need for U.S. Bank and Syncora to clarify what claims, if any, remain after the state court ruling, and he proposed a two-week period for U.S. Bank and Syncora to provide for “a clear articulation” of such claims.
Kevin Burke of Cahill Gordon & Reindel, counsel for GreenPoint Mortgage Funding, argued that the bankruptcy court should decide the assignment issue on the basis that GreenPoint is collaterally estopped from challenging the validity of the assignment in the bankruptcy court.
The only contingency, Burke added, was that the state court’s decision could be reversed, which would set aside the assignment and find that U.S. Bank has no standing.
According to Burke, a subsequent reversal is not an impediment to the bankruptcy court moving forward because the court can deal with the claims as contingent, unliquidated claims.
Constance Boland of Nixon Peabody, counsel for U.S. Bank, praised the state court decision but stressed that GreenPoint has appealed the ruling and added that GreenPoint’s proposed course of action places the risk of the appeal on U.S. Bank. “GreenPoint wants us to withdraw now,” Boland explained, and if the decision is reversed, “we would possibly be out of luck.”
At this point, Judge Chapman made clear to the parties that the course of action going forward is not going to be one where the court “wait[s] for whatever happens in the state court.” Instead, Judge Chapman stated that she was “not going to do nothing” and “keep the estate waiting.” In response to Judge Chapman’s question about what can be done to allow the parties to move forward, Boland stated that U.S. Bank is not going to withdraw its proof of claim in whole. Boland instead suggested that the court decide the motion for summary judgment, specifically the assignment issue, on the basis of an adoption of the New York state court’s ruling or on the basis of collateral estoppel.
Although U.S. Bank would not provide details regarding the non-assignment-based claims against Lehman, Boland revealed that such claims were “smaller.”
In response to Boland’s suggestions for deciding the assignment issue, Burke - for GreenPoint - noted that while the collateral estoppel route is helpful, deciding the issue on the merits avoids any further issue with the appellate court at the state level. Burke added that the court can rule on the U.S. Bank and Syncora claims, and the court does not need to rule again on what the state court has already ruled on. If the bankruptcy court ruled on the assignment issue and ruled against GreenPoint, Burke added, “we would have to appeal bankruptcy court while appealing state court.” Burke called the summary judgment motion in the bankruptcy court a “straw man” that “doesn’t help anything.” Instead, according to Burke, the bankruptcy court can address the claims by either estimation or allowance.
The court discussed with the parties a number of hypothetical situations which would move the case forward, including the method by which Judge Chapman would rule, the events that would be necessary to proceed where GreenPoint is not a defendant or where U.S. Bank and Syncora withdraw their claims, and the possibility of delaying an appeal or some form of tolling.
Judge Chapman seemed to be receptive to moving forward with the summary judgment by way of collateral estoppel or on the merits, noting that the court could disallow U.S. Bank’s claim after such a ruling. U.S. Bank noted that as long as GreenPoint’s appeal is pending, it would have to object. In acknowledging that she can decide the claims in the bankruptcy court, Judge Chapman added, “That’s the whole point. This is my case. I have clear authority to oversee the claims resolution process. I have that authority.” Despite the pending state court proceeding on appeal, she also observed that the parties could appeal any decision she made on the merits.
While Judge Chapman was mindful that she did not want to “cut off anyone’s rights,” she stressed the need to find a way to move forward, reiterating the parties’ ability to pursue appeal. In support of her conclusion, Judge Chapman stressed the need to wind down the bankruptcy estate.
Judge Chapman asked the parties to work out a schedule, and Cosenza stated that Lehman will work to get a hearing date on the summary judgment motion and will also work with U.S. Bank to provide information regarding what claims remain.
At the conclusion of the status conference, and on the suggestion of Judge Chapman, the parties remained in the courtroom to have further discussions.
