Too Big to Fail Banks Still Fighting Over Predatory Loans Compensation, Despite The Greatest Theft

The real victims, the people who owned residential homes before the financial crisis of 2008 have never been financially compensated.
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RMBS Litigation Relating to Loans Sold Prior to 2008: Are We Finally Nearing The End?

MAR 17, 2020 | REPUBLISHED BY LINY : DEC 29, 2021

The years since the 2007–2008 financial crisis have been marked with milestone settlements of claims against the major mortgage “aggregators” (sometimes also known as “investors” in the mortgage purchasing context), who then became “securitizers” or “sponsors” with respect to the loans that they purchased.

In the years immediately following the crisis, aggregators often first faced suits (or, at the very least, threats of high-stakes suits) from government agencies and departments—such as the United States Department of Justice—and by the major GSEs (Government-Sponsored Enterprises), Fannie Mae and Freddie Mac. Even as the aggregators were attempting to resolve those suits and threatened actions, they began getting hit with claims by trustees that managed the residential mortgage-backed securitization trusts established by the aggregators/sponsors and by the monoline insurers that “wrapped” some of the trusts.

These claims by the trustees and monoline insurers comprise RMBS (Residential Mortgage-Backed Securities) litigation.

RMBS plaintiffs notched a number of significant, substantial recoveries against the major aggregators.

Countrywide (after having been acquired by Bank of America) was among the first to yield, reaching a seminal settlement in 2011 concerning the RMBS trusts that it had sponsored.

ResCap announced in 2013 that it had reached a settlement agreement allowing recovery on $8.7 billion in claims.

JPMorgan Chase and its affiliates, including Bear Stearns, reached an agreement in principle to settle their RMBS exposure for approximately $4.5 billion in 2013.

Citibank resolved similar claims in 2014. Lehman Brothers Holdings Inc. (LBHI) reached a final settlement of the RMBS-related claims against it in early 2018.

These settlements have hardly been the end of the story with respect to the underlying loans that the sponsors securitized, however. Many of these settlements generated an enormous amount of follow-up litigation.

In such instances, aggregators transform themselves from defendants into plaintiffs, suddenly professing the opposite of what they asserted when they were defending themselves against incoming claims.

What the aggregators/sponsors formerly hailed as, for the most part, large volumes of sound loans very much worthy of an institutional investor’s investment dollars suddenly become derided as “breaching loans” supposedly rife with material defects.

As they transition to a plaintiff mindset, these aggregators target mortgage originators and brokers, seeking the remedy of contractual “indemnification” to compensate the aggregators for their settlement payments. ResCap sued dozens of originators and brokers in this manner.

LBHI has sued (and is still litigating against) an even larger number of lenders, and Chase (or its affiliate EMC Mortgage) has regularly threatened to bring these types of suits against lenders as well.

It is unclear whether there will be additional RMBS-related “indemnification” or breach of contract claims against originators and brokers (relating to pre-2008 loan sales) once the ongoing LBHI and Chase/EMC suits have ended.

There are additional candidates out there that might also make the defendant-to-plaintiff transition.

In 2019, Deutsche Bank (in its capacity as an RMBS trustee, however, rather than as an aggregator) settled multiple suits filed against it by investors, including Royal Park and BlackRock. Other claims against Deutsche Bank remain ongoing, including a suit brought by the National Credit Union Administration.

In addition to Deutsche Bank, U.S. Bank, Wells Fargo, and Bank of New York Mellon are other prominent defendants that have settled claims brought by investors like Royal Park. Earlier this week, BNY Mellon and Royal Park sought to settle long-running claims brought by Royal Park (though the District Court Judge in Manhattan federal court, Gregory Woods, has asked the parties to provide further justification for the proposed resolution before he will approve it and dismiss the claims).

These suits, too, involve claims against the banks in a trustee capacity, rather than as aggregators/sponsors.

Moreover, the scope and value of these settlements appear much more limited than the earlier, massive settlements by Countrywide and others noted above.

Still, it is possible that Deutsche Bank, U.S. Bank, BNY Mellon, and Wells Fargo could seek to pass their liability “upstream” to the aggregators, or even move directly against the originators or brokers.

On another front, Wells Fargo continues litigating against the FHFA regarding loans sold by Wells to Freddie Mac. The alleged magnitude of the claims in this suit, which seeks recovery of over $1 billion in alleged damages, makes this case one to watch closely.

Given some courts’ narrow interpretations of statutes of limitations, as well as the possibility of more suits by the FHFA (which might fare more favorably under time-bar analyses than trustees or monolines), the end of this era of litigation might still be years away.

Lehman RMBS Settlement Likely to Spur Additional Claims

MAR 19, 2018 | REPUBLISHED BY LINY : DEC 29, 2021

On March 8, the Bankruptcy Court for the Southern District of New York concluded a lengthy “claims estimation” trial to determine the appropriate final settlement price for a resolution of lawsuits filed on behalf of investors in residential mortgage-backed securities (RMBS) created by Lehman Brothers Holdings prior to its bankruptcy in September 2008.

The judge determined that the final settlement value of this particular set of claims was $2.38 billion – down from the $37 billion initially demanded, and the $11.4 billion sought by the plaintiffs in this claims estimation trial.

A separate group of plaintiffs that had previously settled with Lehman Brothers Holdings had resolved their claims for approximately $2.4 billion.

The resolution of the claims estimation trial is significant for businesses that sold residential mortgage loans to Lehman, for at least two reasons.

First, lawsuits that Lehman filed against more than 100 loan originators and sellers in this same bankruptcy court had essentially been on hold for the last several months while the estimation trial was proceeding.

We can reasonably expect that those existing cases, which relate to Lehman’s 2014 settlements of claims against it by Fannie Mae and Freddie Mac, will become more active once again with that trial now completed.

Second, the RMBS settlements will almost certainly soon trigger new alleged “indemnification” claims by Lehman against loan originators/sellers.

We believe there are strong legal and factual defenses to such claims, and originators/sellers need to be aware of the range of defenses that may be available to them.

With new claims on the horizon, it is clear that Lehman’s 2008 bankruptcy continues to generate litigation over what are now very old loan sale transactions.

FIRM OBTAINS VICTORY IN UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ON BEHALF OF LEHMAN BROTHERS HOLDINGS INC.

JAN 5, 2021 | REPUBLISHED BY LINY : DEC 29, 2021

The Firm recently obtained a victory at the Second Circuit for its client Lehman Brothers Holdings Inc. resolving an important issue regarding the Bankruptcy Court’s jurisdiction.

The ruling denied a petition for a writ of mandamus filed by SecurityNational Mortgage Company (“SNMC”), one of dozens of defendants that Lehman seeks to obtain contractual indemnification from for selling defective mortgage loans to Lehman’s affiliate and that Lehman subsequently sold or securitized. The contractual indemnification actions, including two actions against SNMC, are pending in the United States Bankruptcy Court for the Southern District of New York (Chapman, J.).

In its effort to dismiss the actions, SNMC asserted numerous defenses, including that the Bankruptcy Court did not have jurisdiction. SNMC contended that, following the confirmation of Lehman’s bankruptcy plan, the downstream indemnification claims were no longer subject to the jurisdiction of the Bankruptcy Court and therefore had to be brought in a non-bankruptcy court.

In August 2018, the Bankruptcy Court denied the motion to dismiss for lack of jurisdiction.

In May 2019, the United States District Court for the Southern District of New York (Caproni, J.) denied SNMC’s motion for leave to appeal the Bankruptcy Court’s ruling that sustained its jurisdiction.

Nonetheless, in January 2020 SNMC filed a “miscellaneous” proceeding in the District Court (Kaplan, J.), contending that federal subject matter jurisdiction must be determined at the outset of a case, there is no bankruptcy jurisdiction over the downstream claims, and thus no federal subject matter jurisdiction.

SNMC moved in the “miscellaneous” proceeding to dismiss Lehman’s adversary proceeding against it in the Bankruptcy Court. Lehman opposed the entire action as an improper procedural end-run around the prior rulings on bankruptcy jurisdiction.

The District Court referred the matter to Magistrate Judge Debra Freeman, who in a July 2020 Report and Recommendation recommended that SNMC’s motion to dismiss be denied. In August 2020, the District Court issued a brief order that denied SNMC’s motion, substantially for the reasons contained in the Report and Recommendation.

A copy of Magistrate Judge Debra Freeman’ order is attached here.

With no right to appeal, SNMC filed a petition for a writ of mandamus in the United States Court of Appeals for the Second Circuit. On January 5, 2021, the Second Circuit denied that writ because SNMC “ha[d] not demonstrated that exceptional circumstances warranted the requested relief.”

In re SecurityNational Mortg. Co., Case No. 20-3110, ECF No. 46 at 1 (2d Cir. Jan. 5, 2021).

No movement after Doc. 14 in Kappel case

U.S. Bankruptcy Court
Southern District of New York (Manhattan)
Adversary Proceeding #: 21-01051-scc

Assigned to: Judge Shelley C. Chapman
Lead BK Case: 08-13555
Lead BK Title: Lehman Brothers Holdings Inc.
Lead BK Chapter: 11

Demand: $586000

Date Filed: 03/04/21
Nature[s] of Suit:14Recovery of money/property – other

 


Plaintiff
———————–

Lehman Brothers Holdings Inc.
277 Park Avenue, 46th Floor
New York, NY 10017
 

represented by

 

Adam M Bialek
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: abialek@wmd-law.com
LEAD ATTORNEY

Olivia Italiano
Norris McLaughlin, P.A.
400 Crossing Blvd
Ste 8th Floor
Bridgewater, NJ 08807-5933
908-252-4325
Fax : 908-722-0755
Email: ojitaliano@norris-law.com

Brant Kuehn
Wollmuth Maher & Deutsch
500 Fifth Ave.
New York
New York, NY 10110
212-382-3300
Email: bkuehn@wmd-law.com
LEAD ATTORNEY

William A Maher
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
12th Floor
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: wmaher@wmd-law.com

Joshua Slocum
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
212-382-3300
Email: jslocum@wmd-law.com

 

V.

Defendant
———————–

Kappel Mortgage Group Inc.
 

represented by

 

Joshua A Rosenthal
Hargrave Rosenthal, P.C.
5341 Old Redwood Hwy
Suite 320
Petaluma, CA 94594
510-832-2900
Email: jrosenthal@mhlawcorp.com

U.S. Bankruptcy Court
Southern District of New York (Manhattan)
Adversary Proceeding #: 21-01051-scc

Assigned to: Judge Shelley C. Chapman
Lead BK Case: 08-13555
Lead BK Title: Lehman Brothers Holdings Inc.
Lead BK Chapter: 11

Demand: $586000

Date Filed: 03/04/21
Nature[s] of Suit:14Recovery of money/property – other

 


Plaintiff
———————–

Lehman Brothers Holdings Inc.
277 Park Avenue, 46th Floor
New York, NY 10017
 

represented by

 

Adam M Bialek
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: abialek@wmd-law.com
LEAD ATTORNEY

Olivia Italiano
Norris McLaughlin, P.A.
400 Crossing Blvd
Ste 8th Floor
Bridgewater, NJ 08807-5933
908-252-4325
Fax : 908-722-0755
Email: ojitaliano@norris-law.com

Brant Kuehn
Wollmuth Maher & Deutsch
500 Fifth Ave.
New York
New York, NY 10110
212-382-3300
Email: bkuehn@wmd-law.com
LEAD ATTORNEY

William A Maher
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
12th Floor
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: wmaher@wmd-law.com

Joshua Slocum
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
212-382-3300
Email: jslocum@wmd-law.com

 

V.

Defendant
———————–

Kappel Mortgage Group Inc.
 

represented by

 

Joshua A Rosenthal
Hargrave Rosenthal, P.C.
5341 Old Redwood Hwy
Suite 320
Petaluma, CA 94594
510-832-2900
Email: jrosenthal@mhlawcorp.com

 

Docket Date#Docket Text
03/04/20211
(23 pgs; 4 docs)
Adversary case 21-01051. Complaint against Kappel Mortgage Group Inc. (Fee Amount $ 350.). Nature(s) of Suit: (14 (Recovery of money/property – other)) Filed by Adam M Bialek, William A Maher, Brant Kuehn on behalf of Lehman Brothers Holdings Inc.. (Attachments: # 1 Exhibit A # 2 Exhibit B # 3 Exhibit C) (Maher, William) (Entered: 03/04/2021)
03/05/20212
(1 pg)
Summons with Notice of Pre-Trial Conference issued by Clerk’s Office with Pre-Trial Conference set for 4/22/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC), Answer due by 4/5/2021, (Cales, Humberto) (Entered: 03/05/2021)
03/16/20213
(2 pgs)
Certificate of Service and correct copies of the Summons and Notice of Pretrial Conference and Adversary Complaint with Exhibits A-C (related document(s)21) filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. (Italiano, Olivia) (Entered: 03/16/2021)
03/22/20214
(22 pgs; 4 docs)
Amended Complaint against Kappel Mortgage Group Inc. (related document(s)1) Filed by William A Maher on behalf of Lehman Brothers Holdings Inc.. (Attachments: # 1 Exhibit A # 2 Exhibit B # 3 Exhibit C) (Maher, William) (Entered: 03/22/2021)
03/26/20215
(1 pg)
Second Summons with Notice of Pre-Trial Conference issued by Clerk’s Office with Pre-Trial Conference set for 5/20/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC), Answer due by 4/26/2021, (Ortiz, Carmen) (Entered: 03/26/2021)
04/08/20216
(2 pgs)
Notice of Adjournment of Hearing Kappel Mortgage Group Inc. filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. with hearing to be held on 5/20/2021 at 10:00 AM at Courtroom 623 (SCC) (Italiano, Olivia) (Entered: 04/08/2021)
04/22/20217
(2 pgs)
Certificate of Service Kappel Mortgage Group Inc. (related document(s)54) filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. (Italiano, Olivia) (Entered: 04/22/2021)
05/03/20218
(4 pgs; 2 docs)
Application for Pro Hac Vice Admission filed by Joshua A Rosenthal on behalf of Kappel Mortgage Group Inc.. (Attachments: # 1 Pleading Proposed Order) (Rosenthal, Joshua) (Entered: 05/03/2021)
05/03/20219
(2 pgs)
Order Granting Application for Pro Hac Vice Admission of Joshua A. Rosenthal (Related Doc # 8) signed on 5/3/2021 (White, Greg) (Entered: 05/03/2021)
05/03/202110
(8 pgs)
Answer to Amended Complaint (Related Doc # 4) filed by Joshua A Rosenthal on behalf of Kappel Mortgage Group Inc.. (Rosenthal, Joshua) (Entered: 05/03/2021)
05/03/202111
(2 pgs)
Corporate Ownership Statement . Filed by Joshua A Rosenthal on behalf of Kappel Mortgage Group Inc.. (Rosenthal, Joshua) (Entered: 05/03/2021)
05/19/202112
(13 pgs)
Notice of Agenda for Pre-Trial Conference filed by Joshua Slocum on behalf of Lehman Brothers Holdings Inc.. with hearing to be held on 5/20/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC) (Slocum, Joshua) (Entered: 05/19/2021)
07/16/202113
(70 pgs)
Transcript regarding Hearing Held on 5/20/2021 at 10:00 AM RE: Pre-Trial Conference. Remote electronic access to the transcript is restricted until 10/12/2021. The transcript may be viewed at the Bankruptcy Court Clerks Office. [Transcription Service Agency: Veritext Legal Solutions.]. (See the Courts Website for contact information for the Transcription Service Agency.). Notice of Intent to Request Redaction Deadline Due By 7/20/2021. Statement of Redaction Request Due By 8/3/2021. Redacted Transcript Submission Due By 8/13/2021. Transcript access will be restricted through 10/12/2021. (Ortiz, Carmen) (Entered: 07/16/2021)
08/13/202114
(2 pgs)
Notice of Withdrawal (Italiano, Olivia) (Entered: 08/13/2021)

U.S. Bankruptcy Court
Southern District of New York (Manhattan)
Adversary Proceeding #: 21-01066-scc

Assigned to: Judge Shelley C. Chapman
Lead BK Case: 08-13555
Lead BK Title: Lehman Brothers Holdings Inc.
Lead BK Chapter: 11

Demand: $572000

Date Filed: 03/05/21
Nature[s] of Suit:14Recovery of money/property – other

 


Plaintiff
———————–

Lehman Brothers Holdings Inc.
277 Park Avenue, 46th Floor
New York, NY 10017
 

represented by

 

Adam M Bialek
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: abialek@wmd-law.com

Olivia Italiano
Norris McLaughlin, P.A.
400 Crossing Blvd
Ste 8th Floor
Bridgewater, NJ 08807-5933
908-252-4325
Fax : 908-722-0755
Email: ojitaliano@norris-law.com

Brant Kuehn
Wollmuth Maher & Deutsch
500 Fifth Ave.
New York
New York, NY 10110
212-382-3300
Email: bkuehn@wmd-law.com

William A Maher
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
12th Floor
New York, NY 10110
(212) 382-3300
Fax : (212) 382-0050
Email: wmaher@wmd-law.com

Joshua Slocum
Wollmuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
212-382-3300
Email: jslocum@wmd-law.com

 

V.

Defendant
———————–

Smart Mortgage Centers Inc.
 

represented by

 

Wilton A Person
The Law Office of Wilton A. Person
24330 Leski Lane
Plainfield, IL 60585
630-615-8049
Fax : 630-318-7625
Email: wperson@personlaw.com

 

Docket Date#Docket Text
08/31/202116
(2 pgs)
Letter Request for Phone Conference Filed by Wilton A Person on behalf of Smart Mortgage Centers Inc.. (Person, Wilton) (Entered: 08/31/2021)
08/13/202115
(2 pgs)
Notice of Withdrawal (Italiano, Olivia) (Entered: 08/13/2021)
07/16/202114
(70 pgs)
Transcript regarding Hearing Held on 5/20/201 at 10:00 AM RE: Pre-Trial Conference. Remote electronic access to the transcript is restricted until 10/12/2021. The transcript may be viewed at the Bankruptcy Court Clerks Office. [Transcription Service Agency: Veritext Legal Solutions.]. (See the Courts Website for contact information for the Transcription Service Agency.). Notice of Intent to Request Redaction Deadline Due By 7/20/2021. Statement of Redaction Request Due By 8/3/2021. Redacted Transcript Submission Due By 8/13/2021. Transcript access will be restricted through 10/12/2021. (Ortiz, Carmen) (Entered: 07/16/2021)
07/07/202113
(233 pgs; 13 docs)
Motion to Dismiss Adversary Proceeding Pursuant to 12(B)(1) Lack of Subject Matter Jurisdiction and Lack of Standing (related document(s)5) filed by Wilton A Person on behalf of Smart Mortgage Centers Inc.. (Attachments: # 1 Pleading DEFENDANTS MEMORANDUM IN SUPPORT OF DEFENDANTS MOTION TO DISMISS PLAINTIFFS AMENDED COMPLAINT PURSUANT TO RULE 12(B)(1) BASED ON LACK OF SUBJECT MATTER JURISDICTION AND LACK OF STANDING # 2 Pleading DECLARATION OF WILTON A. PERSON IN SUPPORT OF DEFENDANTS MOTION TO DISMISS PLAINTIFFS AMENDED COMPLAINT PURSUANT TO RULE 12(B)(1) BASED ON LACK OF SUBJECT MATTER JURISDICTION AND LACK OF STANDING # 3 Exhibit Exhibit A # 4 Exhibit Exhibit B # 5 Exhibit Exhibit C # 6 Exhibit Exhibit D # 7 Exhibit Exhibit E # 8 Exhibit Exhibit F # 9 Exhibit Exhibit G # 10 Exhibit Exhibit H # 11 Exhibit Exhibit I # 12 Exhibit Exhibit J) (Person, Wilton) (Entered: 07/07/2021)
05/19/202112
(13 pgs)
Notice of Agenda for Pre-Trial Conference filed by Joshua Slocum on behalf of Lehman Brothers Holdings Inc.. with hearing to be held on 5/20/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC) (Slocum, Joshua) (Entered: 05/19/2021)
04/23/202111
(5 pgs)
Motion to Dismiss Adversary Proceeding (related document(s)5) filed by Wilton A Person on behalf of Smart Mortgage Centers Inc.. (Person, Wilton) (Entered: 04/23/2021)
04/23/202110
(3 pgs)
Motion to Dismiss Adversary Proceeding (related document(s)5) filed by Wilton A Person on behalf of Smart Mortgage Centers Inc.. (Person, Wilton) (Entered: 04/23/2021)
04/08/20219
(2 pgs)
Notice of Adjournment of Hearing Smart Mortgage Centers Inc. filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. with hearing to be held on 5/20/2021 at 10:00 AM at Courtroom 623 (SCC) (Italiano, Olivia) (Entered: 04/08/2021)
04/07/20218
(2 pgs)
Certificate of Service Smart Mortgage Centers Inc. (related document(s)75) filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. (Italiano, Olivia) (Entered: 04/07/2021)
03/26/20217
(1 pg)
Second Summons with Notice of Pre-Trial Conference issued by Clerk’s Office with Pre-Trial Conference set for 5/20/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC), Answer due by 4/26/2021, (Ortiz, Carmen) (Entered: 03/26/2021)
03/24/20216
(1 pg)
Order Granting Application for Pro Hac Vice Admission of Wilton A. Person (Related Doc # 4) signed on 3/24/2021 (White, Greg) (Entered: 03/24/2021)
03/22/20215
(22 pgs; 4 docs)
Amended Complaint against Smart Mortgage Centers Inc. (related document(s)1) Filed by William A Maher on behalf of Lehman Brothers Holdings Inc.. (Attachments: # 1 Exhibit A # 2 Exhibit B # 3 Exhibit C) (Maher, William) (Entered: 03/22/2021)
03/19/20214
(2 pgs; 2 docs)
Application for Pro Hac Vice Admission filed by Wilton A Person on behalf of Smart Mortgage Centers Inc. with presentment to be held on 3/24/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC). (Attachments: # 1 Exhibit Proposed Order Pro Hac Vice Application) (Person, Wilton) (Entered: 03/19/2021)
03/16/20213
(2 pgs)
Certificate of Service and correct copies of the Summons and Notice of Pretrial Conference and Adversary Complaint with Exhibits A-C (related document(s)12) filed by Olivia Italiano on behalf of Lehman Brothers Holdings Inc.. (Italiano, Olivia) (Entered: 03/16/2021)
03/05/20212
(1 pg)
Summons with Notice of Pre-Trial Conference issued by Clerk’s Office with Pre-Trial Conference set for 4/22/2021 at 10:00 AM at Teleconference Line (CourtSolutions) (SCC), Answer due by 4/5/2021, (Cales, Humberto) (Entered: 03/05/2021)
03/05/20211
(23 pgs; 4 docs)
Adversary case 21-01066. Complaint against Smart Mortgage Centers Inc. (Fee Amount $ 350.). Nature(s) of Suit: (14 (Recovery of money/property – other)) Filed by Adam M Bialek, William A Maher, Brant Kuehn on behalf of Lehman Brothers Holdings Inc.. (Attachments: # 1 Exhibit A # 2 Exhibit B # 3 Exhibit C) (Maher, William) (Entered: 03/05/2021)

THE LAW OFFICE OF WILTON A. PERSON
24330 LESKI LANE
PLAINFIELD, IL 60585
TELEPHONE (815) 254-2467
FACSIMILE (630) 318-7625
www.personlaw.com

E-MAIL ADDRESS: wperson@personlaw.com

Via ECF and E-mail to scc.chambers@nysb.uscourts.gov

August 31, 2021

Honorable Shelly C. Chapman,
United States Bankruptcy Judge
United States Bankruptcy Court,
Southern District of New York
One Bowling Green
New York, New York
10004-1408

Chapter 11 Case No. 08-13555 (SCC)
Adv. Proc. No. 21-01066;
Lehman Brothers Holdings, Inc. v. Smart Mortgage Centers, Inc.

Re: Request for Conference regarding Stay of Discovery and Mediation

Dear Judge Chapman:

My firm represents Smart Mortgage Centers, Inc., hereafter “Smart Mortgage” in the above referenced matter. Smart Mortgage Centers filed an amended motion to dismiss for lack of subject matter jurisdiction and asserting that Plaintiff Lehman Brothers Holdings, Inc, hereafter “LBHI” lacks standing to seek contractual indemnification in connection with LBHI’s settlement with certain RMBS Trustees (“RMBS Claims”).

Despite Smart Mortgage’s potentially dispositive motion to dismiss, Plaintiff has sought to push Smart Mortgage into a mediation that would cost both parties $15,000.
Further, Plaintiff has issued written discovery that will undoubtedly result in significant expenses and an undue burden to Smart Mortgage.

These expenses could be avoided if Smart Mortgage’s motion to dismiss is granted.

Most importantly, there is no prejudice to Plaintiff if both discovery and the mediation are stayed.

Where a motion to dismiss argues that the plaintiff lacks standing, as argued in the pending motion in this case, a stay may be granted because resolution of the motion to dismiss would dispose of Smart Mortgage case with respect to both the RMBS loans at issue.

See Haha Global, Inc. v. Barclays, No. 1:19-cv-04749, 2020 WL 832341, *1 (S.D.N.Y. Feb. 20, 2020).

Article III standing, which is the standing challenged in the motion to dismiss, as opposed to statutory standing, “ordinarily should be determined before reaching the merits.” Coan v. Kaufman, 457 F.3d 250, 256 (2d Cir. 2006).

In light of the dispositive nature of the standing question raised in Smart Mortgage’s pending amending motion to dismiss, it seems reasonable that discovery and the mediation be stayed until such time that the Court rules on Smart Mortgage’s amended motion to dismiss.

Sincerely,

Wilton A. Person
Attorney for Defendant Smart Mortgage Centers, Inc.

Cc: Adam Bialek via ABialek@wmd-law.com
Brant Kuehn via BKuehn@wmd-law.com
Scott Ferrier via SFerrier@wmd-law.com
Christopher Lucht via CLucht@wmd-law.com
Josh Slocum via JSlocum@wmd-law.com
Antonio Guzman via AGuzman@wmd-law.com,
Alexandra Spina via ASpina@wmd-law.com
Joseph Pacelli via JPacelli@wmd-law.com
Monique Arrington via MArrington@wmd-law.com
William Maher via wmaher@wmd-law.com

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