Here Is Why NY AG Schneiderman’s “Hail Mary” Will Fall Incomplete v. BAC/ BK
- Posted by ToddSullivan
- on August 31st, 2011
I promised more on this so here it is………
In short, other that yelling “I want in on this for the press I can get”, here is how it breaks down:
Before we start, here is a link to his objection:
I. THE ATTORNEY GENERAL’S INTERVENTION IS NECESSARY TO PROTECT THE INTERESTS OF ABSENT BENEFICIARIES
Given the broad relief sought by BNYM in this proceeding, there is a risk that unrepresented beneficiaries, including New York investors, “may be bound by the judgment.”
II. THE ATTORNEY GENERAL SHOULD BE ALLOWED TO INTERVENE TO PROTECT HIS OWN INTERESTS
The Attorney General has an interest in ensuring that any settlement of this magnitude fairly and comprehensively addresses harm to such investors, and does not cast doubt upon, or weaken, the integrity and strength of the financial markets. The Attorney General has the right to intervene to protect this unique interest, which is otherwise unrepresented in this proceeding.
Essentially he is trying to wedge his foot in the door to either (1) increase the pie OR (2) gather information to try and create his own pie later
Institutional Investors best answered the claims asserted by the AG:
An “Article 77″ proceeding is to ensure an “expedited resolution” for certificate holders. This is the entire purpose of it. The NYAG is still free to pursue claims against the Trustee, just not in this proceeding. Further, the NYAG is neither a certificate holder nor does he represent a certificate holder and because of that, lacks standing to intervene in a 77 proceeding. For precedent, see People vs Grasso that ruled “the NYAG’s “parens patriae” standing does not create standing for NYAG to be heard in disputes regarding the private assets of third parties……”. The court further said that the NYAG’s attempt to prosecute private claims for the benefit of private parties “raises serious constitutional questions”. The is precisely what the NYAG is now attempting to do.
The sole issue before the court in this 77 is the resolution of private contract right between certificateholders and the Trustee, because of that the NYAG’s motion ought to be denied. Further, because the primary purpose of a 77 is to provide an “expeditious and efficient means for resolving trust related issues”, “NY courts have regularly refused to allow litigants to turn it into adversary, plenary actions involving claims for damages or other relief.” see Gregory v. Wilkes 1960 and re Houston’s Trust 1968 for precedence
Further, the costs to certificateholders is >$1M a day the settlement is denied. Further delaying this by granting the NYAG’s motion prejudices the certificateholders of the primary reason for a 77. Further, due to performance benchmark in servicing, $BAC may in fact be required to pay more than the $8.5B should they not meet standards. However, this does not go into effect until AFTER the settlement is approved meaning delay is further damaging certificateholders. The settlement provides monetary incentives for $BAC to materially improve servicing, this aid both certificateholders and homeowners.
If that is not enough, remember the reason for a 77 is to provide expeditious remedy to certificate holders. Not a single objectioner has come forth with an alternative resolution for certificateholders. This means that further delay or allowance of the NYAG’s motions will essentially bring negotiations back to square one at considerable damage to certificateholders, not $BAC or Countrywide.
Also, should the court allow the NYAG to turn this into a plenary venue for claims, the resulting litigation would take years. Since the certificateholders claims are settled, but awaiting approval, they would be prohibited by law to seek alternative remedies effectively rendering them helpless to do anything.
In short, the only party demonstrably harmed by allowing the NYAG’s motion is the certificateholders, the very party the 77 proceeding is designed to protect….
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