In an opinion yesterday, Judge Nathan remanded to state court a dispute among lenders to the Stuy Town residential development because it did not arise under federal law.  The plaintiffs are junior lenders who allege that certain senior lenders improperly foreclosed, but the senior lenders claim that there was no excess value for the junior lenders.  The dispute as to whether there was excess value or not turns (at least in part) on how a federal post-judgment interest statute, 28 U.S.C. § 1961, applies to the 2010 federal judgment giving rise to the foreclosure. Judge Nathan ruled that the role of § 1961 in the case was not sufficient for federal jurisdiction because it related only to damages, was not essential to any cause of action:
Continue Reading Judge Nathan Remands Stuy Town Lender Dispute Because Federal Questions Related Only to Computation of Damages

In an opinion today, Judge Furman sent back to state court a multi-district litigation comprised of 19 cases in which various states accused Standard & Poor’s (and, in one instance, Moody’s) of falsely representing that their bond ratings were independent and objective. He found that, despite the efficiencies of a federally-managed MDL proceeding, there was no federal jurisdiction:
Continue Reading Judge Furman Sends Suits by States Against Ratings Agencies Back to State Court

On Tuesday, Judge Gardephe rejected an attempt by Reserve Management Company (RMCI), the investment adviser to the Reserve Primary Fund – the money market fund that “broke the buck” four years ago after Lehman’s bankruptcy – to send its malpractice action against Wilkie Farr & Gallagher LLP back to state court. The Court concluded that the exercise of federal jurisdiction over the action was appropriate because of the “strong federal interest in the federal securities law issues raised in RMCI’s malpractice complaint.” As we reported previously, in defending the SEC’s securities fraud action against them, RMCI and two of its principals have claimed that they relied on Wilkie’s advice in communicating with the public on September 15 and 16, 2008 and considering a credit support agreement that would preserve the Primary Fund’s $1.00 NAV. RMCI’s malpractice action against Wilkie asserts that Wilkie provided incompetent advice to RMCI that led to it being sued by the SEC and private parties. It also alleges that Wilkie’s simultaneous representation of RMCI and the Reserve Primary Fund presented a conflict of interest that the firm never disclosed to RMCI and that has caused significant prejudice to RMCI. RMCI claims that Wilkie failed to advise RMCI properly about including an indemnification and advancement of attorney fees provision in the management agreement between RMCI and the Reserve Primary Fund.
Continue Reading Judge Gardephe Won’t Send Reserve Fund Malpractice Suit Back to State Court