On June 28, S&C achieved a major victory in the Court of Appeals of the State of New York, successfully reinstating a fraudulent conveyance action brought by 11 of the world’s leading financial institutions, including Bank of America, Morgan Stanley, UBS and others, against the monoline insurer MBIA Insurance (“MBIA”). The bank policyholders challenge a 2009 restructuring that stripped $5 billion in assets from MBIA, thereby slashing MBIA’s ability to honor its contractual obligations to structured-finance policyholders and leaving MBIA as a “dying” insurer with a “junk” credit rating.

S&C partner Robert Giuffra successfully argued the appeal on behalf of the financial institutions. The Court of Appeals rejected MBIA’s argument that a regulatory approval granted by the New York State Insurance Department (“NYID”) without holding a hearing or giving notice to policyholders, nonetheless barred the bank policyholders from asserting their fraudulent-conveyance and common-law claims against MBIA. In so doing, the court held that the New York Insurance Law did not extinguish the bank policyholders’ claims, and that it would violate due process to allow the NYID’s secret regulatory approval to bar those claims. Mr. Giuffra was quoted in The Wall Street Journal, The Bond Buyer and The New York Law Journal, among other publications, about the ramifications of this case. Click here to view the oral argument. Click here to read the decision.