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Successful Settlement Follows Two-Week Jury Trial in New York Commercial Division

April 2022

Quinn Emanuel recently achieved a successful settlement for clients MBIA Inc. and MBIA Insurance Corp. following a two-week jury trial in a case in which plaintiffs sought $140 million on claims for fraud and promissory estoppel.    

Quinn Emanuel’s clients served as a credit enhancer and investor for two collateralized loan obligation (or “CLO”) investment funds created and managed by Lynn Tilton—a CLO fund manager—and her fund management enterprise, Patriarch Partners.  At the center of the case was Tilton’s claim that a senior MBIA executive made oral promises that MBIA would consent to extending the maturity date of one of the funds if Tilton spent over $100 million to buy out a non-consenting noteholder.  MBIA, on the other hand, contended the parties never made any such deal, and Tilton bought out a difficult noteholder entirely of her own volition.  When Tilton’s investment funds defaulted, MBIA did what it was supposed to do—it paid out almost a billion dollars on its insurance obligations and exercised its rights to mitigate its losses.  Tilton, on the other hand, blamed MBIA for her investment losses on funds that she herself managed, and sued MBIA for fraud. 

MBIA litigated against Tilton for six years before hiring Quinn Emanuel to try the case.  A trial-tested Quinn Emanuel team quickly jumped in and put on a two-week trial against a squadron of Gibson Dunn attorneys who had been steeped in the case for six years.  But this is exactly the type of challenge Quinn Emanuel thrives on.  Looking at the case with fresh eyes, the firm quickly identified key emails from Tilton herself that conveyed a very different version of events than what she was seeking to present, identified critical witnesses who would refute Tilton’s story, and mastered complex arguments on the proper measure of damages under New York law.

In opening arguments, Tilton’s counsel presented the case as a true “he-said-she-said” in which Tilton would never have spent $100 million on notes that would be “worthless” without a promised extension of maturity from MBIA which it ultimately refused to provide.  But on cross-examination, the firm surprised Tilton with smoking-gun emails, and Tilton was forced to admit that her own attorneys had misunderstood the notes’ seniority on default, leading her to believe the notes were much more valuable than they actually were regardless of any extension.  The firm then got Tilton’s damages expert to admit that he had not analyzed damages by the measure that the jury would be required to apply.  Finally, in its case in chief, the firm called Tilton’s own financial advisor and elicited testimony that entirely contradicted Tilton’s version of events.  Five minutes before the jury was set to hear closing arguments, Tilton tapped out.  Quinn Emanuel secured a confidential settlement on behalf of the clients which dismissed Tilton’s case in its entirety.