November 2013: Settlement Victories for the Federal Housing Finance Agency

In a truly historic partnership between a regulator and a private firm, Quinn Emanuel represents the Federal Housing Finance Agency, as Conservator for Fannie Mae and Freddie Mac, in connection with its investigation and litigation of residential mortgage-backed securities. The firm filed fourteen complaints, asserting billions in damages, against most major investment banks. Each complaint asserts federal and state “strict liability” statutory claims arising out of misrepresentations about the securities, and certain complaints assert common law fraud claims. As widely reported, this is one of the most significant court actions taken by any federal regulator since the advent of the mortgage crisis, and the single largest set of actions ever filed by a governmental entity. In 2012, the Honorable Denise L. Cote denied a motion to dismiss the claims in what was designated the “lead case” brought by FHFA, and in 2013 entered a series of rulings to streamline the cases for trial, including orders as to statistical sampling, loan file collection and reunderwriting, the scope of the so-called “actual knowledge” defense, and other significant issues. This year Quinn Emanuel also obtained a unanimous affirmance by the Second Circuit of Judge Cote’s decision as to the timeliness of FHFA’s claims and its standing to sue, as well as a unanimous rejection of defendants’ joint mandamus petition seeking to overturn certain of the Court’s key discovery rulings. With the cases moving toward fixed trial dates in 2014 and 2015, the firm has now settled three of the actions, against J.P. Morgan, UBS, and Citigroup. The second quarter UBS settlement was for $885 million, and the October 2013 J.P. Morgan settlement, which includes claims as to Bear Stearns and Washington Mutual and also resolves whole loan contract issues, was for $5.15 billion.