New York Appeals Court Relies on Orrick Amicus in Major RMBS Ruling

Embracing an Orrick team’s legal arguments in a key amicus brief, a state appeals court in New York has established that all the elements of common law fraud must be proven for a lawsuit to succeed against Countrywide Home Loans related to the 2008 mortgage crisis.

The First Department of the New York Supreme Court’s Appellate Division specifically relied on the amicus arguments of the Securities Industry and Financial Markets Association in reaching its conclusion. Orrick filed the brief on behalf of the SIFMA in support of Countrywide’s position.

The appeals court squarely rejected the arguments of Ambac Assurance Corp., a monoline insurer, which contended that New York Insurance Code Section 3105 did not require Ambac to prove all of the elements common law fraud. The First Department, relying on SIFMA’s amicus brief, held that Ambac must prove the elements of justifiable reliance and loss causation.

“We are persuaded by the arguments made by amicus curiae Securities Industry and Financial Markets Association that sound policy reasons support our conclusion,” the court wrote.

The decision could set important precedent in other litigation involving applications of New York insurance law to cases brought by monoline insurers against issuers of RMBS.

The court’s decision can be found here. Our amicus brief can be read here.

The Orrick team was led by partners Rich Jacobsen and Paul Rugani, and associate Daniel Robertson.