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Second Circuit Hands Down Major Ruling in Countrywide "Hustle" Case


May.23.2016

As reported on the front page of The Wall Street Journal, a federal appeals court overturned a fraud judgment against Bank of America, Countrywide and former Countrywide executive Rebecca Mairone. The 2nd Circuit U.S. Court of Appeals ruling on May 23 overturns a $1.27 billion verdict against Bank of America over the “Hustle” mortgage program run by Countryside, as well as a liability finding against Mairone, who had been ordered to pay a crushing and career ending $1 million civil penalty. 
 
An Orrick team led by E. Joshua Rosenkranz, which represented Ms. Mairone, and Bank of America’s team from Williams & Connolly succeeded in persuading the court that the U.S. Justice Department’s attempt to secure a fraud finding was an overreach for what amounted to, at most, an allegation of breach of contract. The case was an unprecedented example of the government attempting to hold a senior official at a major bank personally responsible for conduct leading up to the 2008 financial crisis.
 
But the 2nd Circuit panel unanimously held that the “trial evidence fails to demonstrate the contemporaneous fraudulent, intent necessary to prove a scheme to defraud through contractual promises.”
 
“The message here is that the government should stop looking for frauds where they don’t exist,” Rosenkranz said in a statement.
 
In addition to Rosenkranz, the Orrick team was made up of partners Kelsi Corkran and Bob Loeb, senior associate Daniel Rubens and associate Sarah Sternlieb, as well as former associate Alec Orenstein. Bracewell also served as co-counsel in representing Ms. Mairone.