Source: Law360 | Author: Christopher Cole
A New York federal judge has tapped litigation firms Scott+Scott LLP and Lowey Dannenberg PC to head up a proposed class action on behalf of investors who say major banks plotted for several years to fix Fannie Mae and Freddie Mac bond prices.
One of several similar cases accusing financial institutions of taking advantage of the tight-knit environment in which traders buy and sell bonds issued by government-sponsored entities, which include the mortgage giants, the suit was filed by the City of Birmingham retirement plan and other investors who say they lost money due to the alleged conduct.
U.S. District Judge Jed S. Rakoff signed an order Thursday naming Scott+Scott and Lowey Dannenberg as interim co-lead counsel in the action, which was filed Feb. 22, saying the two firms “are best suited to represent the interests of the class.”
“We are very pleased with the court’s order, which recognizes the significance of our client’s claim, as well as the work that our firm put into the case on behalf of the class,” David Scott, managing partner of Scott & Scott, said in an email Friday.
The case will explore whether Bank of America, JP Morgan and other big banks used the private nature of buying and selling unsecured bonds — in contrast to the open, public activity of the stock market — to jack up the prices of newly issued bonds and worked together to inflate their “bid-ask spreads,” or the difference between buying and selling prices.
Judge Rakoff said in Thursday’s order that his only concern is whether the Scott/Lowey team “possesses the resources to litigate this case without excessive delegation to other firms.”
“In their papers, Scott/Lowey obliquely suggested that they might ‘draw upon the resources of’ seven other firms ‘if necessary,’” the judge wrote. “That is not acceptable to the court. No lead counsel work should be delegated to any firm that has not been investigated and approved by the court.”
The judge said his order naming them to lead the class action was “on the condition that no lead counsel work be delegated to any other firm without first obtaining the court’s prior written approval.”
Scott said in the email that the judge’s concern on that issue “reflects the court’s oversight role and goal to ensure efficient representation for the class.”
Lowey Dannenberg declined to comment Friday.
The proposed class is represented by Scott+Scott Attorneys at Law LLP, Berman Tabacco, Lowey Dannenberg PC, and Korein Tillery LLC.
The banks are represented by Williams & Connelly LLP, Beth Stewart Esq., Latham & Watkins LLP, Shearman & Sterling LLP, Cleary Gottlieb Steen & Hamilton LLP, Cahill Gordon & Reindel LLP, Simpson Thacher & Bartlett LLP, Covington & Burling LLP, Sullivan and Cromwell LLP, Skadden Arps Slate Meagher & Flom LLP, Gibson Dunn & Crutcher LLP, and Morgan Lewis & Bockius LLP.
The case is City of Birmingham Retirement and Relief System et al. v. Bank of America N.A. et al., case number 1:19-cv-01704, in the U.S. District Court for the Southern District of New York.
–Additional reporting by Nadia Dreid. Editing by Alyssa Miller.