John Orenstein of Greene Espel in Minneapolis shared with me two things. The first is a decision in a TIP where the majority certificateholder opposed a put-back action (something you do not usually see). The second is a decision by the Minnesota Supreme Court abolishing Minnesota’s common law prohibition against champerty. The case arose in the context of a litigation funding agreement.
Peter Tomlinson of Patterson Belknap shared with me a Daubert decision in Phoenix Light v. Bank of New York Mellon. The decision mostly leaves for the finder of fact the decision on the merits of various experts’ opinions.
Particularly good from my perspective is the court’s response to the argument that an expert opinion on what a prudent trustee should have done during an event of default should have been excluded because there was no evidence that any trustees actually did any of the things the expert said they should have. The court explained that “practice at the time relative to defaulting loans does not necessarily control the standard of care, particularly when the industry was comprised of only a few participants”; “following one’s industry colleagues in a race to the bottom does not mean that the bottom reflects prudent conduct.” (Internal quotations and citations omitted) (emphasis added). That is a quote I will be using in the future. (Other parts of that expert’s report were excluded, though).
I several times have mentioned Chavez v Occidential Chemical Corporation, in which the Court of Appeals is considering the question of whether New York recognizes cross-jurisdictional class action tolling. Argument has been rescheduled to Wednesday, September 9, 2020, at 2:00 P.M. I will keep you updated. The following day, the court is scheduled to hear argument in argument in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., which involves a question under the Trust Indenture Act.
I have written a few times about the CLO market and our suggestion that CLO investors assess what the trustee and other players in the CLO structure are supposed to do to protect investors. Here are two articles, one explaining that the collapse of the CLO market is imminent, the other saying that everything is OK, at least for the big banks.
I know at least two things regarding this. First, I don’t know what is going to happen. I see warning signs, but again, the other day someone at a fund deeply invested in CLOs graciously spent an hour explaining the market (from his view) and his opinion that all will be fine. People vastly smarter and more experience than I will have to figure out what the market will do. Second, because no one knows what will happen, and because there is a lot of turmoil in the market, I stand by my suggestion that people should assess what the trustee and other players in the CLO structure are supposed to do to protect investors and then make sure they are doing it. No one plans to get into a car wreck. They almost never happen. Still, we take the time to buckle our seat belts.