Our Approach

We represent a wide variety of clients in litigation relating to the current financial crisis. Our clients in these unprecedented matters include leading global financial institutions, major private funds and other preeminent corporations from throughout the United States and around the world. Our litigators possess unique experience in highly complex financial investigations and litigation matters and can draw on resources and expertise from across the firm – in areas including securities and bank regulation, investment management, derivatives, insolvency and mergers and acquisitions.

Of Note

Our financial crisis work was profiled in The American Lawyer, which described Davis Polk as “the go-to firm” for matters related to the financial crisis because of its “bank regulatory and insolvency prowess underpinned by broad M&A and capital markets experience.” The article quotes a partner at a rival firm as saying: “If you look at the confluence of all those areas of expertise, it isn’t surprising that Davis Polk was tapped for these matters.”

Notable Matters

Much of our financial crisis-related litigation work is confidential because it arises in the context of non-public investigations and pre-litigation counseling. Nonetheless, the following are sample matters that have been publicly disclosed.

We represent the Board of Directors of Bank of America in connection with shareholder derivative cases relating to Bank of America’s acquisition of Merrill Lynch.
We represent Morgan Stanley and certain of its officers and directors in lawsuits arising out of its announced $9.4 billion loss for the fourth quarter of 2007 resulting from subprime-related trading writedowns – including a purported shareholder class action alleging fraud under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5; a shareholder derivative suit under the Delaware General Corporation Law; and federal ERISA lawsuits.
We represent Morgan Stanley in purported class action lawsuits in the Southern District of New York, brought on behalf of investors who purchased residential mortgage-backed pass-through certificates underwritten by Morgan Stanley in 2006 and 2007. The plaintiff asserts claims under the Securities Act of 1933, alleging that the offering documents made false or misleading statements, or omitted to state material facts, concerning the underlying mortgage loans.

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We represent Morgan Stanley in a putative class action in the Southern District of New York brought by Abu Dhabi Commercial Bank asserting contract, fraud, and fiduciary duty claims on behalf of all purchasers of investment-grade mezzanine capital notes issued by a structured investment vehicle (SIV) that in turn invested in asset-backed securities, including U.S. residential mortgage-backed securities and collateralized debt obligations.
We represent the Federal Home Loan Mortgage Corporation (Freddie Mac) in connection with a number of matters, including an investigation by the U.S. Department of Justice, and as a creditor in the Lehman Brothers insolvency cases.
We represented the audit committee of Bear Stearns in its investigation into the collapse of two of its sponsored hedge funds.
We represent multiple financial institutions (including broker-dealers and hedge funds) in a range of investigations relating to short selling, including SEC and U.S. Department of Justice investigations relating to short sales of certain financial institutions’ securities at critical points during the financial crisis.
We successfully represented a group of six banks, led by Citigroup Inc. and Deutsche Bank, in New York and Texas lawsuits relating to the financing of one of the largest-ever leveraged buyouts – the acquisition of Clear Channel Communications by affiliates of Bain Capital and TH Lee Partners. After trial commenced, the litigation was settled as part of a restructuring of the transaction at a lower price and with reduced loans by the bank group.
We successfully represented Banco Santander, S.A. in purported class action lawsuits relating to its proposed $1.9 billion acquisition of the remaining publicly held shares of Sovereign Bancorp. After a five-day evidentiary hearing, we settled the class actions on favorable terms that included no change to the share price and allowed the transaction to proceed as scheduled. Following the court’s preliminary approval of the settlement, both companies’ shareholders voted overwhelmingly to approve the transaction, allowing it to close.
We represent E*TRADE in a variety of litigations and investigations in connection with its announcements regarding losses stemming from exposure to second-lien mortgages and mortgage-backed securities.
We have been representing GSC Group and a hedge fund managed by a GSC Group fund manager in litigation brought in the Commercial Division of New York Supreme Court. Plaintiffs are fund investors who allegedly suffered losses when the subprime mortgage debt instruments in which the fund invested deteriorated substantially. In January 2009, we won dismissal of all claims against GSC Group.
We represent Baha Mar, a major real estate developer, in litigation against Harrah’s in New York State Supreme Court, Commercial Division, relating to Harrah’s effort to abandon, in the wake of the credit crisis, a $2.6 billion resort development project in the Bahamas.

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