arnold & porter on fraudulent conveyance

The Use of Fraudulent Conveyance Principles to Overturn LBOs

Wednesday, June 6, 2012

arnoldporter.com

12:00 − 2:00 p.m.

Table of Contents

Agenda ........................................................................................................................ Tab 1

Presentation Slides .................................................................................................... Tab 2

Moderator/Speaker Biographies ............................................................................... Tab 3Grant Vingoe, Michael L. Bernstein, Stewart Aaron

Practice Overviews .................................................................................................... Tab 4Bankruptcy and Corporate Restructuring, Financial Services, Litigation

Supporting Material .................................................................................................... Tab 5 � For Some LBO Participants, Section 546(e)’s “Blanket” Protection for Securities

Contract Settlement Payments Has Holes

Financial Markets Regulatory Roundtable


Wednesday, June 6, 2012

New York Seminar Series

Tab 1: Agenda

arnoldporter.com

Financial Markets Regulatory Roundtable


Agenda

12:00 – 12:30 p.m. Lunch and Registration

12:30 – 12:40 p.m. Welcome and Overview

12:40 – 1:45 p.m. Presentation and Discussion Grant Vingoe, Partner, Financial Services Practice, Arnold & Porter LLP, New York, NY

Michael Bernstein, Partner, Bankruptcy and Corporate Restructuring Practice, Arnold & Porter LLP, Washington, DC

Stewart Aaron, Partner, Litigation Practice and Office Head, Arnold & Porter LLP, New York, NY

1:45 – 2:00 p.m. Questions and Answers

New York Seminar Series

Tab 2: Presentation Slides

arnoldporter.com


D. Grant Vingoe, Arnold & Porter LLPMichael L. Bernstein, Arnold & Porter LLP

Stewart D. Aaron, Arnold & Porter LLP

June 6, 2012

1

Fraudulent Conveyance

Fraudulent conveyance laws exist to protect a company and its creditors from transactions that cause harm by extracting value without giving reasonable value in return.

Anyone who benefited from the transaction can potentially be found liable for the fraudulent transfer.

An LBO transaction that goes bad can be a prime target for fraudulent conveyance claims because lenders, management and shareholders may benefit greatly, while the debt used to finance the y g y,deal can render the company insolvent.

Because fraudulent conveyance claims are difficult and expensive to litigate, these cases often, but not always, settle.

2

Leveraged Buyouts

An LBO is typically an acquisition using a significant amount of borrowed t t th t f th i iti Di tl i di tl th t fmoney to meet the cost of the acquisition. Directly or indirectly, the assets of

the company being acquired are used as collateral or support for the leveraged transactions.

The purpose of LBOs is to allow companies to make acquisitions of companies without committing a lot of their capital to make the acquisition.

LBOs are credited with creating a market for corporate control by funding potential owners who would not otherwise have access to sufficient capital.

LBO t ti ll t l f th fi h l b t l t ti ll LBOs potentially create value for the firm as a whole but also potentially transfer value from creditors to equity holders.

Loan proceeds are typically obtained by the acquiring entity, secured by the target entity’s assets, and used by the acquiring entity to buy-out the existing holder(s) of the target entity.

3

LBO Fraudulent Conveyance Litigation

If the target of an LBO fails, parties may initiate fraudulent transfer litigation to:

– Avoid the liens granted to the third party lenders that financed the LBO; and

– Recover the payments made to the target company’s former shareholders when they cashed out their equity positions.

The potential for fraudulent conveyance liability most frequently arises when it is alleged that the debtor failed to receive adequate consideration for the transfer and the debtor at the time of, or as a result of, the transfer was balance sheet insolvent, equitably insolvent, or left with unreasonably small capital.

Unsecured creditors need recourse under fraudulent conveyance laws because:

Th t t t th LBO– They are not a party to the LBO;

– They have no good proxy among the parties to assert their claims; and

– Absent legal recourse, many have no ability to negotiate protection against uncompensated harm.

4

LBO Fraudulent Conveyance Litigation (cont’d)

Fraudulent transfer law originally developed in response to the situation where debtors on the verge of insolvency would transfer their assets to friends or relatives, leaving little or no value in their estates for creditors.

The English legal system responded to this problem by allowing creditors to petition a court to void the transfer as a “fraudulent conveyance.”

The standard under which a fraudulent transfer could be voided was first codified in England in 1570, which permitted creditors to set aside transfers made with the intent to delay, hinder or defraud creditors. Similar standards are used in modern U.S. law.

5

LBO Fraudulent Conveyance Litigation (cont’d)

There has been increased attention on fraudulent conveyance litigation over the last few years.

During the credit boom, banks and bondholders financed many highly leveraged transactions.

As the debts became due and businesses struggled to refinance their debts, there was a wave of defaults, bankruptcies and inter creditor disputesbankruptcies and inter-creditor disputes.

6

Theory of Clawbacks

The term “clawback” is used generally as a theory for g y yrecovering benefits that have been conferred under a claim of right, but that are still recoverable because unfairness would otherwise result. – Retroactive Clawbacks- imposed after the contractual right has

arisen and benefits have been conferred.

– Prospective Clawbacks- introduced into contracts before the l i f i ht t th b fit h iclaim of right to the benefits has arisen.

7

Increasing Attention on Clawbacks

Madoff Clawbacks- trustee has sought to recover payments of fictitious profits and withdrawals of principal.

Executive Compensation Clawbacks- based upon restatements or subsequent period losses.

Sarbanes Oxley Section 304 gives the SEC the power to recover certain restatement-related compensation and stock profits from CEOs and CFOs of public companies in the event the restatement was caused by misconduct.y

Dodd-Frank Section 954 requires the SEC to order national securities exchanges and associations to prohibit the listing of a security whose issue does not have a clawback policy.

8

Potential Defendants in Fraudulent Transfer Litigation

Claims for Fraudulent Transfer (among others)Claims for Fraudulent Transfer (among others) can be brought against several parties involved in a failed transaction, including:– Officers and Directors;

– Lenders;

– Financial Advisors; and

– Former Shareholders.

9

Two Types of Fraudulent Transfer

Actual Fraud- involves intent to defraud whereActual Fraud involves intent to defraud where the trustee must prove that the debtor made transfers with “actual intent to hinder, delay, or defraud” investors.

Constructive Fraud- does not require fraudulent intent but looks at the underlying economics of y gthe transaction.

10

Actual Fraud

Because direct evidence of fraudulent intent is often unavailable, courts t i ll l i t ti l id t i f f d l t i t t Itypically rely on circumstantial evidence to infer fraudulent intent. In evaluating the transferor’s actions, courts have looked at various “badges of fraud” including:

– Becoming insolvent because of the transfer;

– Lack or inadequacy of consideration;

– Family or insider relationship among parties;

– The retention of possession, benefits or use of property in question;

– The existence of the threat of litigation;The existence of the threat of litigation;

– The financial situation of the debtor at the time of transfer or after transfer;

– The existence or a cumulative effect of a series of transactions after the onset of debtor’s financial difficulties;

– The general chronology of events;

– The secrecy of the transaction in question; and

– Deviation from the usual method or course of business.11

Actual Fraud (cont’d)

The presence of one or more badges of fraud shifts the p gburden of proof from the creditor to the debtor. The debtor must then prove that despite the circumstantial evidence, the transfer was made with no fraudulent intent.

Proof of insolvency and fair consideration are not material to a determination of actual intent to defraud.

12

Constructive Fraud

A constructive fraudulent transfer typicallyA constructive fraudulent transfer typically occurs when a debtor makes a transfer and receives less than reasonably equivalent value, and at the time of such transfer the debtor:– Was insolvent;

– Had unreasonably small capital for any business in which the debtor was or was about to become engaged; or

– Intended to incur or believed that it would incur debts beyond the debtor’s ability to pay as such debts matured.

13

Reasonably Equivalent Value

In the LBO context, the party that assumes the debt and pledges its assets generally does not receive the proceeds of the loan financing the transaction.

The value received and given does not need to be equal, but a significant shortfall in the value received will result in a finding that the debtor received less than reasonably equivalent value.

Whether the debtor received reasonably equivalent value is measured from the perspective of the creditors. p p

Bankruptcy Code Section 548(a)(1)(B)(i) provides for avoidance of an obligation if the debtor received less than reasonably equivalent value in exchange (and the other requirements of Section 548(a)(1)(B) are also met).

14

Unreasonably Small Capital

The Bankruptcy Code does not define the term “unreasonably small capital.”

Courts have described the term as a financial condition short of “equitable insolvency,” but which leaves the transferor unable to generate sufficient profits to sustain operations so that the transferor is technically solvent but doomed to fail. The transferor is left with so few assets that its inability to pay debts in the future should have been reasonably foreseeable.

– Equitable insolvency occurs when an entity is unable to pay its debts as they become due in the ordinary course of business.

Determination of “unreasonably small capital” is conducted on a case-by-case basis and often relies on industry-specific financial metrics.

15

Unreasonably Small Capital (cont’d)

Courts consider a variety of factors in determining y g“unreasonably small capital” including:– Historical performance;

– Availability of funds;

– Causation;

– Time horizon;

– Nature of business;

– Likelihood of future growth or contraction;

– Composition of asset portfolio;

– Amount of insurance;

– Likelihood of incurring substantial debt in the future.

16

Bankruptcy Code Provisions

Under the Bankruptcy Code, generally the debtor has the “avoiding power,” including the right to commence an action alleging fraudulent transfers under the Bankruptcy Code.

Section 548 allows avoidance of transfers made or obligations incurred within 2 years of the filing of a bankruptcy petition. 11 U.S.C. § 548.

Section 550 allows the debtor to recover property that has been “fraudulently” transferred. 11 U.S.C. § 550.y §

Section 544 allows the debtor to avoid transfers under applicable non-bankruptcy laws, i.e., state fraudulent conveyance statutes. 11 U.S.C. § 544.

Section 546(e) provides a safe harbor within which transfers cannot be avoided as fraudulent. 11 U.S.C. § 546(e).

17

Section 546(e)

Section 546(e) of the Bankruptcy Code is intended to reduce systemic risk t k t th t lt f d i t ti hi h tto markets that can result from undoing transactions upon which counter-parties have relied, hedged and re-allocated proceeds.

Among other things, the trustee may not avoid transfers that are settlement payments or that are made in connection with securities contracts, by or to (or for the benefit of) a financial institution, unless the transfer was made with actual intent to hinder, delay or defraud creditors.

– The term “settlement payment” is defined to mean “a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade or the securities trade.” 11 U.S.C. § § 101(51A); 741(8).

– The term “financial institution” is defined to include, among other things, all commercial and savings banks, savings and loan associations and federally-insured credit unions. 11 U.S.C. § 101(22).

18

Section 546(e) (cont’d)

– Case law has been inconsistent in applying the requirement that the transfer be “by or to (or for the benefit of)” a financial institution. The majority of courts have held that any participation by a financial institution is adequate under the plain language of the statute and some judges have interpreted the provision to protect shareholders who trade through financial institutions.

– The safe harbor does not apply to claims for actual fraudulent conveyance.

– Creditors have sought to find a way around the safe harbor by suing for constructive fraudulent conveyance under state law, where they argue that Section 546(e) does not apply.

19

State Laws

Section 544 of the Bankruptcy Code allows recovery under state law incorporating the Uniform Fraudulent Transfer Act (UFTA)incorporating the Uniform Fraudulent Transfer Act (UFTA).

43 states and the District of Columbia have adopted the UFTA. The UFTA allows creditors to void transfers that are intentionally or constructively fraudulent under similar criteria to Section 548.

UFTA Section 5 states:– (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor

whose claim arose before the transfer was made … if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer … and the debtor was insolvent at the time or … became insolvent as a result of the transferinsolvent as a result of the transfer.

State laws generally have a longer statute of limitations than the Bankruptcy Code, allowing a trustee to avoid transfers not otherwise voidable under Section 548 of the Bankruptcy Code.

– UFTA has a 4-year statute of limitations, though a number of states have varied this.

– New York has a 6-year statute of limitations.

20

Collapsing Transactions

A threshold inquiry in certain LBO fraudulent transfer actions is whether the particular transaction(s) sought to be avoided can be considered in isolation or should be considered as part of an integrated transaction. Treating a series of LBO or restructuring transactions as a whole is referred to as “collapsing” the transactions.

Courts typically consider three things in determining whether to collapse transactions: – Whether all of the parties had knowledge of the multiple transactions;

– Whether each transaction would have occurred on its own; and

– Whether each transaction was dependent or conditioned on the other transactions.

The fact that transactions were separated by considerable time does not, by itself, prevent collapsing transactions.

21

Tribune Co.

In 2007, the board of directors of Tribune Company approved an LBO proposal by Sam Zell to take the company private In connection with the LBO Tribune borrowedSam Zell to take the company private. In connection with the LBO, Tribune borrowed over $12 billion to buy out its public shareholders and become wholly owned by a newly formed employee stock ownership plan (“ESOP”).

Two-Step Transaction:– In Step One, in June 2007, the ESOP purchased 8,928,571 shares of Tribune common stock

at $28 per share. An entity owned by Mr. Zell also made an initial investment of $250 million in Tribune in exchange for 1,470,588 shares of Tribune common stock at a price of $34 per share and an unsecured subordinated exchangeable promissory note of Tribune in the principal amount of $200 million. Thereafter, Tribune commenced a cash tender offer to repurchase approximately 52% of its outstanding common stock. Tribune then retired the p pp y grepurchased shares. Step One Shareholders received approximately $4.3 billion for their shares.

– In Step Two, in December 2007, Tribune merged with a Delaware corporation wholly owned by the ESOP, with Tribune surviving the merger. Upon completion of the merger, all issued and outstanding shares of Tribune’s common stock (other than shares held by Tribune or the ESOP) were cancelled and Tribune became wholly owned by the ESOP. Step Two Shareholders received approximately $4 billion for their shares.

22

Tribune Co. (cont’d)

Tribune filed for bankruptcy on December 8, 2008.

In February 2010, a group of unsecured creditors, the Official Committee of Unsecured Creditors (the “Committee”) sued for relief under fraudulent conveyance law arguing that Tribune did not receive reasonably equivalent value in exchange for the debt it incurred in the LBO and that Tribune took on this debt for the benefit of the parties driving the deal (i.e., the buyers, the former shareholders, and the lenders financing the LBO).

The Committee argued that Tribune was rendered insolvent by the LBO or, if not, it was foreseeable Tribune would become insolvent if the LBO occurred.

They asked the Delaware bankruptcy court to strip the lenders of their liens and subordinate their claims, denying them their position at the front of the line for distribution of the remaining value in Tribune.

23


In April 2010, the bankruptcy court directed the appointment of an independent examiner, Kenneth Klee, to evaluate allegations that the LBO violated bankruptcy law. In July 2010, the examiner issued a report concluding that Tribune did not receive reasonably equivalent value in exchange for the obligations it incurred to finance the LBO, that it was “highly likely” that Tribune was rendered insolvent and without adequate capital by Part Two of the LBO.

The examiner wrote in his report that fiduciaries charged with the ibilit f i t’ ti d d t i iresponsibility for overseeing management’s actions and determining

whether the Step Two transactions would render Tribune insolvent did not adequately discharge their duties.

The examiner found some evidence suggesting intentional fraud in Step Two of the transaction, however, he said that the evidence supporting constructive fraud was much stronger.

24


In December 2010, Tribune ceded its rights to bring suits to the Committee, hi h bt i d i i t fil l i ll i i t ti l f d i twhich obtained permission to file a claim alleging intentional fraud against

shareholders before the two-year statute of limitations expired.

– The bankruptcy court recently granted the Committee’s motion to dismiss claims against former named shareholders who received less than $50,000 in proceeds from the LBO.

The bankruptcy judge stayed the suit pending the completion of the Chapter 11 process, hoping that the various parties could find a way to settle the charges.

The Committee let the statute of limitations lapse on the constructive fraudulent conveyance claims in December 2010, which meant that individual creditors could bring claims under state law, arguably beyond the reach of the Section 546(e) safe harbor.

In March 2011 creditors sought authority from the bankruptcy court to bring state law fraudulent conveyance actions.

25


Several parties objected to the state law fraudulent conveyance actions arguing that, among other things:among other things:

– the debtor has exclusive authority to pursue the claims; and

– the prohibition on pursuing avoidance of transfers subject to Section 546(e) has preempted state law and cannot be avoided by pursuing the claims in state court instead of bankruptcy court.

In April 2011, the bankruptcy court issued an order allowing noteholders to file their avoidance actions in state court, stating:

– “Because no state law constructive fraudulent conveyance claims against shareholders whose stock was redeemed or purchased in connection with the [LBO] were commenced by or on behalf of the Debtors’ estates before the expiration of the applicable statute of limitations under 11 U.S.C. § 546(a), the Debtors’ creditors have regained the right, if any, to prosecute their respective state law constructive fraudulent conveyance claims against [the shareholders] to recover stock redemption/purchase payments made to such shareholders in connection with the LBO.”

– The bankruptcy court, however, specifically stated that it was making no finding regarding the standing of the noteholders or any creditors to assert the state fraudulent conveyance claims or whether such claims were preempted or otherwise impacted by Section 546(e).

26


Approximately 1,700 individual defendants have been named in the state l it i l di i tit ti d i di id l h ld th $75 000lawsuits, including institutions and individuals who sold more than $75,000 worth of stock. Junior noteholders have also asserted “class allegations” intended to include all other shareholders.

In all, 33,000 to 35,000 investors are potentially liable for money they received in 2007 when the company went private.

On December 20, 2011 the U.S. Judicial Panel on Multidistrict Litigation consolidated 44 fraudulent conveyance suits that had been filed in 21 states in the U.S. District Court for the Southern District of New York.in the U.S. District Court for the Southern District of New York.

However, the consolidated cases were stayed due to Tribune’s bankruptcy proceedings pending further order of the Bankruptcy Court for the District of Delaware or the Southern District of New York.

The Tribune case differs from many other fraudulent conveyance cases because it includes a number of large deep-pocketed shareholders who have sold billions of dollars worth of stock in the deal.

27

Lyondell Chemical Co.

Lyondell Chemical Company merged with Basell AF S.C.A. in July 2007, creating one of the world’s largest polymers, petrochemicals and fuel companies.

Basell was an international chemicals company controlled by Leonard Blavatnik. Over a few years, Blavatnik made several offers for Lyondell’s shares. In May 2007, Blavatnik acquired 21 million shares of Lyondell stock and disclosed in his SEC filing that he might seek to acquire of all Lyondell’s outstanding stock.

In July 2007, Basell agreed to purchase Lyondell in an LBO for $48 per share. As a result of the LBO, Lyondell shareholders received $12.5 billion.

In January 2009, Lyondell and certain affiliates and subsidiaries filed for Chapter 11 protection.

28

Lyondell Chemical Co. (cont’d)

In July 2009, the Creditors Committee filed a fraudulent conveyance lawsuit against Lyondell and its financing parties, among others, alleging that at the time of the merger (i) Lyondell was insolvent because the stated value of its liabilities exceeded the fair value of its assets; (ii) Lyondell was insufficiently capitalized to fund its operations through a downturn; and (iii) the bankruptcy was foreseeable. In the same action, the Creditors Committee sued Barclays Global Investors, N.A. individually and as class representative of the Lyondell shareholdersrepresentative of the Lyondell shareholders.

In a settlement approved by the bankruptcy court in March 2010, the Creditors Committee settled with the LBO lenders for $450 million.

29


In April 2010, the bankruptcy court confirmed a plan of reorganization for Lyondell.

The Creditors Committee then amended its complaint and removed the claim against the shareholder class. A creditor trust was created to litigate state law avoidance actions against the former Lyondell shareholders.

In October 2010, the trustee of the creditor trust filed a lawsuit against former Lyondell shareholders, asserting only state-law g y , g yfraudulent conveyance claims in the Supreme Court of the State of New York.

In December 2010, the case was referred to the United States Bankruptcy Court for the Southern District of New York, which is administering the Lyondell bankruptcy case.

30


Since January 2011, the shareholders have filed numerous motions to dismiss and related joinders arguing in part that the creditor trust may not make an end runrelated joinders, arguing in part, that the creditor trust may not make an end run around the safe harbor of Section 546(e) of the Bankruptcy Code.

– Shareholders have argued that the creditor trust’s claims are preempted by the Bankruptcy Code.

– The creditor trust has countered that, although creditors may not prosecute fraudulent transfer claims against nondebtors as long as the trustee retains standing to do so, the bankruptcy case does not relieve a transferee’s liability to such creditors. The creditor trust asserted that these causes of action could revert to the creditors once relinquished by the trustee, through abandonment, expiration of the automatic stay of Section 362 of the Bankruptcy Code or otherwise.

– The creditor trust has also taken the position that the language, context and legislative history of Section 546(e) indicate that Congress intended to protect financial markets only from the sweeping avoidance powers of the bankruptcy trustee and not the independent state law claims of creditors.

– The court has not yet ruled on the motions to dismiss.

31

Consequences of Fraudulent Conveyance Suits

Markets that depend on the finality of a settled p ytransaction can be disrupted.

Investors may not be able to properly assess the risks of participating in a leveraged buyout.

32

Questions?

Contact:

Grant Vingoe

+1 212.715.1130

[email protected]

Michael L. Bernstein

+1 202.942.5577

Michael Bernstein@aporter com

33

[email protected]

Stewart D. Aaron

+1 212.715.1114

[email protected]

Tab 3: Moderator/Speaker Biographies

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arnoldporter.com

D. Grant Vingoe Partner

D. Grant Vingoe is a partner in the New York office of Arnold & Porter LLP. He concentrates his practice in cross-border securities transactions and financial services regulation. Mr. Vingoe has been deeply involved in regulatory policy

matters for the Canadian securities industry. He has represented numerous non-US issuers and underwriters in US public offerings and private placements. He has established many financial services affiliates for non-US banks and brokerage firms. He also advises these firms on ongoing compliance, governance, and risk management issues. He has also advised senior management of International stock exchanges and self-regulatory organizations concerning regulatory policy matters and cross-border business initiatives. Additionally, he has received the ICD.D director certification from the Institute of Corporate Directors.

Representative Matters

Advises international financial services trade organizations on US and cross-border developments affecting their members.

Established financial services affiliates of non-US banks and brokerage firms and counsels them on US regulatory compliance, corporate finance, and risk management issues.

Advises non-US securities market participants on the impact of US regulatory developments on their operations and competitive positions.

Represents Canadian and other non-US issuers and underwriters in inbound corporate finance transactions, including Rule 144A and Regulation D private placements and offerings effected under the Multi-jurisdictional Disclosure System.

Represents participants in cross-border financial services

Contact Information [email protected] tel: +1 212.715.1130 fax: +1 212.715.1399

399 Park Avenue New York, NY 10022-4690

Practice Areas Corporate and Securities Financial Services

Education LLM, New York University School of Law, 1984 JD, Osgoode Hall Law School of York University, 1981

Admissions New York Ontario, Canada

D. Grant VingoeArnold & Porter LLP 2

mergers and acquisitions transactions.

Conducts governance reviews for securities self-regulatory organizations.

Conducts internal investigations involving securities market activities.

Public policy advice concerning financial services regulation.

Professional and Community Activities Professional Activity

Guest lecturer on US securities law in the Osgoode Hall Law School LL.M Program

Investment Industry Regulatory Organization of Canada (IIROC), Canada's investment industry self-regulatory organization

Independent director

Chair, Governance Committee

Previously an independent director and chair of the Governance Committee of Market Regulation Services Inc., the self-regulatory organization for trading activities on Canadian marketplaces, later merged with IIROC.

Appointed in 1999 to a term with the Ontario Securities Commission Securities Advisory Committee

Member, Securities Industry and Financial Markets Association, Compliance & Legal Society

Member, Ontario Bar Association, Securities Law Subcommittee

Member, Atlantic Council of Canada

Member, Institute of Corporate Directors

Member, National Society of Compliance Professionals

Community Activity

Director and Chair of the Human Resources and Strategy Committee, Reach the World, a New York-based nonprofit that uses a mixture of computer-based and real time connections with sponsored travelers and class visits to enhance elementary and secondary student knowledge of the world beyond their neighborhoods.

Presentations

D. Grant Vingoe. "Fundamentals of U.S. Securities Law-2011: The Public Offering Process" Osgoode Professional Development, Toronto, ON, June 7, 2011.

D. Grant VingoeArnold & Porter LLP 3

D. Grant Vingoe. "Cross Border Issues" Financial Administrators Section Annual Conference 2010, Investment Industry Regulatory Organization of Canada, Toronto, ON, September 24, 2010.

Kevin F. Barnard and D. Grant Vingoe. "Financial Regulatory Reform" Osgoode Professional Development, Toronto, ON, October 19, 2009.

D. Grant Vingoe. "Regulatory and Industry Differences Between Canada and the US" National Society of Compliance Professionals Annual Seminar, Philadelphia, PA, October 7, 2009.

D. Grant Vingoe. "Fundamentals of US Securities Law-2009" Osgoode Professional Development, Toronto, ON, April 21, 2009.

D. Grant Vingoe. "The Canadian Institute's 19th Annual Securities Superconference" The Canadian Institute, Toronto, ON, February 17-18, 2009.

Advisories

"International Implications of New FINRA Registration Rules for Securities Back Office Personnel." Aug. 2011.

"Private Fund Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act." Jul. 2010.

"SEC Adopts Restrictions on Short Sales." Mar. 2010.

"SEC Seeks Comments on Alternative Short Sale Rule." Aug. 2009.

"SEC Announces Additional Steps to Prevent Abusive Short Sales and Increase Market Transparency." Jul. 2009.

"FINRA Proposes Registration Category for Investment Banking Professionals." Mar. 2009.

"SEC Adopts Significant Amendments to the Foreign Private Issuer Exemption from Securities Exchange Act Registration." Oct. 2008.

"SEC Proposes to Ease Requirements on Foreign Broker-Dealers." Jul. 2008.

"SEC Answers Questions Relating to Rule 15a-6 and Regulation Analyst Certification." Jun. 2005.

Multimedia

Alan Avery, Kevin F. Barnard, Michael F. Griffin, Kathleen Scott and D. Grant Vingoe. "WEBCAST: Implications of the Dodd-Frank Act for Non-US Banking Organizations, Securities Firms, and Other Financial Companies" December 02, 2010. (also available as a Podcast)

arnoldporter.com

Michael L. Bernstein Partner

Michael Bernstein is chair of the Firm’s national bankruptcy and corporate restructuring practice. He is consistently distinguished as one of the top bankruptcy and restructuring lawyers in Washington, DC by Chambers USA Leading Lawyers

for Business, which praises him as a "creative and loyal advocate whose knowledge of the Bankruptcy Code makes him incredible at getting the best results for his clients’’ (2011), "an outstanding lawyer [with] fantastic analytical skills and intellectual prowess’’ (2009), for being ‘‘creative and practical" (2008), noting that he ‘‘completely understands [his client’s] business’’ (2007), and has ‘‘an ability to assess risks in a meaningful way and address the tribunal in a strong and tenacious manner’’ (2006).

He represents secured and unsecured creditors, creditors' committees, bondholders, investors, asset purchasers, debtors, and other parties in a wide variety of bankruptcy and workout matters, and in related litigation throughout the United States. He has been involved in large bankruptcy cases, including Chrysler, Lehman Brothers, US Airways, LandAmerica, TWA, Adelphia, Asarco, G-1 Holdings, Mirant, Criimi Mae, Enron, FoxMeyer Drug, Alterra Healthcare Corporation, Fruit of the Loom and Continental Airlines, as well as many other cases throughout the United States.

Mr. Bernstein's bankruptcy experience spans many industries, including telecommunications, energy, real estate, finance, mining, manufacturing, technology, retail, airline, healthcare, and pharmaceuticals. His clients have included AOL, American Capital, American Red Cross, Ardent Communications Creditors' Committee, Bear Stearns, Boehringer Ingelheim, BB&T, Cingular Wireless, Criimi Mae Creditors' Committee, Dynex Bondholders Committee, Gate Gourmet, Glaxo, Guinness Import Company, Health Care REIT, Hilton Worldwide, Lennar Partners, Major League Baseball, Perseus LLC, Sodexo, Texas Pacific Group, The George Washington University, and the Washington Corporations, among others.


555 Twelfth Street, NW Washington, DC 20004-1206

Practice Areas Bankruptcy and Corporate Restructuring (practice chair) Financial Services

Education JD, Northwestern University School of Law, 1989 BA, Brandeis University, 1986

Admissions District of Columbia Supreme Court of the United States

Michael L. BernsteinArnold & Porter LLP 2

Mr. Bernstein is a fellow of the American College of Bankruptcy and a member of the Board of Directors of the American Bankruptcy Institute. He has co-authored two books and has published many articles on bankruptcy-related topics. He is a frequent lecturer, has been interviewed by major newspapers and on television and radio, and has been recognized as a leading bankruptcy lawyer by numerous publications. Mr. Bernstein served as co-chair of the Labor and Employment Committee of the American Bankruptcy Institute. He has testified before Congress as an independent expert on the status of collective bargaining agreements, retiree and pension benefits, and executive compensation in bankruptcy.

Rankings

Washingtonian's "Top Lawyers" for Bankruptcy

Chambers USA: America's Leading Lawyers for Business for Bankruptcy/Restructuring

Washington, DC Super Lawyers for Bankruptcy & Creditor/Debtor Rights, Real Estate, and Business Litigation

Best Lawyers "Washington, DC Bankruptcy and Creditor-Debtor Rights Lawyer of the Year"

The Legal 500 US "Leading Lawyer" for Bankruptcy

Fellow of the American College of Bankruptcy

Washington Business Journal's "Top Washington Lawyers" Finalist for Bankruptcy

ABI Publications Award

Euromoney's ‘‘Guide to the World's Leading Insolvency & Restructuring Lawyers’’

Professional and Community Activities

Fellow, American College of Bankruptcy

Member, Board of Directors, American Bankruptcy Institute

Member, Advisory Board, ‘‘Views From the Bench’’ program, co-sponsored by Georgetown University Law School and American Bankruptcy Institute

Master of the Bench, Walter A. Chandler American Inn of Court

Served as co-chair of the Labor and Employment Committee of the American Bankruptcy Institute

Books

Prof. John Ayer and Michael L. Bernstein. "Bankruptcy in Practice" (co-author) (4th Ed. 2007).


Jonathan Friedland, Michael L. Bernstein, Prof. George Kuney and Prof. John Ayer. "Chapter 11-101" (co-author) 2007.

Michael L. Bernstein. "Bankruptcy & Workouts" Chapter, Small Business Compliance Advisor (Thompson 1994).

Articles

Michael L. Bernstein and Charles A. Malloy. "Bankruptcy Venue Laws May Be Changing" Dow Jones DBR Small Cap Nov. 2011.

Michael L. Bernstein and Rosa J. Evergreen. "Labor Issues: What Impact Would the "Protecting Employees and Retirees in Business Bankruptcies Act of 2007" (H.R. 3652) Have on Chapter 11 Reorganizations?" November 2009.

Michael L. Bernstein and Charles A. Malloy. "Bankruptcy and the Board" NACD------Directors' Monthly September 2008.

Michael L. Bernstein and Charles A. Malloy. "Deepening Insolvency: An Emerging Theory of Liability" Bloomberg Corporate Law Journal Summer 2006 (Volume 1: Issue 3).

Michael L. Bernstein. "Chapter 11-201" column -- ongoing monthly column in ABI Journal on intersection of bankruptcy and other areas of law (2008).

Michael L. Bernstein. "Chapter 11-101" column -- monthly column in ABI Journal (2003-2005).

Michael L. Bernstein and Charles A. Malloy. "Master Leases and Cross Default Clauses in Bankruptcy," Real Estate Finance Journal, Spring 2003.

Presentations

Michael L. Bernstein. "Intercreditor Issues: Trends in Tranche Warfare, Mezzanine Lender Issues, Syndicated Loans and Standing for Certificate Holders" Bankruptcy 2011: Views from the Bench, Georgetown University Law Center, Washington, DC, September 16, 2011.

Michael L. Bernstein. "Bankruptcy Practice and the Law of Unintended Consequences: Be Careful What You Wish For" American Bankruptcy Institute 29th Annual Spring Meeting, National Harbor, MD, April 2, 2011.

Michael L. Bernstein. "Intercreditor Issues and Subordinate Financing: "Tranche Warfare" Bankruptcy 2010 Views from the Bench, Georgetown University Law Center, Washington, DC, October 1, 2010.

Michael L. Bernstein. "Protecting Employees and Retirees in Business Bankruptcies Act of 2010" Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on proposed legislation to amend certain provisions of Chapter 11 of the US Bankruptcy Code, May 25, 2010.

Michael L. Bernstein and Susan E. Hendrickson. "WMACCA Technology & IP Forum: Treatment of IP in Bankruptcy/Buying IP Assets out of Bankruptcy" Arnold & Porter LLP, McLean, VA, May 2010.


Michael L. Bernstein. "Labor and Employment: Litigating the Section 1113 Dispute" ABI Annual Spring Meeting, May 1, 2010.

Michael L. Bernstein. "Chapter 11 at the Crossroads: Does Reorganization Need Reform?" A Symposium on the Past, Present and Future of U.S. Corporate Restructuring (panel on Labor Issues: Would Reform of Federal Law Employee and Benefits Claims Help or Hurt Reorganizations?), November 16-17, 2009.

Michael L. Bernstein and Rosa J. Evergreen. "Bankruptcy and Restructuring: Navigating Employment Issues Under the Code" Best Practices to Negotiate, Modify and Terminate Employment Agreements and Benefit Plans, Strafford, August 20, 2009.

Michael L. Bernstein. "Advising Emerging Growth Companies in Turbulent Times" Panel, DC Bar, April 28, 2009.

Michael L. Bernstein. "Nuts and Bolts of Bankruptcy" ABI Annual Spring Meeting (panel, April 2010 and prior years).

Michael L. Bernstein. "Views From the Bench" Georgetown University Law Center (panel on real estate-homebuilders, commercial and hotels), September 12, 2008.

Michael L. Bernstein. "Understanding Today's Capital Markets" 4th Annual Mid-Atlantic Bankruptcy Workshop, American Bankruptcy Institute, Chesapeake Bay, Cambridge, MD, July 31-August 2, 2008.

Michael L. Bernstein. "Protecting Employees and Retirees in Business Bankruptcies Act of 2007" Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on proposed legislation to amend certain provisions of Chapter 11 of the US Bankruptcy Code, June 5, 2008.

Michael L. Bernstein. "Twelfth Annual Great Debates" (Whether Congress Should Amend the Bankruptcy Code to Eliminate All Forms of Incentive, Bonus or Similar Compensation for Senior Executives and Other Insiders), ABI Annual Spring Meeting, April 2008.

Michael L. Bernstein. "Views From the Bench" Georgetown University Law School (panel on reclamation and other trade vendor issues), October 2007.

Michael L. Bernstein. "American Workers in Crisis: Does the Chapter 11 Business Bankruptcy Law Treat Employees and Retirees Fairly?" Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on the status of collective bargaining agreements and employee benefits in Chapter 11 proceedings, September 6, 2007.

Michael L. Bernstein. "ABI Mid-Atlantic Program" (panel on union, pension and labor issues in bankruptcy), August 2007.

Michael L. Bernstein. "Economic Paradox - Healthy Economy, Sick Healthcare Provider Sector - 2007 Outlook & Thoughts on Avoiding or Dealing with Operating Distress" Turnaround Management Association, January 2007.

Michael L. Bernstein. "Labor Issues in Bankruptcy" ABI Southeast Regional Meeting (Fall 2005).


Michael L. Bernstein. "Workout, Bankruptcy and Collateral Liquidation for Lenders" Lorman (Summer 2003).

Michael L. Bernstein. "Dealing with Insolvent and Bankrupt Companies" AOL Time Warner in-house CLE (Spring 2002).

Advisories

"Are You Prepared? A Compendium of Advisories on the Dodd-Frank Act." Jul. 2010.

"Dodd-Frank Act Creates New Resolution Process for Systemically Significant Institutions." Jul. 2010.

"Purchasing Real Estate and Loan Assets from the FDIC." Oct. 2008.

arnoldporter.com

Stewart D. Aaron Partner

Stewart Aaron heads the firm's New York office. He practices commercial litigation with an emphasis on securities law matters. For over 25 years, Mr. Aaron's practice has involved the representation of clients in litigated matters in state and

federal courts, and before regulatory bodies and self regulatory organizations.

Mr. Aaron currently serves as President of the 9000-member New York County Lawyers' Association. He is a frequent author and lecturer on legal topics, generally in the areas of securities, commercial, and prisoners' civil rights litigation.


Fairfax Financial Holdings Limited v. S.A.C. Capital Management, LLC, et al., Docket No. L-2032-06 (N.J. Superior Court, Morris County). Successfully represented hedge fund defendant against, among others, claims alleging violations of the New Jersey Racketeer Influenced and Corrupt Organization Act related to short selling of Fairfax stock.

In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). Represented underwriter in 67 of 310 consolidated actions in the US District Court for the Southern District of New York alleging that IPO underwriters, IPO issuers and individual officers and directors of issuing companies engaged in scheme to inflate the issuers' share price, in violation of the federal securities laws.

Scott-Macon Securities, Inc. v. Zoltek Companies, Inc., 2005 WL 1138476 (S.D.N.Y. 2005), aff'd in part, 2007 WL 2914873 (2d Cir. 2007). Represented plaintiff placement agent in connection with action for breach of agreement pursuant to which plaintiff was to act as exclusive placement agent in connection with placement of equity and/or debt securities of defendant Zoltek. Obtained partial summary judgment as to liability on behalf of


399 Park Avenue New York, NY 10022-4690

Practice Areas Securities Enforcement and Litigation Litigation Appellate and Supreme Court

Education JD, summa cum laude, Syracuse University College of Law, 1983 BS, Cornell University, 1980

Admissions New York Supreme Court of the United States US Courts of Appeals for the Second, Fourth, and Ninth Circuits US Tax Court

Stewart D. AaronArnold & Porter LLP 2

plaintiff, and judgment in favor of plaintiff after trial awarding fees and warrants totalling in excess of US$6 million. Affirmed in substantial part by Second Circuit, and remanded for consideration of whether fees and warrants are due on two take-downs of fifth and final placement.

In re Mutual Funds Investment Litigation, 384 F. Supp. 2d 845 (D. Md. 2005). Represented mutual fund management company in class and derivative actions involving allegations of market timing and late trading.

Waldock v. M.J. Select Global, Ltd., 2005 WL 2737502 (N.D. Ill. 2005). Represented hedge fund and its principals in securities fraud lawsuit. Obtained dismissal with prejudice of all claims against them.

Keeney v. Larkin, 306 F. Supp. 2d 522 (D. Md. 2003), aff'd, Fed. Sec. L. Rep. 92,868 (4th Cir. 2004). Obtained dismissal of securities fraud claims against Chief Executive Officer and Chief Financial Officer. Affirmed by Fourth Circuit.

Decker v. Yorkton Securities, Inc., 106 Cal. App. 4th 1315 (Ct. App., 1st Dist. 2003). Affirming summary judgment in favor of broker that transferred stolen stock certificates; in deciding issue of first impression under California Commercial Code, appellate court held that, in order to hold broker liable, plaintiff must show that broker had subjective knowledge of a significant probability of an adverse claim.

JPMorgan Chase Bank v. LibertyMutual, et al., 189 F. Supp. 2d 24 (S.D.N.Y. 2002). Represented surety company in this Enron-related litigation during month-long trial; favorably settled prior to jury deliberations.

Rankings

Chambers USA: America's Leading Lawyers for Business 2009-2011 for Litigation: Securities

New York Super Lawyers 2006-2011 for Business Litigation and Securities Litigation

Professional and Community Activities

President, New York County Lawyers' Association (NYCLA)

Member, Board of Directors, NYCLA Foundation

Member, NYCLA Executive Committee

Past Chair, NYCLA Committee on the Federal Courts

Member, NYCLA Task Force on Judicial Independence

Past Chair, Litigation Committee, New York City Bar

Member, Entertainment Committee, New York City Bar

Past Member, House of Delegates, New York State Bar Association (NYSBA)


Member, NYSBA Nominating Committee

Past Chair, NYSBA Committee on Federal Legislation

Member, Federal Bar Council

Member, Lawyers Committee, National Center for State Courts

Member, New York American Inn of Court

Fellow, Litigation Counsel of America

Fellow, American Bar Foundation

Fellow, New York Bar Foundation

Mediator, US District Court for the Southern District of New York

Books

Stewart D. Aaron. "Ethical Issues in Commercial Cases" Author of Chapter 58 in Commercial Litigation in New York State Courts, Second Edition (Robert L. Haig ed.) (West & NYCLA 2009).

Articles

Stewart D. Aaron. "Reflections on 9/11 and the Law" New York Law Journal Sep. 2011.

Stewart D. Aaron and Cara Peterman. "Rule 10b-5 Liability of Secondary Actors: Second Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific Investment Management Co. v. Mayer Brown" Bloomberg's Securities Law Report, Vol. 4, No. 26, July 2010.

Stewart D. Aaron and Cara M. Peterman. "Rule 10b-5 Liability of Secondary Actors: Second Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific Investment Management Co. v. Mayer Brown" Bloomberg Law Reports, Vol. 4, No. 26, July 2010.

Stewart D. Aaron and Lauren R. Bittman. "Proposed Investor Protection Act Could Clarify Reach of U.S. Securities Laws" March 2010.

Stewart D. Aaron, Marcus A. Asner and Yue-Han Chow. "Second Circuit Rules Computer Hacking May Be "Deceptive" Under Section 10(b) of the Securities Exchange Act of 1934" Privacy & Data Security Law Journal, Octobe 1, 2009.

Stewart D. Aaron and Laura Weiss Tejeda. "The Realities and Economics of Civil Litigation in Federal Court and Its Impact on Litigation Management" Bloomberg's Litigation Law Report, Vol. 2, No. 25, June 23, 2008.

Stewart D. Aaron and Susan L. Shin. "Considerations Surrounding Motions in Limine" New York Law Journal April 2, 2007.


Stewart D. Aaron. "Inside The Minds: Securities Litigation" Aspatore Books, Publishers of C-Level Business Intelligence, October 2005.

Advisories

"The Second Circuit Clarifies the US Supreme Court's Ruling on the Extraterritorial Reach of US Securities Laws." Mar. 2012.

"US Supreme Court Limits Extraterritorial Reach of the US Securities Laws; Congress Acts." Jul. 2010.

"Pacific Investment Mgmt. Co. v. Mayer Brown: The Second Circuit Rejects the "Creator Theory" and Adopts the "Attribution Requirement" For 10b-5 Liability of Secondary Actors." May. 2010.

"Supreme Court to Consider Whether "Foreign-Cubed" Securities Fraud Cases May Be Heard in US Courts." Apr. 2010.

"First Circuit Rejects Attempt to Impose Rule 10b-5 Primary Liability for "Implied" Statements." Mar. 2010.

"SEC Announces New Guidance For Cooperation with Investigations." Jan. 2010.

"US Supreme Court Grants Certiorari to Review Foreign-Cubed Securities Transaction Case Despite Solicitor General's Opposing View." Dec. 2009.

"The Eleventh Circuit Finds Subject Matter Jurisdiction in "Foreign-Cubed" Securities Lawsuit." Sep. 2009.

"Fourth Circuit Reinstates Complaint But Maintains Strict PSLRA Scienter Pleading Standard." Aug. 2009.

"Second Circuit: SEC May Investigate and Regulate Certain Forms of Computer Hacking." Jul. 2009.

"Fourth Circuit Adopts Strict Standard for Pleading Scienter in Securities Fraud." Jan. 2009.

"Second Circuit Rejects Bar on "Foreign-Cubed" Securities Lawsuits." Oct. 2008.

"In re: Initial Public Offering Securities Litigation." Dec. 2006.

"The Supreme Court Toughens the Requirements for Private Securities Fraud Claims." Apr. 2005.

Tab 4: Practice Overviews

arnoldporter.com

arnoldporter.com

BANKRUPTCY AND CORPORATE RESTRUCTURING

Arnold & Porter LLP's Bankruptcy and Corporate Restructuring practice represents a diverse client base, including corporate debtors, investors and asset purchasers, committees, bondholders, secured and unsecured creditors, parties dealing with distressed businesses, officers and directors, and other interested parties in corporate restructurings, bankruptcy proceedings, and related litigation throughout the United States.

Our firm and its bankruptcy partners have been recognized by numerous publications as being among the leading bankruptcy lawyers in the United States. Bankruptcy Court Decisions-Weekly News & Comment named Arnold & Porter one of 12 law firms in the United States "providing exemplary service to corporate bankruptcy clients." We have repeatedly been recognized in Chambers USA: America's Leading Business Lawyers as a leading bankruptcy and restructuring practice. Our lawyers have also appeared in The Best Lawyers in America, Lawdragon 500, Legal 500 US: Corporate and Finance, Super Lawyers, Guide to the World's Leading Insolvency and Restructuring Lawyers, and other publications. Our bankruptcy partners are frequent lecturers, published authors, and widely recognized professionals in their field.

Our bankruptcy lawyers are experienced litigators. We appear in trial and appellate courts throughout the United States and are often involved in precedent-setting cases. Our transactional experience is equally extensive. Our Bankruptcy and Corporate Restructuring group has taken the lead in a number of sophisticated transactions in some of the country's largest bankruptcy cases. We have also negotiated and structured successful out-of-court restructurings, helped clients acquire distressed assets or businesses, and advised clients on their dealings with troubled companies.

Our practice includes full-time bankruptcy professionals as well as attorneys from other practice areas, such as litigation, corporate and securities, finance, tax, environmental, antitrust, real estate, intellectual property, and government contracts, who assist with particular issues on an as-needed basis. As bankruptcy issues rarely arise in a vacuum, this multidisciplinary coordination is particularly valuable to our clients. Readily available substantive experience in related areas of the law is often essential to efficient and effective representation.

Although we have a national practice and are often involved in high profile, complex cases, we also can (and regularly do) handle smaller local and regional bankruptcy matters in an efficient, cost-conscious way. Our lawyers staff matters leanly and are mindful of the economic pressures under which many of our clients operate. We provide the same standard of excellence whether the case is a routine bankruptcy litigation matter, a large international insolvency, or a major corporate reorganization.

Bankruptcy and Corporate Restructuring Arnold & Porter LLP 2

Bankruptcy Advice and Counseling In these challenging economic times, our clients often face concerns about the financial strength and viability of parties they are doing business with------their suppliers, customers, joint venture partners, lenders, borrowers, licensors, licensees, or other contract counterparties. Many of our clients recognize that they are better off considering these issues before a default or a bankruptcy occurs. They are interested in understanding their rights in the event of a counterparty's insolvency or bankruptcy, and maximizing their protections through the structuring and documentation of their transactions. We have been able to help our clients------on a cost-effective basis------to understand their rights and to maximize their protections. We often come up with creative solutions to address bankruptcy and insolvency risks. This sort of "preventive medicine" can add enormous value------helping to avoid significant expense and business disruption.

Large Reorganizations We play a prominent role in many of the country’s largest corporate reorganizations. Companies involved in these cases often turn to us because we are able to mobilize a team of experienced lawyers quickly, providing bankruptcy and cross-disciplinary experience. For example, we have represented major airlines in their bankruptcy reorganizations; debtors and other parties in cross-border insolvency proceedings; investors in billion-dollar-plus bankruptcy investments; major parties in some of the country’s largest mass tort and environmental bankruptcies; creditors’ committees in large and complex chapter 11 cases; broker-dealers and customers in complex securities industry liquidations; banks and bank holding companies in financial institution reorganizations; parties engaged in litigation with corporate debtors; and a wide variety of other parties in large bankruptcy and reorganization matters.

Corporate Debtors Arnold & Porter LLP’s restructuring lawyers combine their experience in bankruptcy law with the capabilities of the firm’s lawyers in other practice areas to address the many corporate, tax, environmental, real estate, litigation, antitrust, and regulatory issues that a company faces when operating in chapter 11.

In 2009, we guided Quebecor World, the second largest commercial printer in North America, through a cross-border restructuring that resulted in confirmation of a successful stand-alone plan of reorganization only 18 months after the company filed chapter 11. We were also lead bankruptcy counsel to US Airways in its second chapter 11 proceeding, obtaining confirmation of its successful plan of reorganization just one year after the commencement of its chapter 11 case and culminating in its successful merger with America West. We also represented the largest South American cable company in its successful cross-border restructuring, with formal chapter 11 proceedings in the United States and simultaneous consensual out-of-court restructurings of its subsidiary companies in six South American countries.

In other cases, we have served as special counsel to chapter 11 debtors. For example, we served as special environmental/bankruptcy counsel to a roofing company facing hundreds of millions of dollars of environmental claims and government cleanup orders that threatened the success of its reorganization effort; acted as special bankruptcy/labor counsel to an airline in groundbreaking trial and appellate litigation regarding a debtor’s right to modify its collective bargaining agreements and a union’s right to strike; were retained as special


bankruptcy/workers’ compensation counsel to a national retail chain in its successful reorganization; and have represented several debtors as special intellectual property counsel, addressing the unique issues involving the status of IP in bankruptcy. In each of these cases, our clients benefitted from our combined experience in bankruptcy and other substantive areas of the law.

In addition to our representation of corporate debtors in chapter 11 proceedings, we have substantial experience in advising corporations and other business entities regarding alternatives to bankruptcy, including state-law mechanisms and out-of-court workouts. We have frequently helped clients avoid bankruptcy and achieve consensual, out-of-court restructurings, which may be faster and less costly than a chapter 11 proceeding.

Finally, we have been called upon to counsel boards and independent directors with respect to their duties as directors of troubled companies, both before and after a bankruptcy filing.

Out-of-Court Restructurings It is sometimes said that the mark of a good bankruptcy lawyer is not how many bankruptcy cases she files, but instead how many companies she is able to help keep out of bankruptcy. We have deep experience representing companies and their lenders in negotiating out-of-court restructuring agreements. In many cases, these agreements enable the parties to achieve their objectives quickly, and without the risks and expense of a chapter 11 proceeding. Our bankruptcy lawyers understand corporate finance. Where necessary, we are also able to call upon our colleagues with particular experience in securities law, debt finance, mergers and acquisitions, and tax law------many of whom have significant experience working in the restructuring arena------to assist in these matters.

Our clients are all over the capital structure------from borrowers and equity investors, to senior lenders, second lien lenders, mezzanine lenders, unsecured lenders, bondholders, and other constituencies. We are familiar with the complex, multi-tier structures that have become increasingly common. We are sensitive not only to borrower versus lender issues, but also to the complex intercreditor issues that must be faced in the typical corporate restructuring.

Real Estate Bankruptcy and Restructuring Matters We regularly represent developers, lenders, landlords, investors, and other parties in real estate-related bankruptcies, workouts, and restructurings. We understand the business of real estate, as well as the legal issues, and we work closely with our colleagues in the firm's highly regarded real estate practice, several of whom also have substantial bankruptcy experience. This enables us to achieve our clients' objectives with creative, expeditious, and cost-effective solutions.

Our bankruptcy lawyers regularly represent secured lenders in enforcing their remedies, including through foreclosure or receivership and in bankruptcy court. In single-asset real estate cases, we have had success in obtaining relief from the automatic stay, defeating cramdown plans, confirming creditors' plans, pursuing collection litigation, and defending lender liability suits. We have also negotiated creative, consensual resolutions, quickly and with relatively little expense, in many single-asset cases.

We also represent real estate developers, owners and investors in resolving issues with their lenders. Often we are able to achieve the desired results without the need for a bankruptcy filing.


However, where an out-of-court strategy is not workable, we will help achieve the necessary restructuring in a chapter 11 proceeding.

We also represent investors in acquiring real estate assets from chapter 11 proceedings, and in purchasing debt secured by real estate assets. We have particular experience in the unique issues involving hotel debtors and have represented creditors, owners, and investors in a wide variety of bankruptcy and debt restructuring matters involving hotels.

We also regularly represent landlords facing the bankruptcy or insolvency of their tenants or seeking to structure their lease transactions in a way that will minimize their risk of an insolvency or bankruptcy.

In addition to our extensive experience in single-asset bankruptcy cases, we also play a significant role in some of the largest and most complex real estate-related bankruptcy cases in the country. Many of these matters involve complex financing structures, novel legal issues, and hundreds of millions of dollars in debt.

Creditors' and Equity Committees We represent creditors’ and equity committees in a variety of bankruptcy cases, from medium-sized local cases to mega-cases involving hundreds of millions of dollars of debt, across all types of industries. Our lawyers also represent ad hoc committees in workouts and out-of-court restructurings. We have had success in reconciling the diverse interests of committee members and in structuring negotiated solutions that avoid litigation and expedite recoveries. Where a negotiated solution is not possible, we have the litigation capability to pursue creditors’ remedies aggressively. The breadth of our practice allows committees to rely upon us not only for bankruptcy advice, but also for advice in other substantive areas of the law.

Investors and Asset Purchasers Our lawyers regularly represent clients interested in purchasing assets, business units, and entire operating businesses out of bankruptcy. Our experience ranges from straightforward single-asset acquisitions to complex billion-dollar-plus mergers and acquisition transactions. We help clients structure investments to minimize costly bidding wars, obtain protections such as break-up and topping fees, minimize the risks of successor liability, defer and/or reduce tax liabilities, and otherwise take advantage of the procedural and substantive protections offered by bankruptcy. Working with our corporate and tax lawyers where appropriate, we are able to handle all aspects of distressed M&A transactions. We also represent parties buying and selling distressed debt and bankruptcy claims.

Secured Lenders We regularly represent secured lenders in bankruptcy cases, state law insolvency proceedings, and non-bankruptcy restructurings and workouts. We have also successfully defended secured lenders in litigation brought by debtors, trustees, and committees, including claims for equitable subordination, recharacterization, deepening insolvency, breach of duty, and other lender liability theories, as well as efforts to challenge liens or prepetition payments.

We have also represented debtor-in-possession lenders in structuring, documenting and obtaining court approval of their loans.


We represent both senior as well as subordinated secured lenders. We have particular experience with issues concerning second lien, tranche B, and mezzanine financing, and we advise both senior and junior lenders on intercreditor issues, restructurings, rights in bankruptcy, and related issues.

Unsecured and Trade Creditors We represent trade creditors in some of the largest bankruptcy cases, as well as in smaller cases throughout the country. Our lawyers have represented unsecured creditors with claims as large as hundreds of millions of dollars. Our lawyers advise clients on reducing or altering trade credit;planning for a customer’s bankruptcy; filing and pursuing claims against debtors; potential recoveries from non-debtor parties;rights of reclamation, set-off, and recoupment; and other issues faced by trade creditors. We also represent clients in selling bankruptcy claims, as a way to achieve a quick and certain recovery. We represent unsecured creditors in a wide variety of litigation, including preference and fraudulent conveyance matters.

Environmental Matters We have substantial experience in representing the interests of clients impacted by the intersection of environmental law and bankruptcy law and have been involved in some of the most prominent cases in this area. We have represented both debtors and creditors in this regard, and have addressed a broad array of issues, such as the scope of the automatic stay and bankruptcy discharge in relation to environmental claims, as well as the liquidation and estimation of complex environmental claims in the bankruptcy context. Our work in this area benefits from the fact that we have attorneys who practice in both the environmental and bankruptcy areas. Moreover, we can, as necessary, access the extensive resources of our nationally-recognized environmental practice.

Structured Finance Bankruptcy lawyers play a vital role in structuring corporate and financial transactions to anticipate and avoid bankruptcy risks. Much of our work involves helping clients structure transactions to avoid or minimize the perils of bankruptcy or state insolvency laws.

We work closely with our corporate, tax, and finance colleagues in structuring off-balance-sheet financing transactions, employing multitier structures and otherwise crafting the complex structures required, and providing the requisite legal opinions that are the predicate for such transactions. Moreover, we have considerable experience in the structuring and documentation of securitized transactions in the areas of receivables financings, structured financing of financial products, real estate financing, and other structured finance transactions.

Bankruptcy Litigation Bankruptcy litigation is often fast-moving, and significant cases can proceed from filing through trial in a matter of weeks or months. The pace of these cases, and the complexity of the legal issues, demands trial lawyers who have a sophisticated understanding of bankruptcy law (both procedural and substantive) and can quickly get up to speed in order to effectively try a case.

Our experience includes bankruptcy litigation on behalf of debtors, creditors, and other parties. The firm’s bankruptcy litigators have represented clients in, among other things: avoidance actions (including preference and fraudulent conveyance claims), claims against the officers and


directors of the debtors (including breach of fiduciary duty claims), litigation relating to section 363 asset sales, claims under the Worker Adjustment and Retraining Notification Act (WARN) Act, lender liability issues, successor and alter ego liability, recharacterization and equitable subordination claims, cash collateral and debtor-in-possession financing litigation, and litigation regarding the confirmation of plans of reorganization. We have also handled environmental, intellectual property and antitrust litigation in bankruptcy court proceedings. Several of our litigators have particular experience in emergency litigation.

Arnold & Porter bankruptcy litigators have been involved in some of the most prominent cases in the country, including Adelphi, TWA, and Chrysler.

Appellate Practice Clients often turn to us for counsel in bankruptcy appellate matters, particularly where considerable sums of money or novel or important legal issues are at stake. Arnold & Porter LLP has had a reputation since its founding as a firm with a highly respected appellate practice, and the bankruptcy group continues that tradition. Our group includes highly regarded appellate and Supreme Court advocates.

Airline Industry Over the past 25 years we have played a significant role in nearly every major airline bankruptcy or restructuring, including those involving US Airways, TWA, Northwest, United, Continental, Delta, and many others. In these airline bankruptcy cases, we have represented debtors, major creditors, suppliers, investors, and other parties.

Banking and Financial Institutions Our bankruptcy lawyers regularly partner with lawyers in our highly regarded financial services group to counsel banks and other financial institutions, officers and directors of such institutions, and investors in, and creditors of, such institutions, on issues that arise when banks (or bank holding companies) and other financial institutions encounter bankruptcy, insolvency, or receivership situations. Our firm's combined experience in financial institutions regulation and bankruptcy law enables us to provide effective representation in these matters.

Broker-Dealer / Securities Industry We have substantial experience in addressing client needs at the intersection of bankruptcy law and the securities and derivatives industry. Our bankruptcy lawyers represent creditors, customers and broker-dealers in SIPA proceedings and represent individual customers, large financial institutions, creditors, and committees in significant bankruptcy and insolvency proceedings involving broker-dealers or other securities and derivatives market participants. We also represent hedge funds and private equity funds in their creditor, lender, and investor activities in the bankruptcy arena and counsel foreign exchanges and clearing houses on the bankruptcy implications of their US activities. Where appropriate, we call upon the experience of our colleagues in the securities regulatory practice, including lawyers who have held senior positions at the Securities and Exchange Commission and the Commodity Futures Trading Commission.


Healthcare Industry Bankruptcy and insolvency matters in the healthcare industry present unique business and legal issues. We represent hospitals and healthcare facility operators; lenders and lessors of hospitals, senior living facilities and similar facilities;parties to contracts with such entities; investors acquiring such facilities; and other parties that are affected by insolvencies and bankruptcies in the healthcare industry. We also represent creditors and other parties in pharmaceutical, biotechnology, and medical device bankruptcies and insolvencies. Where appropriate, we are able to call upon our colleagues in the healthcare and pharmaceutical practice groups for assistance, including deep regulatory experience.

arnoldporter.com

FINANCIAL SERVICES

Widely acknowledged as one of the nation's premier financial services practices, the Arnold & Porter LLP Financial Services practice group of over 35 lawyers provides US and international financial institution clients with comprehensive regulatory, litigation, legislative and transactional services. The practice group handles complex regulatory and transactional issues, represents clients in legislative matters (including Congressional hearings and investigations) and litigates cases involving the financial services industry at the administrative level and in the state and federal courts, including the US Supreme Court.

The practice group is recognized for developing innovative structures and novel solutions to regulatory issues, which allow clients to optimize their business strategy. Clients include a broad cross-section of bank holding companies, savings institutions, foreign banks, insurance companies, securities firms, investment managers, electronic commerce businesses, and foreign governments.

The practice group offers extensive experience in dealing with financial institutions and securities regulatory agencies, both federal and state, and with state insurance regulatory authorities, as well with the recently established Federal Insurance Office. Several members of the practice group have served in senior positions at the key federal regulatory agencies. The team is supported by the full interdisciplinary resources of Arnold & Porter, including the Corporate and Securities; Litigation; Public Policy and Legislative; Antitrust/Competition; Tax, Trusts, and Estates; ERISA; Environmental; and Intellectual Property practice groups.

Anti-Money Laundering and USA Patriot Act Defense We have been active in a variety of Patriot Act, anti-money laundering, and computer security matters for our financial services clients, including internal investigations, defense of enforcement actions and civil and criminal litigation, development and documentation of compliance programs, public policy issues, and regulatory counseling. Our information privacy and security team includes former federal prosecutors as well as former senior officials from the US Department of Justice, the Federal Trade Commission, the Central Intelligence Agency, the National Security Administration, the Department of Defense, and the US federal banking agencies.

Antitrust and Competition Bank mergers are unique in the antitrust world. Both the process and standard of review are different from those followed in the antitrust review of mergers in other industries. We assist clients in analyzing potential transactions and shepherd them through the multiple agency review process. Historically, we have had one of the leading bank mergers and acquisition practices in the US. In this regard, for the last two decades, our team has been involved in shaping some of the most complex divestiture proposals ever designed to cure competitive

Financial Services Arnold & Porter LLP 2

concerns. Our lawyers were instrumental in preparing the Bank Mergers and Acquisitions Handbook, a leading reference manual devoted to this area of law. In addition, as a full-service firm, we are also able to draw upon the resources of our consistently top-ranked antitrust and competition practice in such instances as when a non-bank is being acquired and FTC issues are raised.

Charter Assessment We regularly assist clients in assessing which is the optimal charter to operate under to best meet their business goals. We have extensive experience in advising clients on the advantages and disadvantages of the various types of charters------state bank charter, national bank charter, federal savings bank charter, or a specialized or limited purpose charter------and the implications of a charter choice on the parent holding company. As one of the few national firms with a separate, sophisticated thrift practice, we have been at the forefront in developing novel uses for thrift charters, especially by securities and insurance companies, in addition to advising our bank holding company clients on such matters. In the last several years, we have represented several of the nation's largest insurance and securities companies in forming federal savings banks in order to offer banking services to their customers.

Corporate Control Contests and Corporate Governance We help financial institutions develop takeover defenses, handle unsolicited takeover attempts, and prepare shareholders' rights plans, and we advise on corporate governance and shareholder relations issues. We also represent acquirors in takeovers, offering special value in resolving regulatory and antitrust issues raised by proposed transactions.

Enforcement Counseling and Defense We assist individuals and institutions------and their boards of directors and holding companies------with the negotiation of consent agreements, memoranda of understanding and other written settlements, the development of compliance programs, and the defense of enforcement actions in administrative and judicial proceedings, and in addressing financial reporting and disclosure issues presented by agency enforcement initiatives. We also represent officers and directors, accountants, and other professionals in actions by receivers of insolvent financial institutions and in shareholder suits.

We are experienced in such currently high-profile issues as subprime lending, vendor management, privacy, nontraditional lending products and practices, money laundering, bank secrecy, and various activities considered inconsistent with safe and sound practices. In addition, we have substantial experience representing individuals and entities who are alleged to have the control provisions of the Change in Bank Control Act, the Bank Holding Company Act and the Savings and Loan Holding Company Act. Many of our attorneys have served as senior enforcement officials or on the enforcement staffs of the federal banking agencies, adding depth and insight to our representation of clients in enforcement matters.

Financial Products and Services Helping financial institutions enter new lines of business and structure new products and services is a major focus of our financial services practice. We represent clients in establishing, acquiring, and operating lines of business, including securities underwriting and dealing; brokerage; investment advising; mutual and hedge funds; pension servicing; credit, debit, and


other card operations; funds and other money transmission; fiduciary and investment management activities; insurance; and leasing.

Broker-Dealer and Investment Advisers. We represent broker-dealers and investment advisers on regulatory matters related to their creation, expansion, services, and operations.

Private Investment and Private Banking. We represent numerous clients in the creation, operation, and offering of private investment funds, in establishing and structuring the management companies that operate private equity and venture capital funds, and in connection with portfolio investment transactions by the funds. We advise clients on new fund development and structuring, required documentation, and compliance with state and federal securities and banking laws. We are also familiar with issues relating to specialized investment funds, such as SBICs, business development companies, collective investment funds, and employee securities companies. Drawing on the resources of our trust and estates, ERISA, and tax attorneys, our financial services team also represents clients in the bank regulatory and fiduciary law aspects of running a trust department.

Special Purpose Institutions. Our lawyers have helped create special purpose institutions designed to take advantage of favorable regulatory treatment and exploit niche markets. For example, we assist clients in establishing non-depository banks and thrifts created to offer trust services on a nationwide basis, as well as credit card and other limited purpose institutions.

Credit Card/Debit Card/Stored Value and Payments Systems. We assist clients in the card area with litigation, product development, and regulatory policy, and in negotiations of their processing, co-branding, and other agreements. Our clients include representatives of all parts of the credit and debit card industry, including one of the major credit card associations, card issuers, diversified financial services companies offering card products, merchant processors, merchants, and ATM and POS operators. We represent clients that operate other types of payment systems, as well. Clients in this area include funds and other money transmitting companies, a major government-sponsored enterprise, and merchants in a variety of online businesses. Our work for these organizations has included product development, assistance with mergers and acquisitions, advice on compliance with a variety of regulations, development and documentation of internal policies and procedures, documentation of system rules and policies for users, and various commercial, litigation, and regulatory matters.

Financial Regulatory Reform On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, HR4173/Public Law 111-203, the most sweeping overhaul of the US financial sector since the Great Depression. The legislation will affect the manner in which many financial services companies are supervised and, in some cases, structured. For example, the legislation contemplates the creation of a new systemic risk council to monitor macroeconomic threats to US financial stability. This council also will have the authority to impose heightened supervision on entities and activities presenting such risks. The legislation also gives special attention to consumer financial products and services, by providing for the creation of a new consumer protection authority responsible for reviewing the terms and conditions and disclosures surrounding consumer financial products.


In addition, the legislation abolishes the Office of Thrift Supervision and moves supervision of savings banks to the Office of the Comptroller of the Currency and their holding companies to the Federal Reserve. New restrictions on affiliate transactions and lending limits will be imposed on all. The legislation also contains the so-called "Volcker rule," which will prohibit banks from engaging in proprietary trading activities and in investing in hedge funds and private equity funds. As a result of these changes, providers of financial services will likely face increased compliance expectations and costs, and depository institutions and their holding companies will likely confront stricter capital requirements, creating additional funding and profitability challenges for all.

This legislation does not just affect those in the financial industry. For example, a new regulatory structure would be established for over-the-counter derivatives trading, moving most trading onto exchanges and requiring new and higher capital and margin requirements. A new federal insurance office would provide an additional layer of insurance company monitoring. Investment advisors and hedge funds would be subject to new rules. Additionally, all public companies will face the prospect of greater shareholder participation in corporate governance matters and executive compensation practices.

Companies should be aware of these pending changes and be prepared to address them. Arnold & Porter's attorneys are available to respond to questions raised by the new legislation and to help determine how pending regulations may affect your business and industry. Our multidisciplinary team consists of more than 30 lawyers from our financial services, corporate and securities, hedge fund, compensation and benefits, tax, government contracts, legislative, real estate, bankruptcy, and securities enforcement and litigation areas. They have assisted clients in dealing with the special issues that have arisen under the recent stimulus and bailout programs. They provide US and international clients with comprehensive regulatory, litigation, and transactional services, handling intricate issues and litigation at the administrative level and in the state and federal courts, including the US Supreme Court.

Financial Services Consumer Protection We advise clients, including regulated financial institutions, mortgage lenders, and other specialty consumer and commercial lending companies on various consumer credit issues. For example, we counsel clients on exporting interest rates and fees on loans and on the practical implications and limitations of this exportation power; we review client compliance with federal and state consumer credit laws, including the Real Estate Settlement Practices Act, the Truth in Lending Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the Fair Credit Reporting Act, and undertake risk assessments of these areas; we structure lending programs to be compliant with the consumer lending laws; we defend clients that are sued for alleged violations of the consumer credit and consumer protection laws; and we advise clients regarding the agencies' published standards and statements of policy relating to lending practices in the consumer credit area.

In the fair lending area, we regularly assist clients in successfully resolving allegations of violations of the fair lending laws brought by the federal agencies in the earliest stages of the process, thereby avoiding costly and onerous settlements. We also advise clients on the rapidly changing area of subprime and ‘‘predatory’’ lending, and in providing affordable lending products consistent with the fair lending laws. We work with clients whose novel activities do


not fit within the traditional banking model to develop innovative strategic plans to satisfy their Community Reinvestment Act (CRA) responsibilities and have advised investors in and organizers of community development-focused banks and CDCs. We are also experienced in addressing CRA protests raised against clients by parties challenging merger and acquisition transactions.

Financial Services Litigation Financial services clients benefit from our extensive firmwide litigation resources and experience. Professionals in each of our offices regularly handle disputes on behalf of financial services clients, whether arising in a civil litigation/class action context, mediation and arbitration, or in a civil enforcement context. Our clients include financial services companies, banks, thrifts, officers and directors, law firms, accounting firms, other experts and consultants, and parties having dealings with failed institutions. Our representations have included litigation involving issues of federal preemption of state laws; litigation against the federal government for losses caused by changes in legislation that made so-called "supervisory goodwill" ineligible for treatment as regulatory capital; litigation defending financial services companies against alleged violations of consumer protection laws; litigation concerning grants and denials of permission to engage in nonbanking activities and in administrative enforcement proceedings; litigation over commercial transactions, employment issues, and fiduciary relationships of financial services firms; and litigation defending a card association in various antitrust suits filed by merchants and rival card associations.

Our firm’s experience includes client representation in lawsuits and investigations stemming from consumer mortgage lending. The firm also has experience in lender liability litigation arising from, among other things, loan commitments and modifications, alleged untimely or improper disbursements of loan proceeds, alleged erroneous valuation of collateral and of borrower’s ability to pay, as well as usury and bad faith claims. We have substantial experience in litigations with respect to securitization issues in state, federal, and bankruptcy courts involving prime, non-prime, and subprime assets ranging from consumer loan assets to audio-video equipment, which raised a number of significant Uniform Commercial Code (UCC) and secured lending issues. The firm has also represented clients in disputes with respect to investor suitability issues and purported unfair and deceptive business practices arising in the consumer and commercial lending arenas.

Our litigators also have considerable experience in complex securities litigation, demonstrated by the lead role we played in the recent landmark case, Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. 128 S. Ct. 761 (2008), in which the Supreme Court rejected the theory of ‘‘scheme liability’’ and held that a secondary actor cannot be liable unless it has made deceptive statements on which investors have relied.

We regularly handle SEC investigations and enforcement actions, and have represented major financial institutions in SEC investigations arising out of significant corporate governance and related party issues. We also defend financial services companies in class actions alleging securities fraud and related securities law violations.


Financial Services Preemption Litigation We have played a prominent role in much of the most significant federal banking litigation of the past three decades. For a number of years, Arnold & Porter LLP has been actively involved in challenging, on grounds of federal preemption, state and local efforts to supervise and regulate activities of federally chartered financial institutions. The firm in recent years has developed considerable experience in representing national banks and federal savings banks in a series of cases involving preemption of state law by the National Bank Act (NBA) and the Home Owners' Loan Act (HOLA). In a series of cases, the Arnold & Porter team, including lawyers from the firm's Washington, DC, New York, and Los Angeles offices, has achieved major victories for national banks, savings and loan institutions, and credit unions threatened with overreaching state and local actions. With a growing number of states and localities seeking to control financial institutions' activities, these issues have become increasingly important to financial institutions nationwide.

Examples of the cases in which we have recently achieved federal banking law preemption victories include:

State Farm Bank, F.S.B. v. Reardon, 539 F.3d 336 (6th Cir. 2008) (obtained declaratory and injunctive relief from enforcement of Ohio's mortgage-broker licensing laws against agents of federal savings bank)

Rose v. Chase Bank USA, N.A., 513 F. 3d 1032 (9th Cir. 2008), aff'g 396 F. Supp. 2d 1116 (C.D. Cal. 2005) (obtained dismissal of class action complaint alleging violation of state statutory disclosure requirements for access checks and unfair and deceptive practices)

Consumers Against Unfair Business Practices (Miller) v. Bank of Am., N.A. (USA), 170 Cal. App. 4th 980 (2009) (obtained dismissal of class action complaint alleging national bank's collection of finance charges and late fees when credit card payment date fell on weekend or holiday violated state "holiday" statutes and constituted unlawful, unfair and deceptive practices)

Augustine v. FIA Card Servs., N.A., 485 F. Supp. 2d (E.D. Cal. 2007), appeal docketed (9th Cir. No. 07-16751) (obtained dismissal of class action complaint alleging violation state unfair and deceptive practices in that national bank failed to give notice to borrower before raising credit card interest rate due to borrower default)

Montgomery v. Bank of America Corp., 515 F. Supp. 2d 1106 (C.D. Cal. 2007) (obtained dismissal of class action complaint alleging unfair and deceptive trade practices based upon the amount of a national bank's insufficient funds fees and the manner in which the fee amount was disclosed to customers)

State Farm Bank, F.S.B. v. Burke, 445 F. Supp. 2d 207 (D. Conn. 2006) (obtained injunctive and declaratory relief from enforcement of state mortgage broker licensing laws against agents of a federal savings bank)

Silvas v. E*Trade Mortgage Corp., 421 F. Supp. 2d 1315 (S.D. Cal. 2006) (obtained dismissal of complaint alleging violations of Truth in Lending Act and state unfair and deceptive practices laws), aff'd 514 F.3d 1001 (9th Cir. 2008)


Bank of Am., N.A. v. McCann, 444 F. Supp. 2d 1227 (N.D. Fla. 2006) (obtained injunctive relief under the visitorial powers provision of the National Bank Act preventing state court lawsuit by qui tam plaintiffs alleging violation of state escheat laws)

Am. Bankers Ass'n v. Lockyer, 239 F. Supp. 2d 1000 (E.D. Cal. 2002) (obtained summary judgment declaring that state disclosure statute requiring minimum payment disclosures was preempted)

Parks v. MBNA America Bank, N.A., et al., Orange Superior Court, Case No. 04CC00598 (June 17, 2008) (obtained judgment on the pleadings for national bank in class action alleging violation of state disclosure statute), appeal docketed (Fourth App. Dist., Div. Three, No. G040798)

Bank One Del., N.A. v. Wilens, 2003 WL 21703629 (C.D. Cal. July 7, 2003) (obtained injunctive relief barring state court suit alleging violations of state disclosure and unfair and deceptive practices laws)

Armanini v. Bank One, Del., N.A., Orange County Super. Ct., No. 03 CC 00255 (Feb. 3, 2005) (obtained summary judgment for national bank in class action alleging violation of state access check disclosure requirements and unlawful, unfair, and deceptive practices). We also recently achieved a grant of review by the New York Court of Appeals of Spitzer v. Applied Card Systems, 7 A.D.3d 104 (NY 2005), in order that we may appeal our Truth in Lending Act preemption defenses.

In addition, we have filed amicus briefs on behalf of the banking industry arguing federal banking law preemption in numerous cases, including:

Watters v. Wachovia Bank, N.A., 127 S. Ct. 1559 (2007) (NBA preemption)

The Clearing House Assn., L.L.C. v. Spitzer, 510 F.3d 105 (2d Cir. 2007) (visitorial powers), aff'g in part, 394 F. Supp. 2d 620 (S.D.N.Y. 2005), and Office of the Comptroller of the Currency v. Spitzer, 396 F. Supp. 2d 383 (S.D.N.Y 2005), cert. granted (January 16, 2009 No. 08-453).

Pacific Capital Bank, N.A. v. Connecticut, 542 F.3d 341 (2d Cir. 2008) (NBA preemption), aff'g 2006 WL 2331075 (D. Conn. 2006).

Miller v. Bank of Am. N.T. & S.A., 51 Cal. Rptr. 3d 223 (Cal. Ct. App. 2006) (NBA preemption), review granted (March 21, 2007 No. S149178).

Am. Fin. Servs. Ass'n v. City of Oakland, 34 Cal. 4th 1239 (2005) (NBA and HOLA preemption)

Am. Bankers Assn. v. Gould , 412 F.3d 1081 (9th Cir. 2005) (Fair Credit Reporting Act preemption

Financing Transactions and Capital Markets We advise both domestic and international financial institutions on a wide variety of financing opportunities, including securities offerings, leveraged buyouts, lending activities, and debt restructuring. Our attorneys are skilled at structuring securities offerings to ensure favorable regulatory capital treatment. We represent both issuers and underwriters of hybrid capital instruments and other capital markets transactions.


Hedge Fund and Private Equity Investment in Financial Institutions We have considerable breadth and depth of experience in counseling hedge and private equity funds and their investment advisors in working through the implications of the rules and policies that apply to both controlling and non-controlling investments in financial institutions and their holding companies, including the recent policy statements from the FDIC and Federal Reserve on private capital investments in banks and bank holding companies. Our experience includes structuring investment vehicles to make such investments and the forms in which such investments will be made, negotiating the relevant documentation, and working with the funds and the regulators in either obtaining the appropriate regulatory approvals for such investments, or in addressing any presumption of control by negotiating "custom tailored" passivity agreements or rebuttal of control agreements that may be required to ensure that such investment remain passive.

Insurance We represent insurance companies on a wide variety of transactional, litigation, legislative, strategic planning and policy issues. Our transactional lawyers represent insurance companies on a range of capital market and merger and acquisition transactions. We also handle litigation for the insurance industry, generally complex class action cases and cases involving such issues as the Fair Housing Act and the Americans with Disabilities Act. We also represented the insurance industry in litigation involving vehicle safety issues, including in proceedings before the National Highway Traffic Safety Administration.

On the legislative front, our lawyers have represented the insurance industry on a wide variety of matters including The Terrorism Risk Insurance Act of 2002, The Comprehensive Iran Sanctions, Accountability and Divestment Act, and several insurance companies and trade groups on matters relating to the Dodd-Frank Act, including Title I (systemic risk),the development of Title V (creation of the Federal Insurance Office and the Nonadmitted and Reinsurance Reform Act) and Title VI (regulation of savings and loan holding companies and the Volcker Rule). Arnold & Porter lawyers have substantial experience advising insurance companies which own depository institutions.

Our lawyers counsel insurance companies on a range of strategic planning and policy issues, particularly those that involve federal regulatory agencies. For example, we have a long history of representing insurance companies that own depository institutions and thus have in-depth familiarity with the regulation of those companies by federal bank regulatory agencies.

International and Foreign Banking We actively advise foreign banks on entry into the US and the activity of their US offices, as well as regulatory requirements, including comprehensive consolidated supervision determinations, new products (in securities, asset management, derivatives, insurance, and venture capital areas), capital issuances and other expansion opportunities. We also assist US financial services firms in expanding banking activities internationally through the establishment of foreign branches, the acquisition of subsidiary banks, and the expansion of foreign investments in established and emerging markets. In addition to commercial clients, we advise foreign governments and agencies on regulatory issues involving the US. With attorneys from our international practice, we advise foreign governments with respect to their dealings with the


Federal Reserve and other regulators and international organizations located in Washington, DC, as well as their commercial dealings with banks and securities firms.

Legislation and Public Policy We also represent individual institutions and trade associations on matters relating to federal financial regulatory legislation and policy. We develop legal positions for clients on many of the major public policy issues affecting financial institutions. Working with our legislative and public policy colleagues, we monitor legislative developments that concern the financial services industry, draft legislative proposals, provide legal and technical support for institutions commenting on proposed legislation, and work closely with congressional and federal agency staffs.

Mergers, Acquisitions, and Strategic Alliances Our firm historically has had one of the leading bank mergers and acquisitions practices in the US. Our attorneys are experienced with sophisticated merger techniques and skilled in developing related tax, antitrust, and regulatory strategies. Our work includes structuring and negotiating acquisitions of all types within the financial services industry, including cross-industry acquisitions, and strategic alliances among financial services companies and other entities. We also perform targeted due diligence to assist potential acquirors in regulatory risk assessment.

Privacy and Data Security What financial services firms know about their customers has become a heavily regulated aspect of doing business. We have been active for two decades in representing our financial services clients on matters relating to customer privacy.

In this regard, we counsel financial institutions on the rapidly growing body of federal and state privacy laws affecting their operations, including developing privacy notices, negotiating data protection agreements with business partners, and setting up internal databases to ensure appropriate safeguards on access to, and disclosure of, personal information. We also work with clients on the privacy rules adopted pursuant to the HIPAA and on international privacy requirements, including the restrictions imposed by the Data Protection Directive of the EU. Our privacy experience includes protection of financial information, including electronic data. As a complement to this advice, we work closely with clients on the security aspects of information privacy, which involve technical considerations that are integral to any program of privacy compliance.

Regulatory and Strategic Counseling We counsel clients on complicated issues arising under the statutes, regulations, and proposed regulations governing the financial services industry. We also counsel clients on the application of agency guidance documents and statements of policy on a wide range of issues, particularly in the areas of evolving regulatory scrutiny, in order to assist clients in identifying significant legal, supervisory, and reputational risks, and implementing systems and controls tailored to address those risks.

Based on our extensive experience, we often propose changes to agency regulations and request interpretations of existing or proposed agency rules. These efforts have led to novel


legal interpretations that have enabled our clients to offer new products and services, and to expand the scope of their operations.

Thrift Practice The practice group has a long history of representing federal savings banks and their savings and loan holding companies, particularly savings and loan holding companies that are also securities firms or insurance companies. We have in-depth familiarity with the various distribution and marketing programs used by thrift institutions to maximize the relationship the bank has with the customer of the holding company or its affiliates (use of agents, financial professionals, etc.). We have a long history of representing banks before the OCC, and their holding companies before the Federal Reserve Board. Following the passage of the Dodd-Frank Act, we have been sought out by many of the largest federal savings banks and their holding companies as the supervision and regulation of these entities has moved to the OCC and the Federal Reserve, respectively. We currently represent several of the largest savings and loan holding companies and their banking subsidiaries.

arnoldporter.com

LITIGATION

Arnold & Porter LLP is widely recognized for our successful record of representing clients in sensitive, complex, or high-stakes litigation nationwide, particularly in matters at the intersection of law, business and public policy. Chambers USA 2011 notes that Arnold & Porter has a "prominent track record in litigating cases on behalf of public companies… and a strong reputation for its expertise in class action defense." Our litigation practice integrates the firm's regulatory expertise, combining a deep understanding of the regulatory, technical, and business issues facing our clients with creative legal analysis to develop the most effective defense strategy. Our lawyers prepare each case with the expectation of going to trial. This trial-ready approach allows us to aggressively pursue the most favorable results for our clients; whether it is securing a verdict at trial, winning through motion practice, or avoiding the risks of litigation through negotiation.

Our substantial bench of litigators is more than 400 strong and draws on the significant experience of former federal, state and international prosecutors; former government officials; former clerks to the US Supreme Court, and appellate, district and other courts; and seasoned trial lawyers. Recently, Arnold & Porter litigators could be found representing client interests in trial and appellate courts in 40 states across the country, as well as before government agencies and other tribunals. Clients turn to us to resolve commercial disputes, defend against tort claims, defend class and derivative actions, fend off government enforcement proceedings, and challenge government action.

Another hallmark of our litigation practice is the ability to continuously advocate on our clients' behalf - from investigation to litigation; from trial to appeal to the Supreme Court. We have been involved in precedent-setting cases in virtually every major sector including accountant and attorney liability, antitrust & competition, appellate, class action, consumer protection, employment and labor, first amendment, government contracts, international arbitration, mass tort & toxic tort, patent infringement, product liability, securities & shareholder, unfair competition and white collar. Arnold & Porter also has a venerable pro bono practice.

Significant cases include:

State of Rhode Island v. Atlantic Richfield Company, et al. Won a defense verdict after a four-month trial in one of the most significant "public nuisance" cases; the jury exonerated our client while finding three other former lead paint manufacturers liable.

American Savings Bank v. United States. Won a US$401.5-million plaintiff's verdict in a breach of contract action arising out of promises made by the US government to entice our client to purchase an insolvent thrift.

Litigation Arnold & Porter LLP 2

Amos et al. v. GEICO Corp. et al. Defeated national class action alleging GEICO discriminated based on race in its underwriting criteria.

Oakland Raiders Litigation. Represented the Oakland Raiders against the City of Oakland, Alameda County, and the Oakland-Alameda County Coliseum, Inc. in a multi-million dollar fraud and breach of contract suit relating to the Raiders' 1995 return to Oakland from Los Angeles, resulting in a $34 million verdict for our client.

Wyeth Diet Drug Litigation. Served as national counsel for thousands of cases in 17 states involving alleged heart valve injury due to ingestion of diet drugs. We coordinated the overall trial strategy and obtained 10 defense verdicts after 2004. Our lawyers developed the innovative class action settlement.

Brown v. Brown & Williamson Tobacco Corp. Won affirmance in the US Court of Appeals for the Fifth Circuit of our lower court ruling dismissing, as preempted by federal law, purported class action claims of fraudulent misrepresentation and concealment, and breach of express and implied warranties related to the sale of "light" cigarettes.

Antitrust Litigation Arnold & Porter LLP's Antitrust Litigation practice is characterized by the complexity of the cases we handle, our trial-ready approach and our track record. We succeed before trial, in the court room and on appeal. Our matters often involve high-stakes parallel government investigations and private civil actions, novel theories and cases in multiple courts. We meet these challenges through interdisciplinary teamwork. For each matter, lawyers from our nationally recognized Antitrust and Litigation practice areas, located in offices from coast-to-coast, work with our clients to form a case team that has trial, antitrust and industry experience. In Europe too, we represent clients on the full range of antitrust issues, both in private litigation before national courts and in proceedings before the EU courts.

Titan America in a series of class actions alleging price fixing in the ready-mix concrete industry, in which our team defeated class certification for both direct and indirect purchaser classes.

VISA USA in a series of matters raising antitrust challenges to VISA's rules and structure in which we coordinated multiple defense efforts across cases with different plaintiffs and theories where different aspects of conduct were challenged.

Laboratoires Fournier in a two-week jury trial against competitor and direct purchaser claims that our client and its contract partner had engaged in predatory innovation with regard to the launch of new prescription drug formulations.

Business Litigation "We trust this firm with much of our high-stakes work. We appreciate how its lawyers understand our business." These client comments reported in Chambers USA 2011 reflect Arnold & Porter's long-standing practice of serving as a valued partner to our clients. Our business litigators work closely with the firm's regulatory lawyers to assess how litigation would affect our clients' business concerns from a multi-disciplinary perspective. We analyze the risks and opportunities, and then develop a creative and aggressive strategy that will efficiently advance the client's interests.


Our business litigators are always prepared to take a case to trial, and we have extensive experience trying cases before judges and juries in federal and state courts from coast-to-coast, and in US and international arbitral forums. We have won and defended against claims for hundreds of millions of dollars in damages. However, often times the most favorable results for the client come from a consensual resolution. Our lawyers are skilled at negotiating compelling settlements, and we also have significant experience in alternative dispute resolution methods, such as mediation and arbitration.

Arnold & Porter's business litigation clients are some of the leading corporations in the world: General Electric, Honeywell, Hewlett-Packard Company, Monsanto, ARCO/BP, Philip Morris, VISA, GlaxoSmithKline, GEICO, Hoffman-La Roche, Bank of America, Wells Fargo, Kmart Corporation, VeriSign, and many others. We have experience litigating cases involving virtually every industry and profession, including financial services, accounting, pharmaceuticals and healthcare, sports, media, technology, telecommunications, manufacturing, and insurance. We represent both public and private companies as well as international sovereigns in contract disputes, business torts, product liability and mass torts, unfair business practices, and all manner of bet-the-company litigation. Our litigators have defended scores of class action litigations involving consumer protection/false advertising, antitrust, product liability, intellectual property, securities, distributor disputes, and environmental and toxic tort claims.

Significant recent matters:

Successfully represented the Kingdom of Saudi Arabia and its Ministry of Defense and Aviation from 2005-2011 in defeating claims brought by Lear Siegler Services, Inc., a subsidiary of URS Corporation, alleging breaches of three Saudi military contracts and mulitple related business torts. After dismissing several claims, the firm concluded the matter at trial, securing an award of compensatory damages plus punitive damages and injunctive relief.

Representing Nucor Corporation, one of the largest steel producers in the United States, in Standard Iron Works v. Arcelor Mittal, et al., which is pending in the United States District Court for the Northern District of Illinois.

Representing Viacom International Inc., MTV Networks and other affiliates of Viacom in high profile litigations they filed against cable operators Time Warner Cable, Inc. and Cablevision Systems Corporation concerning the live streaming of Viacom television programming to Apple, Inc.'s iPad tablets in the home.

Successfully defended Applebees, Weight Watchers and Dine Equity obtaining summary judgment against suits for more than $100 million claiming fraudulent calorie counts and other nutritional information on menus.

Successfully represented the owners of Trinchera Ranch, the largest single piece of property in the State of Colorado, in a challenge to two utility companies' efforts to install a 95-mile transmission line that would cross more than 20 miles of the Ranch.

Successfully represented the Federal Housing Finance Agency (FHFA), the conservator of Fannie Mae and Freddie Mac, in a variety of lawsuits that have assured that FHFA can fulfill its statutory mandate to preserve and conserve the assets of Fannie Mae and Freddie Mac.


Successfully represented HSBC Bank USA and several of its affiliates in 2010 and 2011 in significant federal court litigation brought by H&R Block.

Representing Bank of America in all litigation related to the Madoff Ponzi scheme in multiple actions pending in the Southern District of New York and the Bankruptcy Court of the British Virgin Islands.

Representing BP Products North America Inc. in multidistrict litigation of more than 30 separate cases pending in federal court in which plaintiffs allege that motor fuel retailers throughout the United States engaged in fraud and violation of state consumer protection and unfair business practices acts by selling gasoline on a volumetric basis without any adjustment to reflect the variations in energy content that result from differences in temperature.

Won an important victory for Atlantic Richfield pertaining to lead pigment cases and the issue of whether a plaintiff in a product liability suit is constitutionally required to prove that the defendant caused plaintiff's injury.

We won a US$401.5-million award in a breach of contract action against the United States on behalf of our client Keystone Holdings Partners, LP and its principal investor, Robert M. Bass.

We won more than US$130 million on behalf of three clients, including SunTrust Bank, after winning three separate trials for breach of contract against the United States government.

We won jury verdicts in the cases of four individuals who claimed personal injuries from taking prescription appetite suppressants sold by our client, Wyeth.

Class Actions As a premier class action defense firm, we handle class actions related to consumer protection/false advertising, antitrust, product liability, securities, distributor disputes, and environmental matters, among other areas. We draw on the full litigation resources of our firm, including a deep bench of experienced class action attorneys, to litigate in state and federal courts throughout the United States. We also have substantial experience with the intersection of class action claims and arbitration clauses.

Our clients include such leading firms as ARCO/BP, Bank of America, GEICO, General Electric, GlaxoSmithKline, Honeywell, Kmart, Monsanto, Philip Morris, Roche, VeriSign, Visa, Wyeth, and many others.

Representing defendants in class action litigation demands a level of resources, strategic skill, and legal acumen that is the hallmark of our firm. We have devised many innovative ways to defeat class actions, advancing new legal theories to bar or limit plaintiffs' legal claims, extricating clients from inappropriate and unfavorable forums, and highlighting conflicts between class members.

In many class actions, the decision on class certification is pivotal, and we have succeeded in extraordinary victories. In one case alleging consumer fraud by a major retailer, Arnold & Porter came into an ongoing case and succeeded in having a class decertified. On behalf of Philip Morris, we have prevailed against class certification repeatedly, for example, defeating


certification of a statewide class of smokers of "light" cigarettes in Oregon and a putative nationwide class in New York for purposes of assessing damages. We prevented class certification in suits charging an insurance company with consumer fraud, as well as in product liability and toxic tort cases.

Dispute Resolution We litigate cases to win------on motions, at trial, or on appeal. But we understand that, for many clients, a desire to avoid the burden, expense, and risk of prolonged litigation often counsels in favor of a resolution short of final judgment on the merits, if that can be done on favorable terms. Therefore, even as we prepare cases for trial and try them, we are alert to opportunities to resolve the case before, or even during, trial in a manner that serves the client’s interests. Our lawyers have extensive experience in all forms of alternative dispute resolution, including arbitration, mediation, and traditional settlement negotiations. We have devised and counseled clients regarding precedent-setting settlements for private class action litigation and claims asserted by governmental plaintiffs.

Electronic Discovery Arnold & Porter LLP has a history of addressing complex discovery issues in large, document intensive litigations. Arnold & Porter has been at the forefront of discovery issues in various areas, including antitrust, products liability, class actions, securities fraud, complex commercial litigation, intellectual property, and criminal investigations. In recent years, with increased attention on the preservation and production of electronically stored information, settlement strategy and trial outcomes can hinge on the proper management of e-discovery. The attorneys and specialists on Arnold & Porter’s E-Discovery Team are multi-disciplinary with experience in handling e-discovery in litigation, government investigations, administrative proceedings, and in managing the review of electronic information in internal investigations, due diligence and other nonlitigation contexts.

We do not shoehorn our clients into a single e-discovery ‘‘solution.’’ Rather, we work with our clients to understand their information systems and needs so that we can develop a litigation response plan appropriate for their systems and the specific litigation they face. Throughout the engagement, we work with our clients to handle e-discovery obligations in a legally defensible manner. Members of the E-Discovery Team represent clients in court, negotiations, and depositions to further the client’s discovery objectives. Working with our e-discovery support specialists, we can offer clients a variety of hardware and software litigation support applications to facilitate the review and production processes. In addition, our team has significant experience with a wide variety of e-discovery consultants and vendors where the client’s best interests are served by bringing in third party support.

Members of our E-Discovery Team also work closely with clients to help them with their electronic information needs, from assisting with the development of sound records retention programs, developing litigation hold policies procedures to satisfy the client’s preservation obligations, assisting in the development of litigation readiness policies and programs, and carrying out the client’s preservation and other discovery obligations in specific proceedings.

We understand that clients’ e-discovery issues come in all shapes and sizes and that our clients often have differing levels of e-discovery sophistication and diverse technological platforms. We


tailor our advice to the varying situations we face, priding ourselves in working with our clients to work out the most effective and efficient practical solutions to satisfy their legal obligations.


A major international bank with numerous overseas offices to meet its preservation, collection and production obligations in securities litigation filed in federal court.

A company with a nationwide sales force to identify, preserve, collect, and review responsive electronic records from that sales force in response to a government subpoena.

A major US corporation on the development of its litigation response plan, including records retention and management procedures.

A ‘‘Fortune 50’’ company in responding to a subpoena covering a variety of electronic media, including audiotapes.

A Washington, DC-based nonprofit corporation to assess their e-discovery preparedness and help it develop records management and retention policies so that it can more efficiently respond to FOIA and discovery requests in litigation.

A major corporation to negotiate limitations on the scope of collection in a litigation matter. The results of our approach significantly reduced the cost of collection and review for our client.

Financial Services Litigation Financial services clients benefit from our extensive firmwide litigation resources and experience. Professionals in each of our offices regularly handle disputes on behalf of financial services clients, whether arising in a civil litigation/class action context, mediation and arbitration, or in a civil enforcement context. Our clients include financial services companies, banks, thrifts, officers and directors, law firms, accounting firms, other experts and consultants, and parties having dealings with failed institutions. Our representations have included litigation involving issues of federal preemption of state laws; litigation against the federal government for losses caused by changes in legislation that made so-called "supervisory goodwill" ineligible for treatment as regulatory capital; litigation defending financial services companies against alleged violations of consumer protection laws; litigation concerning grants and denials of permission to engage in nonbanking activities and in administrative enforcement proceedings; litigation over commercial transactions, employment issues, and fiduciary relationships of financial services firms; and litigation defending a card association in various antitrust suits filed by merchants and rival card associations.

Our firm’s experience includes client representation in lawsuits and investigations stemming from consumer mortgage lending. The firm also has experience in lender liability litigation arising from, among other things, loan commitments and modifications, alleged untimely or improper disbursements of loan proceeds, alleged erroneous valuation of collateral and of borrower’s ability to pay, as well as usury and bad faith claims. We have substantial experience in litigations with respect to securitization issues in state, federal, and bankruptcy courts involving prime, non-prime, and subprime assets ranging from consumer loan assets to audio-video equipment, which raised a number of significant Uniform Commercial Code (UCC) and


secured lending issues. The firm has also represented clients in disputes with respect to investor suitability issues and purported unfair and deceptive business practices arising in the consumer and commercial lending arenas.

Our litigators also have considerable experience in complex securities litigation, demonstrated by the lead role we played in the recent landmark case, Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. 128 S. Ct. 761 (2008), in which the Supreme Court rejected the theory of ‘‘scheme liability’’ and held that a secondary actor cannot be liable unless it has made deceptive statements on which investors have relied.

We regularly handle SEC investigations and enforcement actions, and have represented major financial institutions in SEC investigations arising out of significant corporate governance and related party issues. We also defend financial services companies in class actions alleging securities fraud and related securities law violations.

Government Contracts and Qui Tam We advise government contractors and their employees on issues that arise from and relate to audits, government contracts-related investigations, suspension and debarment notices and proceedings, and the False Claims Act. Our respected practice in Washington offers clients a trusted partner in interacting with government agencies, investigative tribunals, and suspension and debarment officials. We have successfully represented our clients in such matters both in negotiations and in the courtroom.

Additionally, we strategically advise clients in creating effective business ethics codes and compliance programs essential to maintaining and demonstrating a company’s present "responsibility" as a government contractor. We assist in the development and implementation of such compliance programs------ones that prevent, deter, and detect violations of federal, statutory, and regulatory requirements (including the necessary business processes and systems controls), and draw on the vast experience of our firm in the wide range of industries that we serve.

Intellectual Property and Technology Litigation Our lawyers represent some of the largest companies in the world in high-stakes IP and technology litigation. We have extensive experience representing clients in leading-edge litigation and test cases concerning technology and the scope of IP law, including patent, copyright, trade secret, trademark, right of publicity, and unfair competition litigation. We regularly practice in US state and federal trial and appellate courts, in UK and EU courts, in arbitrations, and before the International Trade Commission and the US Court of Appeals for the Federal Circuit. We have also led litigation of important commercial disputes in other parts of the world. Due to our sophisticated understanding of new technologies and their impact on the development of IP law, our lawyers actively represent clients in regulatory and/or congressional proceedings related to issues we are also litigating in court. Recently, for example, we successfully represented a large technology company in major litigation pending in multiple federal and state courts and before the ICC, while also representing the company in related US agency proceedings and congressional hearings. We likewise have extensive experience representing companies in litigation concerning the novel issues posed by new media, including IP and unfair competition litigation among competitors, state and federal regulatory


proceedings, and consumer class actions. Our team has long had a national reputation for its cutting-edge work.

Preemption For decades, Arnold & Porter LLP has played an important role in significant federal preemption litigation, including in the US Supreme Court. We have represented financial institutions, pharmaceutical companies, device manufacturers, and others in key cases involving friction between federal regulation and state or local law. In a series of recent cases, we have successfully raised preemption challenges to state and local efforts to regulate, supervise, or oversee the activities of federally chartered financial institutions. The firm is widely recognized for its in-depth preemption experience, as Washington counsel, in dealing with federal regulatory agencies such as the Food and Drug Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, the National Highway Traffic Safety Administration, the Department of Housing and Urban Development, and others. We work closely with clients on analyzing and pursuing the most advantageous possible preemption strategies, including forum selection for litigation, raising early defenses to avoid protracted litigation, and using the federal courts as a means to curb threatened or ongoing state court or administrative proceedings. Our litigators have gained national recognition from our prominent preemption practice and their publications on the issue, as well as their litigation victories, are regularly cited by courts and other litigators.

Toxic Tort Our environmental litigation team helps clients avert or successfully defend toxic tort litigation. Our reservoir of experience covers all environmental media (air, groundwater, surface water, waste, and products or materials in commerce). Our toxic tort litigators have proffered, deposed, and debunked many of the field's leading experts in a multitude of scientific and other expert disciplines. We have defeated class certification in federal and state cases across the US. Our experience enables us to counsel clients on ways to minimize exposure after liability-creating conduct has occurred, but before litigation is initiated. We help clients analyze and assess exposure; consider proactive measures; unify, simplify, and ensure the accuracy of the company's public "voice"; get on top of the scientific and technical issues; and develop, if need be, an integrated, coherent litigation strategy.

Our toxic tort team has been recognized among the strongest anywhere, and several of our lawyers have been singled out for high commendation in the fields of toxic tort, class action, and product liability defense. Outside of our environmental toxic tort litigators, the firm has a deep bench of lawyers who have been lead or national counsel to numerous companies in major mass tort litigations, including Wyeth (formerly American Home Products), Philip Morris USA and its parent Altria, Atlantic Richfield Company, The Red Cross, Motorola, and Hoffmann-LaRoche.

Trials At Arnold & Porter LLP, we are not just litigators, we are trial lawyers. While the legal media has recently publicized the decline of the trial, our team has tried more than 33 cases -26 of those to verdict-since 2008. Reflecting the breadth of our litigation practice, our trial experience spans a broad spectrum of industries, substantive legal issues, and even borders. Among others, we have tried cases on behalf of pharmaceuticals manufacturers, municipalities, oil and gas


companies, banks and financial services institutions, airlines, and publishing houses. We have taken to verdict cases involving allegations ranging from products liability to copyright infringement, bankruptcy, and breach of contract. Our trial practice is not limited to the US; in addition to our significant international arbitration practice representing sovereign nations and other international clients, our European offices boast active trial practices as well.

Our extensive hands-on trial experience informs our approach to every litigation. From the start of a matter, we focus on what will be necessary to try the case effectively. We assess early the critical legal and factual issues on which the dispute may turn, develop the best witnesses and themes possible to articulate our client's position at trial, and focus our resources where they will have the most trial impact. In many cases, that intensive preparation for trial, and our willingness and ability to take the case to trial, ultimately results in a victory on motion practice or a favorable settlement. But when a litigation does carry through to trial, we have the practical trial experience to achieve the victories our clients have come to expect.

Our recent trial activity is evidence that the firm's long and rich tradition of representing clients in high-profile, high-stakes litigation is alive and well. While we recognize that our success in the courtroom is due to the fact that our litigators are well trained, we understand that there is no substitute for on-your-feet courtroom experience. The firm remains committed to getting our litigators as much courtroom work as possible. Toward that end, we supplement our commercial trial schedule with an active pro bono trial docket. For example, we have an extensive program handling criminal defense matters for indigent defendants in DC Superior Court. Arnold & Porter lawyers at all levels of experience are now handling those matters, supported by our full-time Trial Training Counsel, who is the former Training Director for the DC Public Defender Service. Our active trial docket in these cases (21 jury trials and three dispositive motions hearings since the program started in 2006l) and in our commercial matters ensures that we can supply our clients with a litigation team that includes not only senior lawyers with trial experience, but also experienced courtroom advocates at the more junior levels.

Recent representative trials include:

State of Rhode Island v. Atlantic Richfield Company, et al. We won a defense verdict after a four-month trial in one of the first and most significant "public nuisance" cases involving a lead paint pigment manufacturer; the jury exonerated our client while finding three other former manufacturers liable.

American Savings Bank v. United States. We won a US$401.5-million verdict in a breach of contract action arising out of promises made by the US government to entice our client to purchase an insolvent thrift.

Wyeth Diet Drug Litigation. Since 2004, we have won defense verdicts in ten trials involving alleged heart valve injury due to ingestion of diet drugs. Recent defense verdicts include Townley et al. v. Wyeth; Roork v. Wyeth; and Starks, et al. v. Wyeth.

Sacramento Municipal Utility District v. United States. Following a two-week evidentiary hearing, our client was awarded $40 million in damages against the US government for breaching a disposal contract with respect to high-level radioactive waste.


United States v. Antonio Clark. We achieved a mistrial near the end of this first-degree murder case on the basis of the government's failure to disclose exculpatory or impeaching material as required by U.S. v. Brady.

Michael Baigent, et al. v. Random House Group Limited. We won a defense verdict for our client Random House in a copyright infringement suit alleging infringement by the author of The DaVinci Code of the central theme of an earlier work. In addition to prevailing in the suit, our client was awarded 85% of its attorneys' fees.

Tab 5: Supporting Material

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1In a typical LBO, the target company’s assets are pledged in order to obtain financing, which is then used to purchase the company’s equity from the current owners. If a target company subsequently encounters financial trouble and files bankruptcy, creditors of the company may seek to undo the LBO as a constructively fraudulent transaction and to recover payments from shareholders who cashed out while leaving behind an over-leveraged company.

A formidable defense available to shareholders in these actions is found in section 546(e) of the Bankruptcy Code, which provides that a payment that qualifies as a “settlement payment” (a term that encompasses certain payments made in settlement of a securities trade or transaction) or a “transfer…made in connection with a securities contract” (a broadly defined term that includes contracts for the purchase or sale of securities and ancillary agreements) is protected from avoidance as a constructively fraudulent transfer if such payment or transfer is made by or to a “financial institution” or other entity specified in section 546(e).

Congress’ purpose in enacting Section 546(e) was to balance the rights of creditors to recover fraudulent transfers against the risks that bankruptcy presents to the securities markets. If securities settlement payments and similar transfers were generally avoidable, the ability of market participants to rapidly close out and replace positions could be impaired. The bankruptcy of a single broker or other institution could cause a ripple effect and

1 Michael L. Bernstein is a partner in Arnold & Porter LLP and chair of the firm’s national bankruptcy and corporate restructuring practice. Charles Malloy is counsel at Arnold & Porter LLP. The authors also wish to acknowledge the assistance of Dana Yankowitz, an associate at Arnold & Porter LLP, in the preparation of this article.

threaten to collapse the entire industry. Thus, section 546(e) prohibits the avoidance of “settlement payments” and transfers in connection with a securities contract on grounds they are constructively fraudulent, while preserving the ability to avoid such transfers in cases of actual fraud.

While courts initially applied section 546(e) in the context of publicly traded securities, a series of appellate decisions recently applied it in cases where stock was privately held:

� In Contemporary Industries Corp. v. Frost, 564 F.3d 981 (8th Cir. 2009), section 546(e) protected a $26.5 million cash payment to the shareholders of a closely held corporation because the transfer qualified as a “settlement payment” for securities and was made by or to a financial institution, because both the purchaser and sellers of the stock deposited the cash and shares necessary to settle the transaction in escrow with a bank pending closing of the sale.

� Then, in In re QSI Holdings, Inc., 571 F.3d 545 (6th Cir. 2009), cert. denied, -- U.S. --, 130 S.Ct. 1141 (2010), a $111.5 million cash payment to shareholders of a privately held corporation was shielded because it qualified as a “settlement payment,” and a bank served as the exchange agent.

� Finally, in In re Plassein International Corp., 590 F.3d 252 (3rd Cir. 2009), cert. denied, -- U.S. --, 130 S.Ct. 2389 (2010), section 546(e) protected $51.1 million in cash transferred through a bank to the shareholders of four companies that were acquired by a single purchaser pursuant to a series of LBOs.

Following these decisions, one could ask whether, in an LBO, all payments or transfers for stock are protected so

For Some LBO Participants, Section 546(e)’s “Blanket” Protection for Securities Contract Settlement Payments Has Holes

By Michael L. Bernstein and Charles A. Malloy1

http://arnoldporter.com/

| 2For Some LBO Participants, Section 546(e)’s “Blanket” Protection for Securities Contract Settlement Payments Has Holes

long as the parties utilize a financial institution to effectuate the transfer. Recent decisions suggest, however, that there are limits to the section 546(e) defense:

� In In re MacMenamin’s Grill Ltd., 450 B.R. 414 (Bankr. S.D.N.Y. 2011), three stockholders sold their ownership interests in a bar and grill pursuant to an LBO for amounts ranging from $334,983.07 to $390,000. The payments were made to the stockholders by wire transfers from the bank that financed the LBO. Citing legislative history, the court held section 546(e) inapplicable because of the small size of the transaction, the lack of any evidence that the parties were acting as participants in a securities market, and the fact that avoiding the transfers would not threaten the functioning of any securities market.

� In In re DEI Systems, Inc., 2011 WL 1261603 (Bankr. D. Utah Mar. 31, 2011), two individuals sold 44.8% of their shares in the target company to the purchaser for $3,920,000. The funds flowed from the purchaser’s bank to an escrow account of the sellers’ attorneys, and ultimately to the sellers. The court concluded that section 546(e) did not apply because of the small size of the transaction and the fact that the banks were involved merely as conduits for payments, and not in their capacity as participants in any securities market.

� Also limiting section 546(e), but under much different facts, is In re Mervyn’s Holdings LLC, 426 B.R. 488 (Bankr. D. Del. 2010), a case that involved an LBO comprised of series of securities and non-securities transactions. In addition to transfers of more than $1 billion in loan proceeds to the owner of the target corporation, the LBO involved transfers of real estate and grants of liens on property of the target company. As happens with some complex LBOs, the court determined that it was appropriate to collapse the transfers into a single transaction and look to the overall financial impact on creditors. As a result of collapsing the LBO, the court held that the protections of section

546(e) fell away, because certain of the transactions that comprised the LBO — such as transfers of real estate — could not qualify as settlement payments or transfers in connection with a securities contract.

These cases indicate that participants in an LBO should not assume that section 546(e) offers blanket protection against actions to avoid and recover transfers to selling shareholders. This is particularly true where the size of the transaction is small enough that a court could conclude it would not impact securities markets, or where a single integrated transaction involves both securities and non-securities transfers.

For further information please contact:

Michael L. Bernstein+1 [email protected]

Charles A. Malloy+1 [email protected]

mailto:Michael.Bernstein%40aporter.com%20?subject=

mailto:Charles.Malloy%40aporter.com?subject=

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