July 1, 2011 8:45 AM

Litigator of the Week: Robert Giuffra, Jr., of Sullivan & Cromwell

Posted by David Bario

From The Litigation Daily

Sullivan & Cromwell's Robert Giuffra, Jr., knew to expect lots of questions when he prepared for May oral arguments before the New York State Court of Appeals in the monster litigation over MBIA's $5 billion restructuring. And did the court ever deliver.

As we've chronicled (here, here, and here, for instance), Giuffra filed state law fraudulent conveyance and contract claims against MBIA for a phalanx of banks in 2009, arguing that the monoline insurer's 2009 transfer of $5.4 billion in assets to a subsidiary left it unable to honor policies covering billions of dollars in complex financial instruments. After surviving MBIA's motion to dismiss in February 2010, Giuffa's clients suffered a major setback earlier this year. A lower state appellate court ruled that the banks could only challenge the restructuring in an "Article 78" administrative action against the state insurance department, which granted approval for the deal. (For that we named MBIA counsel Marc Kasowitz of Kasowitz Benson Torres & Friedman Litigator of the Week in January.)

Giuffra, who clerked for U.S. Supreme Court chief justice William Rehnquist, told us he prepared for his May argument before the Court of Appeals knowing the judges would appreciate a clear theory that would allow him to answer questions quickly and consistently. "Our position was relatively straightforward: Unless the legislature had expressly barred debtor-creditor law or contract claims in connection with transactions approved by the superintendent, policyholders had the right to go forward because policyholders had no notice or opportunity to be heard before the approval."

At the oral arguments, the seven judges began firing away before Giuffra finished his first sentence. What about the Article 78 administrative proceeding that the banks had already brought to challenge the MBIA restructuring? Why couldn't Giuffra's clients challenge the deal through that action--as the lower appeals court ruled they must?

The S&C partner was ready with answers. The Article 78 proceeding didn't allow his clients to seek money damages and offered limited discovery, forcing the banks to litigate "with our hands tied behind our backs," Giuffra responded. The legislature could have specified that the insurance superintendent had exclusive jurisdiction and preempt claims like these, but it never did, Giuffra told the court. (You can watch a video of the arguments here.)

The judges--at least the majority--liked what they heard. As we reported on Tuesday, they voted 5 to 2 to reinstate the banks' fraudulent conveyance suit. That case can now proceed along with the Article 78 action, and the decision lifts a stay on a parallel Manhattan federal class action handled by Simpson Thacher & Bartlett for hedge fund plaintiffs.

Giuffra said he's confident that the banks will prevail in both the fraudulent conveyance case and the Article 78 action. "There was no good reason for the superintendent to have approved a massive restructuring transaction in secret for the benefit of an insurance holding company and its executives and shareholders without even consulting the policyholders," Giuffra said. "It was a plainly erroneous decision that violated the insurance laws."

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