| NEW YORK, July 19
NEW YORK, July 19 Fourteen major banks sued by
the Federal Housing Finance Agency over soured mortgage
investments have lost a bid to have a U.S. appeals court
intervene in their cases based on what they called a judge's
"gravely prejudicial" rulings.
In a brief order on Friday, the 2nd U.S. Circuit Court of
Appeals in New York denied the banks' petition, saying they had
not demonstrated they "lack an adequate, alternative means of
obtaining the relief they seek."
The banks had jointly in March filed what is called a
mandamus petition, complaining that U.S. District Judge Denise
Cote in Manhattan had systematically deprived them of evidence
needed to fight the FHFA's lawsuits.
The banks, which include UBS AG, JPMorgan Chase &
Co and Bank of America Corp, also said the judge
had issued rulings that sought to force them to settle.
The banks asked the 2nd Circuit to reverse rulings by Cote
and allow them to gain more access to information about Fannie
Mae and Freddie Mac.
The FHFA regulates Fannie and Freddie after the two mortgage
finance companies were placed into federal conservatorship at
the height of the 2008 financial crisis.
The filing, unusual in its targeted critique of a federal
judge, was a sign of how serious the litigation had become for
The FHFA sued 18 banks in 2011, accusing them of violating
securities laws by misleading Fannie and Freddie about $200
billion in mortgage-backed securities they purchased.
Sixteen of those lawsuits were transferred in December 2011
to Cote, a former federal prosecutor who recently ruled against
Apple Inc in an antitrust case over ebooks brought by the U.S.
In the year and a half since, Cote has become a major
influence in the direction of the litigation, denying motions to
dismiss the lawsuits and limiting depositions and document
The banks, which also include Barclays PLC, Goldman
Sachs Group Inc and Deutsche Bank AG, in their
petition to the 2nd Circuit called the judge's approach
"The rulings prejudge facts a jury should decide based on a
full evidentiary record," the banks said.
The rulings so far have meant banks "are being forced to
proceed under a series of gravely prejudicial rulings, some
aimed at pressuring petitioners to settle," the petition said.
The appeals court denied the petition on Friday.
Cote has set a quick trial schedule. UBS is set to go to
trial first, in January 2014.
Two defendants who were before Cote, General Electric Co and
Citigroup Inc, have settled so far. Terms were confidential.
The mandamus petition was not the first trip for the FHFA
cases to the 2nd Circuit. In April, a different appellate panel
upheld Cote's decision not to dismiss the case against UBS, in a
ruling that would apply to the 13 other cases remaining before
her, as well as one in Connecticut.
Banks other than UBS on Monday sought permission to
intervene in order to appeal the dismissal decision to the U.S.
Supreme Court, citing the "substantial risk" the UBS case might
settle before the high court could rule.
Other banks that were part of the mandamus petition to the
2nd Circuit were First Horizon National Corp, Nomura
Holdings Inc, Societe Generale, Morgan Stanley, Ally
Financial Inc, Royal Bank of Scotland Group
and Credit Suisse Group AG.
Representatives for the banks and FHFA either declined
comment or did not immediately respond to requests for comment.
The case is In re FHFA Coordinated Securities Litigation,
2nd U.S. Circuit Court of Appeals, No. 13-1122.