The suit against Cadwalader was filed last October in the Manhattan Supreme Court over documents the
At issue are two separate warranties included in the documentation stating that each mortgage included in the pool qualified for special tax status under Internal Revenue Service regulations. One warranty specifically stated that this meant the mortgages were backed by properties worth at least 80% of the mortgage amounts.
That second warranty became a problem for Nomura after a number of the mortgages went into default. LaSalle Bank, which was holding the securitised pool in trust, sued Nomura on the grounds that the defaulting mortgages were not qualified, with one large mortgage secured by property worth only around 60% of the loan.
Nomura reached a $67.5m (£33.4m) settlement with LaSalle but is now demanding $70m in damages from Cadwalader.
Cravath Swaine & Moore disputes partner David Marriott is acting for Cadwalader, which claims the inclusion of both warranties was standard practice.
The suit comes against the backdrop of a credit crisis that has seen investors in mortgage-backed securities and other structured finance products hit hard by a wave of defaults among sub-prime mortgages.
In July Nomura announced it was pulling out of the
Click here for a full version of this article. The New York Law Journal is a US sister title of Legal Week.
More news, deals and comment on Cadwalader Wickersham & Taft