$295M settlement reached in state’s potential class action against Bear Stearns

In what Attorney General Bill Schuette is calling “good news for Michigan taxpayers,” a national class-action securities fraud lawsuit against Bear Stearns and Deloitte & Touche has been settled for $295 million.

Hon. Robert Sweet, U.S. District Judge for the Southern District of New York, granted preliminary approval to the proposed suit, in which Michigan was court-appointed lead plaintiff.

As part of the deal, the defendants will pay investors nationwide — including State of Michigan Retirement Systems (SMRS) — after being misled about the value and risks of Bear Stearns’ mortgage-backed assets.

The amount SMRS will receive as part of the settlement will be finalized Sept. 19.

In a statement, Schuette called the settlement “good news for Michigan taxpayers. … [This] demonstrates our commitment to holding accountable any bank or investment firm that violates the public trust.”

Michigan contended that Bear Stearns and auditor Deloitte & Touche misled the state’s pension fund and other investors about risky exposure to the U.S. housing market and subsequent write-downs to its assets, which led to Bear Stearns and its stock collapsing.

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Less information is a good thing?

Late in March, a miracle occurred in Lansing. House Republicans and Democrats actually agreed on something, and it was an issue that had the potential to be one of those political wedge issues that pits corporate interests against the little guy.

For years, Democrats have fought to repeal a law that prohibits people from suing drug manufacturers if the drug was compliant with FDA standards.

But it has been met with strong Republican opposition by lawmakers who say that it would be harmful to business at a time when Michigan needs to send a business-friendly message to the corporate world.

It’s a fight that has gone nowhere, and the statute — section 2946 of the Revised Judicature Act, as amended by 1995 PA 249 — remains in place.

But that law bit the Republican Michigan Attorney General in the behind last October, when the Michigan Supreme Court opined in Attorney General State of Michigan, et al. v. Merck Sharp & Dohme Corp. that the AG cannot join a class action against the manufacturer of Vioxx.

When every other state in the country could join the suit, but Michigan could not recover the $20 million that Michigan paid for Vioxx prescriptions dispensed to Medicaid patients, it didn’t sit well with members of either party.

So state representatives Ellen Cogen Lipton, D-Huntington Woods, and Fred Durhal, D-Detroit, proposed an amendment to the House Appropriations Subcommittee on General Government. The amendment would require Michigan’s Attorney General to report the money lost by Michigan residents from not participating in the federal class action lawsuits brought by states against drug companies whose products were found to be harmful.

And it got bipartisan support.

Lipton said that she thinks Michigan is missing out on being able to recover millions of dollars every year, money that should be put back into Medicaid. And she said that if the state is going to continue to provide drug makers that level of immunity, lawmakers should at least have a full understanding of the consequences of the law.

“We might decide after we have the information that it’s not worth it to repeal that statute,” Lipton said. “But at least we’d be making an informed decision.”

The amendment must now be presented Wednesday to the House Appropriations Committee. And it might not survive, despite at least tentative interest on both sides of the aisle.

It’s possible that no other lawmaker than Sen. Roger Kahn, R-Saginaw Twp., has been a bigger proponent of immunity for drug makers. He consistently corrects anyone who calls it immunity by interjecting a quick “FDA defense.”

Kahn is a cardiologist who said he’s seen first-hand how beneficial new drugs have been in his patients’ lives. He wants Michigan to be a beacon to other states who want to pass immunity … err, FDA defense … laws.

And some have done just that. A handful of states have weaker versions of Michigan’s law. They either bar punitive damages in suits against manufacturers of drugs that are FDA-approved, or they have a rebuttable presumption that FDA warnings are adequate to protect consumers.

And even Kahn said in a phone interview this morning that he’d like to hear a full debate of Lipton and Durhal’s bill. It’s premature to say that he supports it, but he said, “I want to hear a debate and keep an open mind.”

By golly, there’s hope for us all.

Realtors hope $25B foreclosure settlement will spark housing revival

The following post was written by John Stodder, The Dolan Company National Affairs Correspondent. Dolan is the parent company of Michigan Lawyers Weekly.

With the residential real estate industry shell-shocked from years of a moribund market, its spokespeople can be forgiven for taking a cautious attitude toward this week’s announcement of a $25 billion settlement with five of the nation’s biggest mortgage lenders over flawed and fraudulent foreclosure practices.

The money in the settlement will mostly go to borrowers and homeowners who are underwater. According to the Washington Post, the settlement “will force lenders to revamp how they interact with troubled homeowners and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.”

But could the settlement help get the residential market moving again, even in the face of historic low interest rates and plummeting prices?

“We do hope that the resolution will help more lenders with the certainty they need to kick loose more loans,” said Walter Molony, a spokesman for the National Association of Realtors inWashington,D.C. He cautioned, however, that the impact will be limited because the settlement doesn’t help the millions of borrowers with loans owned by Fannie Mae or Freddie Mac.

Eric Berman, communications director for the Massachusetts Association of Realtors, was pleased that the settlement was designed to help more homeowners stay in their homes because that kind of stability slows the ongoing descent of home values in many markets – though the market isn’t as bad, he hastened to add, inMassachusetts as it is in many other areas.

But even there, he said, “Distress sales impact values of homes of people who are not in a distress situation.”

Realtors also hope the settlement “can give lenders the confidence to start up with loan modifications, short sales and principal write-downs,” Berman said. “We’re going to have to wait and see. From our members’ point of view, short sales take forever. The only thing short about a short sale is the definition.”

While realtors continue to ruminate, the blogosphere reacted quickly:

 

  • Financial blogger Yves Smith at Naked Capitalism gives “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement.”  She is scathing. “We’ve now set a price for forgeries and fabricating documents: It’s $2,000 per loan,” which, as she points out, for an average loan is “less than the price of the title insurance that banks failed to get when they transferred the loans to the trust.”
  • Writing at the Huffington Post, financial reform activist Dennis Kelleher calls the deal a “criminal sell-out,” because the $20 billion in loan forgiveness, though impressive at first blush, only adds up to $20,000 per 1 million homes. According to a Zillow report in November, some 14.6 million home borrowers have fallen into a negative equity position.
  • Reuters’ financial blogger Felix Salmon likes the deal because the attorneys general didn’t give up too much and the banks didn’t get too much. Banks only got immunity from suits over the practice of robosigning, but can still be sued over a range of other alleged misdeeds that contributed to the mortgage default crisis.

 

– John Stodder

 

Medical marijuana: AG says motels, hotels, landlords can ban use and cultivation

Motel, hotel and apartment complex owners can ban the use and cultivation of medical marijuana anywhere on the premises without violating the Michigan Medical Marihuana Act, says Attorney General Bill Schuette.

Opinion No. 7261 is Schuette’s response to several inquiries from Sen. Rick Jones, R-Grand Ledge.

Jones first asked if Michigan’s ban on smoking in public places applies to medical marijuana use.

Well, no, said Schuette because the smoking ban applies to tobacco products, not marijuana.

Jones’ second question was does the MMMA’s ban on smoking medical marijuana in public apply to public areas of food service establishments, hotels, motels, apartment buildings, and any other place open to the public.

Well, yes, said Schuette.

The MMMA does not define the term “public place.” The administrative rules adopted to implement the MMMA simply define “public place” as “a place open to the public.” See 2009 AACS, R 333.101(16). …

Employing this definition, it cannot reasonably be disputed that the public areas of food service establishments, hotels, motels, and apartment buildings are public places as that term is used in the MMMA. Thus, the plain language of the MMMA would apply to prohibit the smoking of marihuana within these places.

Jones’ third question, however, was not as simplistic as the first two.

Jones wanted to know whether the owner of a food service establishment, hotel, motel, or apartment building may prohibit the smoking of marihuana anywhere within its facility.

You mean “in what would traditionally be considered non-public areas, such as individual rooms, units, or any other area not open to or accessible by the public[?]” Glad you asked, said Schuette, an avowed foe of the MMMA. Yes they can, and although you didn’t ask, they can ban the growing of medical marijuana as well.

While your request referred only to the smoking of marihuana, this opinion will also address the growing of marihuana plants in these areas since that activity raises similar concerns.

Property owners may want to prohibit smoking marihuana or growing marihuana plants within their privately-owned facilities for a number of reasons.

For example … all marihuana-related activity remains illegal under the Controlled Substances Act. See 21 USC 812(c), 823(f), and 844(a). …

Property owners who allow their properties to be used by patients or caregivers for the purposes of using or growing marihuana could be subject to prosecution, civil forfeiture, or other penalty under the Controlled Substances Act. See 21 USC 856(a) and 881(a)(7).

In addition, the smoking of marihuana or the possession of marihuana plants within a property may make other tenants or guests within a facility concerned for their own or their family’s personal safety.

Further, property owners may simply wish to respect the preferences or expectations of other guests or tenants within a facility. Marihuana smoke, like tobacco smoke, has a strong and distinctive odor, which may offend other persons using the facility or discourage future occupancy of the facility.

So, property owners, go ahead and ban the use and cultivation of medical marijuana on your property, Schuette said. The law is on your side.

The MMMA is silent regarding the rights of private property owners with respect to the smoking of marihuana or the growing of marihuana plants by registered patients or registered primary caregivers on property or portions of property not open to the public.

Nor does the MMMA create any private right of action against any owner of a hotel, motel, apartment building, or any other place open to the public that does not allow the smoking of marihuana within its facility. See, e.g., Casias v Wal-Mart Stores, Inc, 764 F Supp 2d 914 (WD Mich, 2011).

To the extent the MMMA provides that registered patients and primary caregivers shall not be “denied any right or privilege,” MCL 333.26424(a) and (b), this language is inapplicable here because it presumes the existence of a right or privilege outside of the MMMA.

In other words, the terms “right or privilege” do not encompass the medical use of marihuana under the Act. See Redden, supra, 290 Mich App at ___ (“The MMMA does not codify a right to use marihuana”). [People v Redden, 290 Mich App 65, __; 799 NW2d 184 (2010) (O’Connell, J., concurring) (citations omitted) (footnotes omitted) (emphasis in original).]

There is no constitutional or statutory right or privilege to housing or accommodation at a hotel, motel, or apartment building. Rather … individuals have a right not to be denied housing or accommodations based on certain enumerated personal characteristics.

Thus, if there is any legal prohibition or impediment regarding an owner’s ability to prohibit the medical use of marihuana on private property, it must be found elsewhere in the law.

AG: No marijuana growers’ cooperatives

Michigan Attorney General Bill Schuette has taken a narrow view of how marijuana can be legally cultivated under the Michigan Medical Marihuana Act.

The act authorizes licensed caregivers to grow up to 12 plants for each of five patients.

Schuette has issued Opinion 7259, which states:

The Michigan Medical Marihuana Act, Initiated Law 1 of 2008, MCL 333.26421 et seq, prohibits the joint cooperative cultivation or sharing of marihuana plants because each patient’s plants must be grown and maintained in a separate enclosed, locked facility that is only accessible to the registered patient or the patient’s registered primary caregiver.

Schuette’s opinion was issued in connection with Rep. John Walsh’s (R-Livonia) announcement of a package of bills “that will ensure public safety by clarifying the many ambiguities in the Medical Marihuana Act.”

All of this comes on the heels of the Michigan Supreme Court’s decision to take up several issues regarding affirmative defenses provided by the MMA. See “MSC will hear medical marijuana appeals.”

Schuette subpoenas 3 mortgage processors over questionable documentation

The Michigan attorney general’s office has subpoenaed three mortgage processors as part of a state investigation of “robo-signing.”

Attorney General Bill Schuette said his office serviced Lender Processing, Fidelity National Financial Inc. and CT Corporation System with investigative subpoenas as affiliates of DocX, a mortgage service support provider. Schuette said he is seeking information about documents signed by DocX employees as “Linda Green.”

The subpoenas are part of a criminal investigation into questionable mortgage documentation filed with Michigan Register of Deeds offices, Schuette said in a statement. The subpoenas were approved June 13 by the state court in Lansing and require responses by June 30, Schuette said.

“Allegations of forged mortgage documents are very serious and require a thorough investigation,” Schuette said. “I will continue to work closely with federal and local authorities to find answers on behalf of Michigan homeowners.”

Schuette said he started the investigation in April after county officials across Michigan said they suspected assignment of mortgage documents filed in their offices may have been forged.

Source: Michigan Attorney General’s Office

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Ex-AG Cox at Dykema

The old Lansing regime apparently doesn’t have to look too far for their next gigs. In fact, they may just be working alongside you.

First, ex-Senate Majority Leader Mike Bishop announced last week he’s joined Clark Hill PLC. Now, former Michigan Attorney General Mike Cox is taking up professional residence at Dykema Gossett PLLC.

Dykema Chairman and CEO Rex Schlaybaugh told Crain’s Detroit Business that Cox moves in Jan. 17 as a senior attorney in its litigation department in Detroit. Health care fraud, white-collar criminal law and federal and state regulatory compliance will be among his specialties.

This makes one wonder whether former Gov. Jennifer M. Granholm will announce sometime next that she’ll be the next one from the Capitol Hill Class of 2002-10 going back into private practice. They come in threes, y’know.

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