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News Now

CU System
Court orders CU Wall Street banks to negotiate
FORT LAUDERDALE, Fla. (4/2/12)--A federal judge has ordered a Florida-based credit union and the Wall Street banks and ratings agencies it is suing over $100 million in losses from collateralized debt obligations (CDOs) to go to the negotiating table.

U.S. Magistrate Judge  Barry S. Seltzer in the U.S. District Court for the Southern District of Florida Wednesday issued the order requiring mediation in the case filed by Melbourne, Fla.-based Space Coast CU, acting as successor in interest to the defunct Eastern Financial Florida CU, against Merrill Lynch and other banks and ratings agencies.

Eastern Financial Florida CU, which was based in Miramar, Fla., was acquired by Space Coast in 2009 after becoming the largest natural person credit union failure in history. The suit seeks to recover more than $100 million in investment capital paid by Eastern Financial for the CDOs  during 2008 to 2010, plus damages.

Defendants in the case include: Merrill Lynch and its credit corporation, Merrill Lynch Home Loans; Wells Fargo Securities (former Wachovia Capital Markets); J.P. Morgan Securities (formerly Bear Stearns & Co. Inc.); UBS Securities; Barclay's Capital Inc.; Richard S. Fuld Jr., who ran Lehman Brothers at the time; Moody's Investors Service Inc.; and The McGraw-Hill Cos. Inc. (formerly Standard & Poor's Ratings Services).

In the order requiring mediation, the court gave the parties 14 days to agree upon a mediator. All proceedings will be confidential and privileged. At least 14 days before the mediation date, the parties, whose representatives must have full authority to enter into a compromise and settlement, must present their confidential briefs identifying the issues to be resolved.  Cost of mediation will be shared equally by the parties unless otherwise ordered by the court. After the mediation conference, the mediator has seven days in which to file the mediation report.

The court noted that if mediation is not conducted, the case may be stricken from the trial calendar and other sanctions imposed.

The court, in a separate scheduling order, set a pre-trial time line with pretrial motions set for May 24, 2013. It also set a date for a two-week trial to begin Sept. 9, 2013.


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