LATEST DEVELOPMENTS FROM NEW JERSEY COURTS REGARDING TAX SALE CERTIFICATES

 

 

The United States Court of Appeals for the Third Circuit recently issued an opinion that brings an end to six years of litigation and provides meaningful guidance to both lenders and rating agencies regarding the sale of tax liens in New Jersey.  While this string of cases was pending, lenders and rating agencies had concerns about including New Jersey tax liens in financings and in rated securitizations.  With the conclusion of this litigation, we should see more financings and securitizations of New Jersey tax sale certificates.[1]

 

The Tax Sale Certificate

 

In 1998, Princeton Office Park, L.P. (“Princeton”) purchased a 220,000 square foot commercial building on 37 acres of land in the Township of Lawrence, New Jersey (the “Township”).  Princeton failed to satisfy its tax obligations to the Township.  By 2005, Princeton owed the Township $204,296.79.  The Township conducted a public auction of the tax sale certificate, and Plymouth Park Tax Services, LLC (“Plymouth”) had the winning bid.  Plymouth agreed to accept a 0% interest rate and pay the full amount of taxes owed by Princeton, plus a $600,100.00 premium and $100.00 to cover the cost of sale.  Plymouth then paid the full amount of taxes owed by Princeton to the Township.  Pursuant to New Jersey Statute 54:4-67 and 54:5-6, the redemption amount would accrue interest at a rate of 18% following the sale.

 

On December 18, 2007, Plymouth filed a tax lien foreclosure against Princeton seeking to enjoin Princeton from exercising any right of redemption of the tax sale certificate and requesting a declaration that Plymouth was the owner in fee simple of the underlying property.  While the foreclosure action was pending, Princeton filed a voluntary Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey.  In response, Plymouth filed a proof of claim for taxes in the amount of $1,155,487.81, which included the amount paid for the tax sale certificate, the post-sale tax payments made to the Township, other penalties and the accrued post-petition interest at 18%.  Princeton then filed a Plan of Reorganization that included an interest rate of 6%, not 18%, for its obligation owed to Plymouth.  Plymouth objected to the Plan of Reorganization, arguing that because it obtained a tax lien entitling it to certain tax claims under New Jersey law, the Bankruptcy Court could not reduce the statutory interest rate of 18% to 6%.[2]

 

Are Tax Sale Certificates Considered Tax Liens under the Bankruptcy Code?

 

Princeton originally filed a motion in the Bankruptcy Court to resolve the interest rate issue.  The two questions before the Bankruptcy Court were (1) “whether the holder of a tax sale certificate maintains a ‘tax claim’ under 11 U.S.C. § 511(a), thereby necessitating the payment of the New Jersey statutory interest rate as part of the debtor’s treatment under its plan pursuant to 11 U.S.C. § 1129(b)(2)(A)”, and (2) “if the claim does not qualify as a ‘tax claim,’ what is the appropriate interest rate to be applied to the claim.”  The Bankruptcy Court ultimately held that, under New Jersey law, a tax sale certificate holder is not the holder of a tax lien (and therefore has no “tax claim” rights) but, rather, only acquires a lien on the property owner’s real estate.[3]  The Bankruptcy Court determined that the current 18% interest rate would be re-calculated and reduced in accordance with the Supreme Court’s decision in Till v. SCS Credit Corp., 541 U.S. 465 (2004).[4]  This decision was affirmed by the United States District Court for the District of New Jersey, which substantially adopted the reasoning of the Bankruptcy Court.  The ruling of the District and Bankruptcy Courts was significant because it meant that Plymouth’s tax sale certificate was not entitled to “anti-modification protections” and instead the interest rate on it could be reduced or “crammed down” after Princeton filed for bankruptcy.[5]

 

Plymouth appealed to the United States Court of Appeals for the Third Circuit, which recognized that the issues raised were unresolved under New Jersey law.  The Third Circuit certified the following question to the New Jersey Supreme Court: “whether, under New Jersey law, a tax sale certificate purchaser holds a tax lien.” [6]  The New Jersey Supreme Court construed the plain language of several provisions of the New Jersey Tax Sale Law and answered in the affirmative.  Thus, based on the New Jersey Supreme Court’s ruling, the purchaser of a tax sale certificate possesses a tax claim with respect to an encumbered property and therefore a bankruptcy court may not reduce or “cram down” the rate of interest to be paid by the debtor to a creditor.  Princeton was obligated to pay the 18% interest rate as a result.[7]

 

Filing a Proof of Claim for a Tax Sale Certificate

 

Despite Plymouth’s win in the New Jersey Supreme Court in 2014, Princeton was ultimately victorious, as seen in a recent non-precedential opinion issued by the United States Court of Appeals for the Third Circuit.  The issue in that case was whether Plymouth’s proof of claim, which included both the tax debt that Princeton owed on the property and the premium amount Plymouth paid to the Township to acquire the tax sale certificate, was properly disallowed by the Bankruptcy Court and the District Court.[8]  The Bankruptcy Court and District Court found that the inclusion of the premium amount in Plymouth’s proof of claim violated N.J. Stat. Ann. § 54:5-63.1, which prohibits knowingly charging an excessive fee in connection with the redemption of the tax sale certificate.[9]

 

The Third Circuit agreed with the lower courts that the inclusion of the premium amount constituted an excessive fee under New Jersey law.  The court reasoned that state law governs the viability of a claim of a creditor against a bankruptcy debtor; therefore, the court looked to New Jersey state law and not federal law, as Plymouth argued.  The court found that Plymouth violated New Jersey state law, specifically N.J. Stat. Ann. § 54:5-63.1, when it improperly included the premium amount ($600,100.00) in its proof of claim in an attempt to charge an excessive fee.  Finally, the court rejected Plymouth’s argument that the filing of a proof of claim did not constitute a demand “in connection with [Princeton’s] redemption of [the] tax sale certificate.”  Plymouth argued that, at the time, Princeton could only redeem a tax sale certificate through the tax collector’s office and not by filing for bankruptcy and, therefore, Plymouth’s action could not be considered a demand in connection with a redemption.  The court stated that there is nothing under New Jersey law preventing a debtor from redeeming a tax sale certificate through bankruptcy action as opposed to using the tax collector’s office.  Therefore, Plymouth’s tax sale certificate was automatically forfeited when Plymouth charged this excessive fee in connection with Princeton’s redemption of the tax sale certificate.

 

Takeaways

 

The string of cases relating to Plymouth’s tax sale certificate has helped to remove a shadow over the New Jersey tax lien market and has provided important guidance under New Jersey law.  First, it is now clear that the purchaser of a tax sale certificate has a tax claim with respect to the underlying property and a bankruptcy court cannot “cram down” the interest rate owed by the debtor in any reorganization plan.  Second, purchasers in New Jersey must pay careful attention when drafting proof of claims.  In this case, Plymouth originally included the premium amount in its first proof of claim but later filed an amended proof of claim which removed it.  Despite curing its mistake, Plymouth’s initial error caused its tax sale certificate to be completely voided.  Thus, Purchasers should be cautious in adding any extra fees, whether intentionally or accidentally,[10] to avoid completely losing the ability to collect anything they are owed.

[1] While the Third Circuit opinion discussed in this memorandum is categorized as “not precedential” and attorneys are prohibited from citing it within the Third Circuit, the trend we are seeing today is that many of these “not precedential” opinions are cited by attorneys arguing cases in other federal circuits or in state courts.  Thus, “not precedential” opinions still can have an impact on the development of the case law in a particular area.  Therefore, I believe this case, coupled with the 2014 New Jersey Supreme Court decision discussed below, is likely to influence the future development of tax sale certificates under New Jersey law.

[2] Princeton Office Park, LP v. Plymouth Park Tax Services, LLC, 218 N.J. 52, 55-59 (2014).

[3] In re Princeton Office Park, L.P., 423 B.R. 795, 797 (Bankr. D.N.J. 2010).

[4] Id. at 797-801 (the court reasoned that “Plymouth Park does not possess an allowed claim for taxes as it was undisputed that the underlying taxes owing to the Township have been paid and that Plymouth Park is not empowered to assess or collect taxes.”)

[5] Id. at 789.

[6] Princeton Office Park, LP, vs. Plymouth Park Tax Services, LLC, 218 N.J. 52, 55 (2014).  The courts have used “tax lien” and “tax claim” interchangeably, but in each instance they mean the ability to possess a claim for taxes at a time when the interest rate cannot be “crammed down” after the debtor files for bankruptcy.  See also Princeton Office Park, LP v. Plymouth Park Tax Services, LLC, 218 N.J. 52, 58-59 (2014) (certifying question) and Princeton Office Park, LP v. Plymouth Park Tax Services, LLC, 214 N.J. 336, 336 (2012) (accepting certified question).

[7] Id.

[8] In re Princeton Office Park, L.P., No. 15-1514, 2016 WL 2587974 (3d Cir. May 5, 2016) (non-precedential).

[9] Id.

[10] In footnote 2 in the In re Princeton Office Park, L.P. opinion, the Third Circuit states that the Bankruptcy Court “found as a fact…that Plymouth had a policy of including these premiums in proofs of claims that it filed even though it knew that the debtor property owner was never obligated to pay this money.”

 

Mia Rosati is an associate at Dechert LLP, at which Patrick D. Dolan, Chair of the New York City Bar Association’s Structured Finance Committee, is a partner.  The other members of the Committee are Mark H. Adelson, Cyavash N. Ahmadi, Howard Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant Buerstetta, Lewis Rinaudo Cohen, John M. Costello, Jr., Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Jon Finelli, Shuoqiu Gu, Christopher Haas, Michael Hanin, Marsha Henry, Greg Kahn, Alan F. Kaufman, Anastasia Kaup, Jamie D. Kocis, Mark J. Kowal, Jason H. P. Kravitt, Ritika Lakhari,  Steve Levitan, Gregory T. Limoncelli, George P. Lindsay, Gilbert K. S. Liu,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl,  David Z. Nirenberg, Christopher J. Papajohn, Steven Plake, Lauris G. L. Rall, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam M. Singer, Craig S. Stein, Jeffrey Stern (Chair from 2011-14), Michael Urschel, Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Joyce Y. Xu, Jordan E. Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Ms. Rosati.

Highlights from Global ABS Conference held in Spain, June 2016

Approx 3200 structured finance/securitization met June 14-16 in Barcelona. 

 

Panelists generally blame US subprime mortgage collapse for financial crisis in Europe. 

 

Frustration with new and changing regulation of transactions by EU INCLUDING new proposal to increase risk retention to 20%!!

 

Other EU proposals restrict what types of investors are permitted to buy asset backed securities and what due diligence investors are required to undertake. 

 

Brilliant speech by Editor of the Economist. Philip Coggan.  Immigration actually key to fixing stagnant economies.  Very concerned about the rise of nationalistic right wing leaders and effect of their policies on global economy. 

 

Much panel discussion on risk retention. Concern about uncertainties how RR rules will change and how EU and US rules could be harmonized. 

 

Much outspoken criticism about US government supported housing mortgage market and the ironic contradiction of a country that champions capitalism and free markets has created a socialized sub economy through FNMA and FHLMC. 

 

Investor round table including well known US and EU investors quite negative about state of ABS market in part driven by disappearing liquidity in ABS markets. 

 

Fair amount of attention to marketplace lending with several Americans on panels relating current experiences and transactions. Seems like a growth sector in EU leading to potential securitizations on marketplace loans including middle market business loans. 

 

For this attendee it was helpful that all presentations were in English despite the country of origin of the panelist. Unfortunately for this attendee it was challenging at time to fully comprehend the words spoken by some of the panelists in “English”. But the comments in this report were made by speakers that were clearly understood.  

 

Lauris G. L. Rall is a partner at Dentons US LLP and a member of the New York City Bar Association’s Structured Finance Committee.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant Buerstetta, Lewis Cohen, John M. Costello, Jr., Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas,  Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake,  Adam M. Singer, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Rall.

 

 

 

H.R. 4620: Attempting to Preserve Access to CRE Capital

Dodd-Frank’s risk retention rules for CMBS transactions go into effect on December 24, 2016.  On March 2, 2016, the U.S. House Financial Services Committee passed H.R. 4620, entitled “the Preserving Access to CRE Capital Act of 2016.” Rep. J. French Hill (R-AR) introduced the bill, the stated purpose of which is to “amend the Securities Exchange Act of 1934 to exempt certain commercial real estate loans from the risk retention requirements and for other purposes.” In particular, the bill would (1) modify the “b-piece buyer option,” (2) add an exemption for single asset/borrower securitizations and (3) revise the exemption for qualified commercial real estate loans (“QCRE Loans”). However, only time will tell if the bill will be signed into law.

B-Piece Buyer Option

A unique provision of the risk retention rules that applies only to CMBS is that a sponsor may satisfy all or a portion of its risk retention requirement if an independent third party purchaser (referred to in the industry as a “b-piece buyer”) purchases and holds an “eligible horizontal interest” for its own account. To satisfy the b-piece buyer option, the current risk retention rule allows no more than two b-piece buyers in any single CMBS transaction to hold the eligible horizontal interests, on a pari pasu basis.  The bill’s proposed changes would modify the “b-piece buyer option” by allowing the b-piece buyers to hold their interests in either a pari pasu structure or a senior/subordinate structure.  However, the bill would still not allow more than two b-piece buyers in any single CMBS transaction.

Single Asset CMBS

Currently, the risk retention rules cover all forms of CMBS, including single asset or single borrower CMBS transactions.  Market participants have long claimed that single asset/borrower CMBS do not present the same issues that the risk retention rules were intended to protect against because disclosure is detailed and easier to evaluate since the deals generally involve only one loan and more often than not there has been no role for b-piece buyers in the single asset/borrower CMBS space. Therefore, the bill would exempt single asset/borrower CMBS from the ambits of the rule by creating an exemption for “ a securitization of a single commercial real estate loan or a group of cross-collateralized or cross defaulted commercial real estate loans that represent the obligation of one or more commercial properties under direct or indirect common ownership or control…”

QCRE Loans

The risk retention rules provide for an exemption from the risk retention requirements for loans that qualify as a QCRE Loan.  Industry participants have noted that the elements of a QCRE Loan were such that there were few (if any) loans in the market that could qualify. Accordingly, the proposed bill would amend the elements of a QCRE Loan as follows:

  • To include requirements under which an interest-only loan would qualify as a QCRE Loan. Currently, QCRE Loans require level monthly payments of principal and interest (at the fully indexed rate) to fully amortize the debt over the applicable term.
  • To remove the requirement that a QCRE Loan have a minimum term. Currently, QCRE Loans require a minimum 10-year loan term.
  • To remove the requirement that QCRE Loans require an amortization schedule that does not exceed 25 years (or 30 years in the case of a qualifying multifamily loan).
  • To remove the provision that requires that a QCRE Loan originated based on an appraisal that used a “lower” capitalization rate be subject to a lower loan-to-value (“LTV”) ratio. Currently, QCRE Loans are required to have an LTV that is not greater than 65%; however, if the property was appraised with a capitalization rate that was less than the sum of the 10-year Treasury swap rate plus 300 basis points, the QCRE Loan would be required to have an LTV that does not exceed 60%.

Adam Singer is an associate at Cadwalader, Wickersham & Taft LLP and an affiliate member of the New York City Bar Association’s Structured Finance Committee.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant Buerstetta, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Singer.

No Ruling on Specific Performance of Non-Petition Clause in Zohar I; Leaves Open Question of Whether Contract Parties Can Expect Specific Performance of Such Clauses

On February 6, 2016, Lynn Tilton’s Patriarch Partners XV, LLC filed a notice of withdrawal of its involuntary chapter 11 petitions filed against Zohar CDO 2003-1, Ltd. and affiliated entities (“Zohar I”). Patriarch has maintained that it filed the petitions in order to protect itself and other junior creditors in Zohar I from allegedly damaging activities by bond insurer MBIA, the senior creditor. Zohar I defaulted at maturity of the senior bonds in November 2015 and MBIA subsequently made the payments.

Patriarch’s withdrawal of the petitions followed an evidentiary hearing held on February 1, during which valuation experts from Patriarch and MBIA offered testimony regarding Patriarch’s proposed restructuring plan whereby proceeds from the sales of certain underlying portfolio companies (largely controlled by Patriarch) would be allocated to pay MBIA’s senior notes in full over approximately three years. The testimony of the valuation experts indicated that information to allow for a thorough valuation analysis had not been made available. In response, the court urged the parties to work together in order to ascertain the value of the portfolio companies and adjourned the hearing based on an agreement in principle to select an individual to serve as an independent fiduciary and collateral manager for Zohar I and sister CDOs, Zohar II and Zohar III.

On February 5, Patriarch announced its resignation as collateral manager for Zohar I, as well as Zohar II and Zohar III, in order to “avoid any further financial distress to the underlying portfolio companies.” Patriarch filed its notice of withdrawal of the involuntary petitions against Zohar I the following day.

Despite Patriarch’s withdrawal of the involuntary petitions, the action against Zohar I may have industry-wide implications, as the court did not need to rule whether enforcement of the non-petition provision (including by specific performance) should be granted as Zohar I sought in its motion to dismiss. The lack of a ruling in the case leaves open whether contract parties can expect to obtain specific performance of non-petition provisions. Going forward, market participants should consider whether to modify typical non-petition clauses to make clear that they are intended as a waiver of the right to bring a proceeding in bankruptcy that is enforceable by specific performance and injunctive relief.

Grant Buerstetta is a partner at Blank Rome LLP and member of the New York City Bar Association’s Structured Finance Committee.  Ritika R. Kapadia is an associate at Blank Rome LLP.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Buerstetta and Ms. Kapadia.

United States District Court (E.D. Pennsylvania) Adds to the Mix on Madden, “True Lender” and Rent a Bank Arrangements in Refusal to Dismiss Pennsylvania Attorney General’s Claims against On-Line Lender’s Payday Loans in Pennsylvania

The context of this case is as follows.  On November 13, 2014, the Pennsylvania Attorney General (“AG”) first filed suit in state court against Think Finance, Inc., a non-bank on-line lender, several of its related parties providing loan servicing, marketing and other services for fees (“Think Defendants”) and various loan purchasers and debt collectors.  On December 17, 2015, various defendants removed the case to federal court.[1]  The complaint alleged that the Think Defendants utilized the services of a state -chartered bank in Delaware (in a so-called rent-a-bank structure) in order to, among other matters, avoid the application of Pennsylvania usury laws to high-interest rate, short-term loans made by the Think Defendants over the Internet to Pennsylvania residents.  On August 28, 2015, the Think Defendants filed several motions to dismiss.

 

In a Memorandum opinion, dated January 14, 2016, cited as Commonwealth of Pennsylvania, by Attorney General Kathleen G. Kane, v. Think Finance, Inc. et al.,[2] the U.S. District Court for the Eastern District of Pennsylvania declined on various grounds the motions to dismiss relating to usury law violations, determining that the AG had alleged sufficient facts from which one could conclude that the Think Defendants engaged in such violations (the relevant standard in a motion to dismiss).

 

Initially, Think Finance and certain other related non-bank entities, partnered with First Bank of Delaware (“FBD”), a Delaware state-chartered, FDIC-insured bank, in making the loans.  FBD was entitled to the federal preemption[3] of any state laws that conflict with FBD’s power to make loans at any interest rate as allowed to FBD under Delaware law.  The Think Defendants argued that federal preemption applies to any challenge of interest or fees on a bank-issued loan, even when brought against a non-bank.  They further asserted that preemption rights do not disappear when a loan is assigned or transferred from a bank to a non-bank entity.

 

The crux of the AG’s position is that FBD was a mere nominal lender, arguing that the Think Defendants provided the infrastructure to market, fund, underwrite and collect the loans (including providing customer leads, the technology platform, indirect funding relating to the purchase of the loans from FBD, and payment-processing and collection mechanisms). What seemed to be most important to the court was the fact that FBD seemed to have received only a small share of the earnings from the loans while Think Defendants extracted most of the earnings as payments for “services” provided by them to FBD or the borrower, supporting the AG’s position that the Think Defendants are the true lenders.

 

The resolution here of the alleged state usury violations highlights the different circumstances under which the determination of federal preemption applies.  The District court in the Think Finance case noted that, notwithstanding results in other Circuit courts that may appear on their face to reach different conclusions, the U.S. Court of Appeals for the Third Circuit, which includes Delaware, New Jersey and Pennsylvania, distinguished, for purposes of determining preemption, between claims against banks and claims against non-banks.  The court determined that, even though the AG complaint contained state usury claims, those claims were not asserted against FBD but only against the Think Defendant non-banks and, accordingly, federal preemption did not apply.  Because the court determined that there was sufficient evidence to support the conclusion that the non-bank Think Defendants, not FBD, were the real parties in interest (the “true lenders”) the court declined to dismiss the claims on federal preemption grounds.

 

While one can spin forever in the judicial web of rent-a-bank lending cases, it appears that the existence of one or more of the following factors can make a decisive role in a court’s decision:

  1. The level of activities in which the non-bank party and/or its affiliates engages in the making of the loan;
  2. Whether the non-bank entity receives the majority of the economic benefits of the loans;
  • Whether the bank participant is made a defendant in the litigation in respect of the preemption issue;
  1. Whether the non-bank entities are sued on state usury grounds;
  2. Whether the proceeding is brought in a state or federal court;
  3. Whether the bank participant is closely related to the on-line entity; and
  • What procedural posture is presented: motion to dismiss; motion for summary judgment; motion for injunction; or full trial on the merits.

[1]               On March 11, 2015, the AG moved to remand to state court but this was denied by the district court.  Based on other cases in the area, this play of changes of venue appears to be significant in terms of the varying approaches taken by different state courts, different federal circuits and state v. federal courts, in resolving these types of claims and other factors.

[2]               2016 WL 183289 (E.D. Pa. January 14, 2016).

[3]               Section 521 of the Depository Institutions Deregulation and Monetary Control Act.

Lorraine Massaro is a partner in the New York office of K&L Gates LLP and a member of the New York City Bar Association’s Structured Finance Committee.   The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant Buerstetta,  Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser. Any analysis and opinions expressed in this post are Ms. Massaro’s own.

Bankruptcy Court Decision May Challenge Force and Effect of Structured Finance Non-Petition Clauses

An action pending before the U.S. Bankruptcy Court for the Southern District of New York may have industry-wide implications regarding the force and effect of non-petition clauses in structured finance transactions.

On November 22, 2015, Lynn Tilton, self-styled distressed debt empress and Chief Executive Officer of Patriarch Partners XV, LLC, filed an involuntary chapter 11 petition against Zohar CDO 2003-1, Ltd. and affiliated entities (“Zohar I”), an investment vehicle composed of loans to distressed companies. Zohar I is one of three collateralized loan obligations managed by Patriarch, the affiliates of which hold substantial equity stakes in many of the portfolio companies across all three CLOs. Patriarch maintains that the petition was filed in an effort to protect junior creditors in Zohar I from fraudulent activities by the senior creditor, bond insurer MBIA.

Patriarch, holding approximately $286.5 million in notes issued by Zohar I, is the fund’s largest creditor. Following 2008’s financial crisis and in anticipation of an event of default, Patriarch unsuccessfully sought to extend Zohar I’s maturity from November 2015 to January 2017. Under Zohar I’s insurance policy, MBIA guaranteed the payment of principal and interest to senior noteholders in the event of a default. On November 20, 2015, the senior notes came due and MBIA made principal and interest payments to senior noteholders.  Following the payment default, MBIA, as the controlling party, has certain rights in connection with asset dispositions by Zohar I. Patriarch alleges that the involuntary petition is necessary in order to prevent MBIA from foreclosing on Zohar I’s collateral and threatening the portfolio companies Patriarch controls.

Like many CLO structures, Zohar I’s indenture contains a non-petition clause which insulates the issuer from involuntary bankruptcy petitions filed by its noteholders. Despite the indenture’s subordination and non-petition language, Patriarch argues that there is no support in the Bankruptcy Code or case law for the position that a non-petition clause invalidates an involuntary petition. Zohar I has countered that Patriarch’s filing violated “the core fundamental and bedrock principles” that govern investment vehicles, like CLOs, which are designed to be shielded from bankruptcy.

At a hearing on Zohar I’s motion to dismiss on January 6, 2016, the bankruptcy court concluded that an evidentiary hearing was needed in order to, among other things, assess further whether Patriarch’s violation of the indenture’s non-petition clause is subject to specific performance or whether the clause is merely an agreement for which Patriarch can be held accountable for damages suffered upon its breach.

The bankruptcy court stated that it believes that the determination of the motion to dismiss may rest on a balancing between the interests of Zohar I in enforcing the non-petition clause and the ability of Patriarch to propose a plan with a high likelihood of success (referring to the to-be-proposed plan as needing to be “gold-plated”). According to Patriarch, its reorganization plan will pay MBIA in full with interest within a relatively short period, while preserving value for the junior notes Patriarch holds and protecting the value of Patriarch’s portfolio companies (the underlying obligors on the loans held by Zohar I).

Structured finance transactions, including the Zohar CLOs, are designed to be bankruptcy- remote as evidenced by the prevalence of non-petition clauses. Courts have not been called upon to determine the enforceability and specific performance of non-petition clauses.  As such, the Bankruptcy Court decision on the motion to dismiss in Zohar I threatens to disrupt structured finance markets. A finding that Patriarch may proceed with an involuntary bankruptcy case, in spite of an acknowledged breach of the indenture’s non-petition clause, has the potential to upset the commercial expectations of parties across a wide spectrum of structured finance transactions where such clauses are commonly used.

Grant Buerstetta is a partner at Blank Rome LLP and member of the New York City Bar Association’s Structured Finance Committee.  Ritika R. Kapadia is an associate at Blank Rome LLP.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Buerstetta and Ms. Kapadia.

Risk Retention Rules for ABS Transactions – Some Interesting Aspects of the B-Piece Buyer Option

On October 22, 2014, the federal regulatory agencies responsible for implementing regulations under Dodd-Frank finalized the risk retention rules for ABS transactions.  For all forms of ABS securities (other than RMBS) sponsors will need to comply by December 24, 2016.  Generally, the rule requires the sponsor to retain an economic interest in the credit risk of an ABS transaction in the form of either an “eligible vertical interest” (i.e., 5% of each class of securities issued) or an “eligible horizontal interest” (i.e., the most subordinate securities in an amount equal to 5% of the fair value of the class of the ABS securities issued) or by a combination of horizontal and vertical retention. A unique provision that applies only to CMBS is that a sponsor may satisfy all or a portion of its risk retention requirement if an independent third party purchaser purchases and holds the eligible horizontal interest for its own account. Under this provision, the third-party purchaser (a “B-Piece Buyer”) will be required to purchase and hold the eligible horizontal interest in a CMBS transaction subject to  requirements similar to those that would have applied to the sponsor.

The “b-piece buyer option” requires a B-Piece Buyer to purchase 5% (or possibly less if the sponsor of the transaction retains an additional eligible “vertical interest”) of the most subordinate class or classes of securities issued in a CMBS transaction (excluding the REMIC residual), based on a “fair value” measurement under U.S. GAAP (which may equate to more than 5% of the face value of the CMBS issuance), which is likely more than a typical B-Piece Buyer currently purchases.  Once purchased, the b-piece generally cannot be transferred or sold for at least 5 years, and there are strict rules on hedging the interest.  There can be no more than two b-piece buyers in any single CMBS transaction, and they must hold their interests pari pasu (no senior/sub structuring is allowed). Note that the name of the B-Piece Buyer will need to be disclosed in the offering, as well as such Buyer’s experience in investing in CMBS and the purchase price and the fair value of the b-piece. Furthermore, a description of the valuation method and key inputs and assumptions used in the determination of fair value will need to be disclosed.

CMBS transactions utilizing the “b-piece buyer option” will also be required to appoint an independent operating advisor.  Notably, from the closing date of the transaction, the operating advisor will be able to recommend the replacement of the special servicer if the advisor believes that the special servicer failed to comply with a standard in the applicable transaction documents and the replacement is in the best interest of the investors.  Upon such recommendation, the special servicer may be replaced upon the affirmative vote of a majority of the outstanding CMBS interests.  The required quorum for such vote may not exceed 20% of the outstanding principal balance of the CMBS (as set forth in the transaction documents (including 3 unaffiliated investors)).  Moreover, the operating advisor will have certain consultation rights (with respect to major decisions) when the b-piece is reduced to 25% or less of its initial principal balance (taking into account realized losses and appraisal reduction amounts in accordance with the transaction documents).

Adam Singer is an associate at Cadwalader, Wickersham & Taft LLP and an affiliate member of the New York City Bar Association’s Structured Finance Committee. The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant E. Buerstetta, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard L. Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Singer.

Is China Ready for RMBS?

Observers needn’t resort to reading tea leaves to find a number of convincing recent portents that residential mortgage backed securities may soon be coming to market in a significant way in China.  In May 2015 the National Association of Financial Market Institutional Investors (NAFMII) issued guidance titled “RMBS Information Disclosure Guidelines” (see link to original text and unofficial translation at:  http://chinastructuredfinance.org/2015/06/75/).  NAFMII is a quasi-governmental Chinese SRO that operates under the direction of the People’s Bank of China, with the mission of promoting sustainable development in China’s OTC market.  It is generally perceived in the market that such formal guidance from an organization so closely linked to central government financial regulatory authority serves as a clear signal as to where regulators are planning to open up opportunities in the foreseeable future.

Moody’s Investor Service is also evidently preparing for action in a Chinese RMBS market.  On December 3, 2015, the rating agency issued a request for comment on a draft methodology titled “Moody’s Approach to Rating Chinese RMBS”.  As presented in the December 3 paper, Moody’s proposed approach to rating RMBS in China involves applying Moody’s proprietary “individual loan analysis” model (“MILAN”), using settings that are typically applied to rating RMBS in new securitization markets.  In the case of China, Moody’s is using a reasoned comparative approach to apply seasoned MILAN settings from comparable jurisdictions in order to arrive at benchmarks for a number of key aspects of the Chinese residential mortgage market.

Moody’s proposed methodology is available through a press release on Moody’s website at https://www.moodys.com/research/Moodys-requests-comments-on-proposed-approach-to-rating-Chinese-RMBS–PR_340299, or directly at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF422565.

Moody’s is also inviting market participants to comment on the proposed methodology.  Comment letters may be submitted through January 15, 2016 by clicking on the appropriate link at https://www.moodys.com/researchandratings/research-type/methodology/request-for-comment/003006005/4294964517/4294966848/-1/0/-/0/-/-/en/global/rr#.

Notwithstanding the encouraging signals from Chinese market regulators and the excellent statistical economic analysis that Moody’s is engaging in, there are still a number of troubling legal issues that need to be resolved.  For instance, Jeff Chen of Dentons Hong Kong has pointed out that under PRC law mortgages over real estate are created by registration.  (see Denton’s article available at http://www.dentons.com/en/insights/articles/2015/february/11/securitization-in-china).  Thus, if the originator and registered mortgagee of a pool of residential mortgage loans wished to sell the same to a purchaser thereof (such as an SPV or under a trust arrangement), then the purchaser would acquire only receivables without also acquiring the attendant mortgagee rights, unless the mortgages were also re-registered in the name of the purchaser, which may not be logistically feasible.  The integrity of the securitization may thus be impaired because the purchaser remains exposed to the seller’s insolvency and performance risks in respect of the collateral securing the receivables–i.e., the mortgagee rights, which would remain part of the seller’s estate in bankruptcy.

 

Richard L. Mertl is an associate at Schulte Roth & Zabel LLP and an affiliate member of the New York City Bar Association’s Structured Finance Committee. The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant E. Buerstetta, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Founder and Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Mertl.

Expanding Proven Financing for American Employers Act–Risk Retention for Qualifying CLOs

On December 3, 2015, Representatives Andy Barr (R-KY) and David Scott (D-GA) introduced to the U.S. Congress a bill, H.R.4166, captioned “Expanding Proven Financing for American Employers Act”, that is intended (in its own words) to “amend the Securities Exchange Act of 1934 to provide specific credit risk retention requirements to certain qualifying collateralized loan obligations”.   The bill was referred, on the date of its introduction, to the House Committee on Financial Services.

H.R.4166 specifies an alternate (and less burdensome) risk retention requirement for collateral loan obligations (CLOs) that satisfy the definition, and detailed criteria, for a so-called “qualified collateralized loan obligation”.  Under the bill, the risk retention requirements for such a qualified collateralized loan obligation would be met if the collateral manager, or one or more majority-owned affiliates of the manager (or its knowledgeable employees and other employees), purchase, and hold for the relevant retention period (without hedging or transferring the credit risk), no less than five percent of the equity of such collateralized loan obligation (rather than five percent of all of the securities issued by the CLO (or the fair value thereof, as applicable), as required under the current risk retention rules).

The criteria for a qualified collateralized loan obligation include, inter alia, various portfolio composition and concentration requirements.  In order to be a qualified collateralized loan obligation, a CLO must, at the time of the purchase of any asset, comply with those portfolio requirements or, if not in compliance with any such requirement, maintain or improve the level of compliance after giving effect to the purchase.

The portfolio composition and concentration requirements include the following:

  • At least 90 percent of the CLO’s assets are comprised of senior secured loans and cash equivalents.
  • None of the CLOs assets are asset-backed securities or derivatives.  (Note that this requirement does not prohibit the acquisition of a loan participation or any interest related to or in a letter of credit, or entering into derivative transactions to hedge interest rate or currency rate mismatches.)
  • The CLO may not purchase assets in default, margin stock, or equity convertible securities.
  • The CLO may acquire only loans
    • held or acquired by three or more investors or lenders unaffiliated with the manager;
    • to borrowers whose financial statements are subject to an annual audit from an independent, accredited accounting firm.
  • No more than 60 percent of the CLO’s assets may be comprised of “covenant lite” loans.
  • No more than 3.5 percent of the assets of the CLO may relate to any single borrower.
  • No more than 15 percent of the assets of the CLO may relate to any single industry.

In addition, H.R.4166 specifies certain structural protections, including a requirement that the CLO’s equity be at least 8 percent of the value of the CLO’s assets (presumably—although not explicity—measured only at closing).  The requirements for a qualified collateralized loan obligation also include certain monthly reporting obligations and other requirements relating to alignment of manager and investor interests and regulatory oversight.

Given the proximity of the introduction of this bill to the commencement of the Presidential primaries, the prospects for swift passage of H.R.4166 appear to be less than certain.  Still, in an election year already full of surprises, perhaps the passage of this bill will be yet one more.

Jeffrey Stern is a partner in the New York office of Winston & Strawn LLP and a member and former chair (from 2011-14) of the  New York City Bar Association’s Structured Finance Committee.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira Brereton, Grant E. Buerstetta, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard Mertl, Willard S. Moore, Dina J. Moskowitz, David Z. Nirenberg, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Gregory D. Walker, Craig A. Wolson (Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Stern.

Changes to the Internal Revenue Code may Impose an Entity-Level Tax on REMICs and Other Securitization Vehicles Treated as US and non-US Partnerships

Recent changes to the Internal Revenue Code would change the current auditing procedures for REMICs and other securitization vehicles treated as partnerships—including some special purpose vehicles such as CLOs that have elected to be taxed as partnerships—in a manner that would, in certain cases, impose tax liability on the partnership itself.  In such a case the tax liability would fall indirectly on partners that may not have been partners for the period under audit. The provisions would be effective for taxable years beginning in 2018.

Current Law.  Current law generally permits the Internal Revenue Service (“IRS”) to make adjustments to so-called “partnership items” at the partnership level through certain partnership audit proceedings but does not provide for any tax liability to be imposed on the partnership itself.  Adjustments to partnership items flow through to individual partners and any resulting tax liability falls directly on the affected partners.  Under current law, a “tax matters partner” (who must be a partner) is responsible for representing the partnership in audits and giving notice to partners of the proceedings.  There is a mechanism, however, for certain partners to elect out of partnership audits and to negotiate and settle partnership items individually.

New Law.  The new law permits the IRS to make adjustments to a partnership’s items of income, gain, loss, deduction, credit and allocations for a reviewed year, with any resulting liability imposed on the partnership in the year in which the audit is completed.   Due to the mechanics of how partnership adjustments are calculated under the new rules, the tax liability of the partnership may be greater than the aggregate of the liabilities of the individual partners would have been for the audit period.  For example, an adjustment that results in a reallocation of distributive shares among partners would disregard any decreases in income or gain and any increase in deduction, loss or credit.   The new audit procedures do permit a partnership to lower, to a limited extent, ithe partnership’s tax liability based on the actual tax statuses and attributes of the partners for the audit period and also to the extent any of the tax liability is actually paid by such partners.

As an alternative to partnership-level liability, the partnership may elect to issue adjusted Schedules K-1 to the partners for the audit years and those partners would take the adjustments (and any penalties and interest and any effects on intervening years between the audit and current years) into account on their individual returns in the year in which the audit and adjustments are completed.

The new rules replace the “tax matters partner” with a “partnership representative” that has the authority to bind the partnership in audit and judicial proceedings.  The partnership representative is not required to be a partner of the partnership but must have a substantial presence in the United States.

Although the new law includes an opt-out provision that would permit partnerships with 100 or fewer qualifying partners to be excluded from the new audit procedures, the opt-out is not available to partnerships that have any partners that are themselves partnerships. Accordingly, this opt-out will not be available to many investment and securitization vehicles.

Non-US Entities.  Non-US investment vehicles may elect to be treated as partnerships for US tax purposes in order to obtain tax transparency.  The new partnership audit rules generally would apply to non-US partnerships that file (or that are required to file) US tax returns. With limited exceptions, a non-US partnership with at least one US partner (or any effectively connected income) is required to file US tax returns.

Suggestions.  Partnerships should consider including provisions in the operative documents (i) requiring the partnership, if possible, to elect out of the new provisions, and (2) if not possible, requiring the partnership to avoid partnership-level liability by issuing adjusted K‐1s to the partners for the audit years.

Consideration should be given in drafting disclosure to indicate that, although the partnership intends, if possible, to elect out of these new rules, and otherwise to avoid entity-level liability by complying with the procedures to issue revised K-1s to persons that were partners during the audit period, there can be no assurance that the partnership will be able to comply with the procedures in all cases.  In such a case payments to partners, note holders and other creditors may be reduced or delayed.

REMICs.  REMICs are treated as partnerships and holders of residual interests are treated as partners for tax procedural and administrative matters.  To the extent a REMIC is unable to opt-out effectively, any entity- level tax likely will be economically borne by holders of the regular interests inasmuch as REMIC residuals generally are not entitled to meaningful distribution.  Accordingly, in order to ensure that a REMIC is able effectively to opt-out of the new audit procedures, sponsors may want to ensure that transfer restrictions appropriately limit the number of residual holders and require all residual holders to be C corporations.

David Z. Nirenberg is a partner in the New York office of Ashurst LLP and a member of the  New York City Bar Association’s Structured Finance Committee.  The other members of the Committee are Patrick D. Dolan, Chair, Mark AdelsonHoward Altarescu, Robert Steven Anderson, Vincent Basulto, Kira, Brereton, Grant E. Buerstetta, Lewis Cohen, John M. Costello, Jr., John J. Dedyo, Christopher J. DiAngelo, Afsar Farman-Farmaian, Karen Fiorentino, Shuoqiu Gu, Christopher Haas, Bryan Hall, Marsha Henry, Greg Kahn, Jamie Kocis, Jason H. P. Kravitt, Steve Levitan, Gregory T. Limoncelli, George P. Lindsay,  Alexander G. Malyshev, Jerry R. Marlatt, Lorraine Masssaro, Richard Mertl, Willard S. Moore, Dina J. Moskowitz, Christopher J. Papajohn, Steve Plake, Lauris G. L. Rall, Brian D. Rance, Richard J. Reilly, Jr., Y. Jeffrey Rotblat, Paul R. St. Lawrence, Adam Singer, Craig Stein, Jeffrey Stern (Chair from 2011-14), Gregory D. Walker, Craig A. Wolson (Chair from 2004-08), Jordan Yarett, and Boris Ziser.  Any analysis and opinions expressed in this post are those of Mr. Nirenberg.