Mississippi District Court Defers to New York Court in Bond Action
The United States District Court for the Northern District of Mississippi denied the motion of defendant ACA Financial Guaranty Corporation (ACA) to dismiss a class action complaint, finding that the issues were previously adjudicated adversely to ACA in the New York Supreme Court where a companion case, Oppenheimer v. ACA Financial Guaranty Corporation, is currently pending.
The putative class action arose from ACA’s agreement to insure municipal bonds issued by a South Carolina road construction project, “Connector 2000.” Connector 2000 sought bankruptcy protection and as part of that bankruptcy, the court cancelled certain bonds. In both the New York Supreme Court and in the Northern District of Mississippi, ACA argued that the cancellation of the bonds eliminated its insurance obligation.
In Oppenheimer, Judge Ramos found that the project’s bankruptcy filing did not relieve ACA of its insurance obligation. The District Court denied ACA’s motion to dismiss—which was largely based on its argument that the case in New York was wrongly decided—and noted that if Judge Ramos’s determination is overruled by the Appellate Division, ACA could use that decision at summary judgment.
Davis v. ACA Fin. Guaranty Corp., Cause No. 3:11-CV-093-MPM-SAA (N.D. Miss. May 9, 2013, 2013)