In the past seven days, two separate courts in New York rejected MBIA Inc.'s motions to dismiss lawsuits alleging its February 2009 restructuring was an intentionally fraudulent action and a breach of good faith that hurt policyholders.

In the most recent decision on Wednesday, New York Supreme Court Judge James A. Yates rejected the motion to dismiss and ordered both parties in the lawsuit to proceed with their depositions and reconvene on March 12.

The lawsuit is one of four against MBIA. Each stem from the company's decision last year to split its public finance portfolio from its more toxic structured-finance holdings. The restructuring involved the transfer of more than $5 billion in capital away from MBIA Insurance Corp. and into a new public finance unit called National Public Finance Guarantee Corp.

The plaintiffs — which in this case are 18 banks including Barclays Bank, BNP Paribas, Citi, JPMorgan Chase, and UBS — argued the restructuring "was a massive fraudulent conveyance designed to loot MBIA Insurance Corp.'s assets and to evade its finance guarantee coverage obligations to them," according to court documents.

As in the other lawsuits brought about by a number of hedge funds and investment funds, the banks claimed the restructuring left MBIA Insurance "undercapitalized and insolvent."

In May 2009, lead counsel for the plaintiffs, Vince DiBlasi from the law firm Sullivan & Cromwell LLP, also called the restructuring "a blatant attempt to enrich MBIA Inc. and its management."

He added: "Our lawsuit simply seeks to ensure that policyholders receive what they have paid premiums for: contractually guaranteed insurance protection."

As sources at MBIA pointed out on Thursday, however, the idea that the insurance company was on the brink of collapse last year has not been borne out since the lawsuit was filed.

At the time of the restructuring, MBIA Insurance's claims-paying resources were $8.4 billion. By the end of the third quarter last year, the figure had been reduced to $7.1 billion as a result of paying claims, according the company's most recent financial statement.

In the courtroom on Wednesday, DiBlasi said that "$50 million leaves MBIA every month, and some of those dollars should go to the benefit of the plaintiff banks."

MBIA's attorney, Marc Kasowitz, of the firm Kasowitz, Benson, Torres & Friedman LLP, did not dispute that MBIA Insurance Corp. was losing money, which would make sense if the company continues to pay claims. But he called the suggestion that MBIA should be paying the plaintiff banks "nonsense," noting that, to date, the restructuring has made no material difference to whether the company's policyholders have been paid.

"Even months after being accused of being insolvent-like, [MBIA Insurance Corp.] hasn't defaulted on a single claim," Kasowitz told the court. "So, with the transformation or without the transformation, it would be paying legitimate claims."

MBIA's other defense is that its restructuring was approved by the New York Insurance Department, its regulator, and that if the plaintiffs wish to contest the approval of its restructuring, they must do so under Article 78 of New York Civil Practice Law and Rules.

The plaintiffs have called that reasoning "erroneous." However, the same banks also filed a suit under Article 78 last June. The case, which is also presided over by Yates, is still pending.

In his rejection of MBIA's motion to dismiss on Wednesday, Yates did not agree that Article 78 was the only avenue for the plaintiffs to pursue.

"The mere fact that there was earlier approval of the MBIA restructuring ... does not immunize defendants from subsequent statutory and common law claims," he wrote in his 21-page decision. "The focus here is on the intent and conduct of defendants in stripping away assets and shielding them from the legitimate claims of a corporate creditor."

Kevin Brown, spokesman for MBIA, said the company plans to appeal the decision.

"As both MBIA and the New York State Insurance Department have stated, this lawsuit is an improper collateral attack on the Insurance Department's approval of our transformation, and the currently pending Article 78 proceeding is the only appropriate forum for challenging it," Brown said in an e-mailed statement. "We are confident that the Appellate Division will reach the same conclusion and reverse [the] decision. We expect to ultimately prevail in this and any other litigation challenging our transformation."

Yates's decision was similar to one last Thursday when the U.S. District Court for the Southern District of New York denied MBIA's motion to dismiss the case brought from a number of hedge funds led by Aurelius Capital Master Inc. District Judge Richard J. Sullivan ordered the parties to submit a case management plan by March 9.

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