Law and legal issues

Late Tuesday night, Judge Rakoff of the Southern District Court of New York ruled in favor of Assured Guaranty in its lawsuit brought against Flagstar Inc. for breaching its representations and warranties contract relating to over $900 million of residential mortgage-backed securities.

Moody's revised its outlook for West Penn Allegheny Health System bonds to developing from negative as it monitors an affiliation agreement with Highmark.

The trustee for bankrupt American Airlines Inc.'s $1.4 billion of New York City airport revenue bonds hopes to submit a final settlement agreement after a majority of bondholders endorsed the terms.

Texas district judge ruled Monday that the state system of funding public education is inadequate and unconstitutional.

Assured Guaranty said Monday that it disagrees with the trustee for Jefferson County, Ala.'s sewer warrants to suspend payments, and will continue to make good on its insurance policies.

Bank of New York Mellon said Friday that it will stop payments on Jefferson County, Ala.'s defaulted sewer warrants, and will seek court approval to accelerate payment of outstanding principal.

Detroit Mayor Dave Bing announced the city would close 50 parks, whittling the number of open parks down to 57, after the city council rejected a proposal to lease the city's largest park to the state for 30 years.

Fresno, after much of its debt was downgraded to junk by Moody's, is facing cash flow problems that will likely lead to more layoffs and service cuts.

Pennsylvania is distributing $8.6 million in restitution from JPMorgan Chase & Co., to municipalities and nonprofit organizations who were victims of a scheme to rig bids of municipal bond reinvestment contracts, the Pennsylvania Attorney General's office announced.

City officials recently warned that the Detroit suburb of Allen Park, which is already under state control, could run out of money by the end of February, and a new audit raises questions about the city's ability to continue "as a going concern."

An Orange County Superior Court Judge has 90 days to rule on a lawsuit filed by the California Department of Finance and the chancellor of the state's community colleges against Orange County after the county diverted money from education to balance its budget.

The majority of the 202 California cities that Standard & Poor's rates are likely to see improving credit quality in 2013 as their economies recover and revenues strengthen.

Revenues at municipalities may increase slightly in 2013 and additional municipal bankruptcies will be uncommon as state and local governments continue a slow economic recovery, speakers at the Governing Outlook conference said here Tuesday.

JobsOhio sold $1.56 billion of liquor profit-backed bonds Monday and Tuesday despite unresolved litigation that scared some investors away, seeing spreads of up to 137.5 basis points above Treasury rates on the taxable series.

The new sewer rate structure recently approved by Jefferson County, Ala., commissioners is an interim plan that can be altered as creditors negotiate a settlement to restructure more than $3 billion of defaulted debt, the county said.

Amalgamated Bank is providing a second round of financing to Scranton, Pa., so that the city can pay its employees and other obligations. The bank won't say what it's charging the city.

Former Boston Red Sox pitcher Curt Schilling intends to sell the famous bloody sock he wore during a 2004 playoff game at New York's Yankee Stadium to appease creditors of his defunct video-game company.

JP Morgan and Citi were set to price $1.5 billion of liquor-backed bonds issued by JobsOhio Monday and Tuesday despite delaying the deal last week when the state Supreme Court announced it would hear a case challenging the state law authorizing the bond sale.

Rhode Island Rep. Michael Marcello said he doesn't want public hearings on the $75 million loan guarantee to 38 Studios to interfere with a State Police probe.

Officials in Atwater, a northern California city that narrowly avoided bankruptcy last year, have proposed a half cent sales tax specifically earmarked for public safety for the March 5 ballot.