February 24, 2015 (Boston) – Global law firm Proskauer prevailed before the Rhode Island Superior Court on behalf of its client, the Tobacco Settlement Financing Corporation (TSFC), in a case involving the proposed issuance of more than $600 million in tobacco bonds.
The TSFC was established by the State of Rhode Island to facilitate the issuance of municipal bonds backed by the expected future income stream resulting from the settlement of the tobacco litigation in 1998.
In the summer of 2014, the TSFC sought to take advantage of historically low interest rates by issuing new bonds and refunding bonds carrying substantially higher interest rates. OppenheimerFunds, which owns a substantial amount of the TSFC’s existing bonds, filed a lawsuit alleging that the proposed bond issuance violated both the Indenture for the existing Series 2007 Bonds and Rhode Island law.
After the TSFC signaled its intention to proceed with the planned bond issuance despite OppenheimerFunds’ complaint, OppenheimerFunds effectively blocked the proposed bond issuance when its counsel (Quinn Emmanuel) amended its complaint to add as defendants both the State of Rhode Island and the prospective purchasers of the proposed bonds.
In addition to OppenheimerFunds’ aggressive litigation strategy, the TSFC was grappling with a volatile bond market. The TSFC was concerned that the low interest rate environment could shift at any time, effectively closing the window on the bond issuance. In response, Proskauer persuaded the court to adopt an expedited timeline for the case. On October 2, the TSFC answered the amended complaint and filed a counterclaim against OppenheimerFunds. The TSFC then moved for early summary judgment on October 21.
In response to OppenheimerFunds’ demands for extensive discovery, Proskauer persuaded the court to order the parties to complete all discovery in five weeks, complete all summary judgment briefing by December 3, and present oral argument on December 8.
On January 15, the court issued a decision granting the TSFC’s motion for summary judgment in all respects. This decision is expected to permit the TSFC to move forward with a bond issuance of approximately $650 million, which would generate an immediate up-front payment of approximately $30 million for the State of Rhode Island and save the State more than $900 million over the next forty years.
The Proskauer team was led by litigation partner Timothy Mungovan and bankruptcy partner Mark Thomas, and included associates Joel Cavanaugh, Michael Hackett and William Dalsen (Private Investment Fund Disputes); partner Martin Bienenstock and associates Vincent Indelicato, Maja Zerjal and Steve Ma (Business Solutions, Governance, Restructuring & Bankruptcy); senior counsel Scott Harshbarger (White Collar Defense & Investigations); associate Andrea Miller (Multi-Tranche Finance); and paralegal Tom Fiascone (Labor & Employment). The TSFC’s co-counsel in Rhode Island, Joseph Larisa, was also an integral part of the winning team.