Opinion ID: 1058593
Heading Depth: 2
Heading Rank: 1

Heading: The UBS Litigation and Settlement

Text: In March 2002, Wells Fargo [5] filed a lawsuit against UBS in a Texas state court alleging breach of contract and fraud claims arising from UBS' transfer of numerous promissory notes in the securitized loan pool, including the Lee Hall Loan, to the REMIC Trust. Wells Fargo contended that UBS' conduct materially and adversely affected the value of the Lee Hall Loan, and it sought in the lawsuit to have UBS honor its written, contractual obligation to repurchase the Lee Hall Loan, or pay damages equal to the repurchase price[]. [6] In September 2004, UBS and Wells Fargo signed a settlement agreement and mutual release (UBS Settlement), which resolved the Texas litigation. While the terms of the UBS Settlement were confidential, public documents introduced by Nizan in the circuit court indicate UBS paid $19.375 million to the REMIC Trust in liquidation proceeds. [7] Pursuant to the Pool and Servicing Agreement between Wells Fargo and Orix, the UBS Settlement proceeds were required to be classified as payment upon one or more of the promissory notes held in the REMIC Trust. Consequently, Wells Fargo treated [approximately $13.4 million from the UBS Settlement] as having been received in respect of the Lee Hall Loan for purposes of accounting in the REMIC Trust.