Modification: State of California ex rel. Edelweiss Fund v. JPMorgan Chase & Co.

STATE OF CALIFORNIA ex rel. EDELWEISS FUND, LLC, et al.,

Plaintiffs and Appellants,

v.

JPMORGAN CHASE & COMPANY et al.,

Defendants and Respondents.

No. A163264

(City & County of San Francisco Super. Ct. No. CGC-14-540777)

California Court of Appeal

First Appellate District

Division Four

Filed May 30, 2023

ORDER MODIFYING OPINION AND DENYING REHEARING; NO CHANGE IN JUDGMENT

THE COURT:

It is ordered that the opinion filed herein on April 27, 2023, be modified as follows.

1. On page 22, add the following sentence to the end of footnote 12:

We also emphasize that, because the definition refers to the "most common week-over-week rate change," the bucketing of a VRDO means only that it matched the change shared by the greatest number of other VRDOs---however many that might be---in a particular week at least 80 percent of the time over 26 weeks. The definition does not require the same VRDOs to undergo identical changes for an extended period of time, and does not specify a particular percentage of VRDOs that must have the "most common" change in a given week.  In their petition for rehearing, defendants complained that the opinion occasionally departed from this definition by referring to "identical" or "lockstep," rather than "matching," changes. To avoid potential confusion, we have revised some of the language, but we disagree with defendants that Edelweiss's definition of bucketing does not support an inference of fraud when the analysis is combined with the other allegations in the seventh amended complaint.

2. On page 23, in the second full paragraph, in the sentence that ends with the phrase "(4) given the dynamics of the market . . .", the phrase shall be modified to read:

(4) given the dynamics of the market, one could not reasonably expect VRDOs with vastly different characteristics to have matching interest rate adjustments (under the criteria in the seventh amended complaint) if the objective were to select the lowest interest rate for each VRDO that would enable the series to be sold at par.

3. On page 24, on the seventh line, the word "lockstep" shall be modified to the word "matching".

There is no change in the judgment.

The petition for rehearing, filed May 12, 2023, is denied.

Dated: May 30, 2023 STREETER, Acting P. J.

Trial Court: City and County of San Francisco Superior Court

Trial Judge: Honorable Anne-Christine Massullo

Counsel for Plaintiffs and Appellants: STEYER LOWENTHAL BOODROOKAS ALVAREZ & SMITH, Allan Steyer, Jill M. Manning, Jill K. Cohoe THE LAWRENCE LAW FIRM, Jeffrey W. Lawrence SCHNEIDER WALLACE COTTRELL KONECKY, Todd M. Schneider, Jason H. Kim, Matthew S. Weiler, James A. Bloom CONSTANTINE CANNON, Ari Yampolsky

Counsel for Defendant and Respondent Wells Fargo Bank, N.A.: JONES DAY, Michael P. Conway, Matthew J. Silveira, Margaret Adema Maloy

Counsel for Defendant and Respondent JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC GREENBERG TRAURIG, William J. Goines

Counsel for Defendant and Respondent Bank of America Corporation, Bank of America N.A., and Merrill Lynch, Pierce, Fenner & Smith Inc.WILLIAMS CUTLER PICKERING HALE AND DORR, Matthew Benedetto

Counsel for Defendants and Respondents Citigroup Global Markets Inc., Citibank N.A., Citigroup Financial Products Holdings Inc., and RBC Capital Markets, LLC KEESAL, YOUNG & LOGAN, Peter R. Boutin, Christopher A. Stecher

Counsel for Defendants and Respondents Morgan Stanley & Co. LLC, Morgan Stanley Bank, N.A., Morgan Stanley Capital Services Inc., and Morgan Stanley Capital Group Inc.SIDLEY AUSTIN, Matthew J. Dolan

Counsel for Defendant and Respondent Piper Jaffray & Co., and Piper Jaffray Financial Products Inc.KEESAL, YOUNG & LOGAN, Ben Suter

Counsel for Defendants and Respondents Barclays Capital Inc. and Barclays Bank PLC SKADDEN, ARPS, SLATE, MEAGHER & FLOM, Jack P. DiCanio, Kasonni M. Scales

Counsel for Chamber of Commerce of the United States of America, California Chamber of Commerce, and American Bankers Association as Amici Curiae on behalf of Respondents KING & SPALDING, Ethan P. Davis, Matthew V.H. Noller