Anthony Lin, in the NYLJ, reports on this securities based legal malpractice law suit:

"Cadwalader is one of the nation’s top law firms when it comes to securitizations, and its large practice in the area has helped catapult the firm to the top of the profitability charts over the past few years. Such transactions involve the creation and issuance of tradeable securities tied to fixed assets or revenue streams, most commonly residential or commercial mortgages.

Nomura Asset Capital Corp., a U.S. division of Japan’s largest securities firm, filed suit against Cadwalader last October in Manhattan Supreme Court over documents the law firm drafted for a 1997 securitization transaction in which Nomura pooled 156 commercial mortgages worth around $1.8 billion.

At issue in the Nomura suit are two separate warranties Cadwalader included in the documents for the transaction. Both warranties stated that each mortgage included in the pool "qualified" for special tax status under Internal Revenue Service regulations. But one warranty more specifically stated that this meant the mortgages were backed by properties worth at least 80 percent of the mortgage amounts.

That second warranty became a problem for Nomura after a number of the mortgages went into default. LaSalle Bank, which was holding the securitized pool in trust, sued Nomura on the grounds that the defaulting mortgages were not qualified, with one large mortgage secured by property worth only around 60 percent of the loan.

Nomura hoped to escape liability on the basis of a "safe harbor" provision of the IRS regulations, which state that mortgages should be 80-percent secured by property but allow that an issuer’s "reasonable belief" about a property’s value may be sufficient to qualify a mortgage. "