You don't have to know much about the credit-default swaps market to know this: A team from Simpson Thacher & Bartlett led by partner Lynn Neuner and co-counsel from Friedman Kaplan Seiler & Adelman just pulled off a big win.

On Monday, U.S. District Judge Laura Taylor Swain of the Southern District of New York declined to issue a preliminary injunction in a case that Barrons called “The Hedge Fund Skirmish That Could Kill the CDS Market.”

On one side: plaintiff Solus Alternative Asset Management LP, represented by Quinn Emanuel Urquhart & Sullivan's Jonathan Pickhardt, who co-chairs the firm's structured finance litigation practice, and partners Andrew Corkhill, Daniel Cunningham, Ellison Ward Merkel and Michael Liftik.

On the other: Neuner and Simpson Thacher partners Craig Waldman and Mike Osnato for homebuilder Hovnanian Enterprises, Inc., plus Friedman Kaplan partners Eric Seiler, Anne Beaumont, Mala Ahuja Harker and Philippe Adler for hedge fund GSO Capital Partners L.P.

At issue: a transaction where GSO agreed to finance some of Hovnanian's debt by exchanging certain outstanding bonds for new bonds.

Solus is crying foul, calling the transaction in its complaint filed on Jan. 11 “imminent fraud” and a “bribe” that will “irrevocably distort the market” and cost credit protection sellers hundreds of millions of dollars. “And the integrity of the CDS market—which is predicated on the expectation that companies seek to avoid payment default, not to accept illicit payments to default intentionally—will be irreparably damaged,” wrote Pickhardt for Solus (emphasis in the original).

In late 2016, GSO bought hundreds of millions of dollars of CDS protection on Hovnanian debt, betting that the homebuilder would default on its payment, according to the complaint. Solus took the opposite position, betting that Hovnanian would pay its debts as they came due.

According to Solus, Hovnanian did well in 2017, and a payment default looked increasingly unlikely—good news for Solus, bad for GSO.

“Rather than accept that it had made a misguided wager against Hovnanian and its ability to pay its debts, GSO embarked on a fraudulent scheme to pervert the normal operation of the CDS market,” Solus lawyers said.

The details of the GSO transaction are complex, but the key fact is that Hovnanian will intentionally default on an upcoming payment to its own subsidiary, even though it has the money to pay what's due. That will trigger a “credit event” and open the door to the new refinancing deal.

To Solus, this is a market manipulation scheme in violation of Section 10(b) of the Exchange Act and Rule 10b-5.

Judge Swain held a full-day evidentiary hearing on plaintiff's motion for a preliminary injunction on January 25, but declined on Monday to halt the deal.

The plaintiffs didn't show they would suffer irreparable harm absent an injunction, she found. If they ultimately succeed, they can be compensated with money.

She was also not persuaded by the plaintiffs' argument that allowing the transaction would “existentially threaten the CDS market” and cause “irreparable public harm.”

Swain wrote, “[T]he allegedly threatened community of CDS market participants, consisting of CDS traders and dealers, is a relatively insular and sophisticated subset of the public.” Moreover, she noted that the International Swaps and Derivatives Association could create rules to deal with the risk of such transactions.

“The court need not and does not make a determination as to whether similar transactions will proliferate,” she wrote, “and whether the CDS market faces, as [one expert] hypothesizes, an 'existential threat' from such proliferation.”

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Getting the Piper Paid

In a win for songwriters and music publishers, Pryor Cashman partners Benjamin Semel and Frank Scibilia secured the biggest rate increase in Copyright Royalty Board history.

The full decision isn't public yet, but the firm says it will increase royalty payments to songwriters and music publishers from music streaming companies by nearly 44 percent. The rates will apply to interactive streaming and limited download services such as Amazon, Apple, Google, and Spotify for the years 2018-2022.

Pryor Cashman represented the National Music Publishers' Association and the Nashville Songwriters' Association International in the four-month trial.

Client David Israelite, president of the National Music Publishers' Association, said in a statement, “The decision represents two years of advocacy regarding how unfairly songwriters are treated under current law and how crucial their contributions are to streaming services,” he said. “While the court did not grant songwriters a per-stream rate, the increases in overall rates and favorable terms are a huge win for music creators.”

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Lateral Watch

King & Spalding in Houston added litigation partner Craig Stanfield, who joins from Morgan, Lewis & Bockius.

Stanfield has tried product liability, environmental, commercial and insurance recovery cases—and in one matter, scored a defense verdict after only 35 minutes of jury deliberation.

In September, Lit Daily affiliate Texas Lawyer named him a “Rising Star.”

The Golden State holds the line against objectors who are “annoying to lawyers and judges.”

Former high-ranking federal government lawyers Thomas Perrelli and Ian Gershengorn are challenging Kentucky's newly approved Medicaid work requirements.

“Hi, it's Tony. It's my first day. By the way, I have to tell you about a data breach.”

Just because an argument is novel—even if it fails—doesn't mean it's frivolous.

Federal judges aren't that keen on requests to censor their own rulings to make lying cops look better.

Get over it—she had plans way in advance. Also, Mike Huckabee is rude and can't spell.

Could be Rachel Brand or Noel Francisco or a U.S. Attorney. Or a potted plant.