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United States District Court Judge Richard Sullivan issued a decision on February 11, 2010 denying the MBIA Defendants' motion to dismiss the class action fraudulent conveyance lawsuit brought by the Firm on behalf of clients Aurelius Capital and Fir Tree Capital in the Southern District of New York over MBIA, Inc. 's February 2009 so-called "transformation" transactions. Up until February 2009, MBIA, Inc.'s principal operating subsidiary, MBIA Insurance Corp., was the world’s largest “monoline” financial guaranty insurer of municipal bonds as well as “structured finance” products such as residential and commercial mortgage backed securities, other asset backed securities and collateralized debt obligations. The lawsuit alleges that the publicly traded parent company MBIA, Inc. orchestrated a massive fraudulent conveyance transaction in which the MBIA Defendants stripped over $5.4 billion of assets from MBIA Insurance Corp at the height of the worldwide financial meltdown to create a separate U.S. municipal bond insurance subsidiary, leaving MBIA Insurance Corp. insolvent, without sufficient capital and unable to satisfy the claims of its policyholders who purchased approximately $241 billion in structured finance products insured by MBIA Insurance. Following the transactions, MBIA Insurance Corp policy obligations, which had been sold by MBIA as Triple AAA rated, were reduced to junk status by Moody's, MBIA Insurance preferred stock began selling for ten cents on the dollar and credit default protection against MBIA Insurance default required an up front payment of 70 cents for every dollar of protection sought.

MBIA moved to dismiss the Complaint last May, principally on the ground that the transactions had been approved by the New York Insurance Department. In response, Aurelius and Fir Tree contended that the MBIA Defendants misled the New York Insurance Department to obtain the approvals for the transactions by grossly understating their projected losses by billions of dollars, that the approvals did not address the fraudulent conveyance and bad faith claims presented in the lawsuit and that their lawsuit could not be dismissed based upon Insurance Department approvals for which they were not given notice or an opportunity to be heard in the approval process. MBIA also asked the court to abstain from handling the case in favor of the similar state court fraudulent conveyance lawsuits brought by 19 banks against the MBIA companies. Following oral argument, Judge Sullivan denied the motion to dismiss in all respects.

David Ichel argued the motion to dismiss, and the Simpson Thacher team is additionally comprised of Barry Ostrager, Patrick Shilling, Jodie Sopher Pimentel, Meg Ciavarella and Mary Ann Totino, along with paralegal Steve Wilson.