Within 90 days of filing a declaratory judgment complaint and within 60 days of filing a motion for summary judgment on that complaint, Skadden won summary judgment in favor of Merrill Lynch on June 10 in a lawsuit in the U.S. District Court for the Southern District of New York defeating monoline insurer XLCA's attempt to terminate approximately $3 billion in credit default swaps. XLCA asserted that Merrill Lynch had anticipatorily repudiated the credit default swaps by having entered into certain other swaps with a different monoline insurer. Merrill Lynch argued that XLCA improperly issued the notices purporting to terminate the credit-default swaps "without any basis and under a pretext based entirely on rank speculation."
Judge Jed Rakoff agreed, granting Merrill Lynch's motion for summary judgment in all respects and declaring that Merrill Lynch had not repudiated its obligations and that the terminations were without effect. This victory has been described in the financial and legal press as a bellwether case in enforcing the terms of credit default swaps as written.