Asset Management Fund Sues Bank of America, Merrill Lynch, Countrywide, and Others for $478 Million

On March 1, 2012, Asset Management Fund filed a summons with notice in New York state court against Bank of America, Merrill Lynch, Countrywide, Credit Suisse, Goldman Sachs, and others.  Asset Management Fund alleges that it purchased $239 million in RMBS from defendants, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions.  The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract.  Asset Management Fund is seeking approximately $478 million in damages, including punitive damages, and alternatively seeks rescission.  Summons.

JPMorgan Sued for $314 Million by Deutsche Zentral-Genossenschaftsbank

On March 1, 2012, Deutsche-Zentral Genossenschaftsbank (“DZ Bank”) filed a summons with notice in New York state court against Bear Stearns, JPMorgan Chase, and related entities.  DZ Bank alleges that it purchased $157 million in RMBS from defendants, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions.  The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract.  DZ Bank is seeking approximately $314 million in damages, including punitive damages, and alternatively seeks rescission.  Summons.

JPMorgan Sued for $228 Million by Principal Life Insurance

On March 1, 2012, Principal Life Insurance Company filed a summons with notice in New York state court against JPMorgan Chase and related entities.  Principal alleges that it purchased $114 million in RMBS from JPMorgan, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions.  The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract.  Principal is seeking approximately $228 million in damages, including punitive damages, and alternatively seeks rescission.  Summons.

New York Court Dismisses Insurer Claims In $1.8 Billion RMBS Suit

On February 28, 2012, New York State Supreme Court Judge Bernard J. Fried rejected an attempt by Syncora and CIFG Assurance to plead new claims against Greenpoint Mortgage Funding after their initial claims were dismissed in March of 2010.  The court held that the new claims, which were based on evidence, documents and knowledge that the insurers had during the initial suit, were barred by the doctrine of res judicata, which precludes relitigation of issues already decided.  The initial suit was filed by the insurers and U.S. Bank as trustee for over $1.8 billion.  Decision.

Wall Street Firms Disclose Government Investigations Of RMBS Activities

Bank of America, Citigroup, Wells Fargo, JP Morgan, and Goldman Sachs announced in their respective 2011 Forms 10-K filed with the SEC that they have received requests and subpoenas seeking documents, testimony and other information from government regulators including the SEC, DOJ Civil Division, state attorneys general, and bank regulators. These requests and subpoenas appear to be focused on issues relating to the sale and offering of mortgage-backed securities. Goldman Sachs, JP Morgan, and Wells Fargo also acknowledged that they have received Wells notices advising them of possible SEC civil or administrative action.  Bank of America.  Citigroup.  Wells Fargo.  JP Morgan.  Goldman Sachs.

Second Circuit Orders Bank of America Settlement Remanded to New York Supreme Court

On February 27, 2012, the United States Court of Appeals for the Second Circuit reversed the decision of the United States District Court for the Southern District of New York and ordered the district court to remand to New York State Supreme Court the proceeding seeking court approval of the $8.5 billion Bank of America settlement of claims based on alleged breaches of representations and warranties in connection with RMBS securitizations.  The district court had determined that it had subject matter jurisdiction pursuant to the Class Action Fairness Act, reasoning that the settlement approval proceeding constituted a “mass action.”  In reversing, the Second Circuit concluded that the “securities exception” to the Act applied, and that the federal court therefore lacked jurisdiction.  Decision.

Deutsche Bank Sued For RMBS Losses in New York State Court

On February 14, 2012, Phoenix Light and seven other plaintiffs sued Deutsche Bank, Ace Securities, and related entities in New York state court for $300 million in damages resulting from the purchase of allegedly overvalued RMBS. In their summons with notice, Plaintiffs allege that the offering materials for the RMBS contained material misrepresentations and omissions regarding the underwriting standards and quality of the loans underlying the RMBS. Plaintiffs allege claims for common-law fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud. Summons.

Syncora Sues JP Morgan For Losses From Insuring RMBS

On February 14, 2012, Syncora Guarantee filed a complaint in New York state court against JP Morgan, Bear Stearns, and EMC Mortgage alleging $52 million in losses incurred by the insurance company as a result of its insuring RMBS issued by the defendants. Syncora alleges that the defendants misrepresented not only the quality of the home-equity line of credit residential mortgages underlying the RMBS, but also the quality of their due diligence processes during the securitization. Syncora brings claims for breach of contract and common-law fraudulent inducement. Complaint.

Wells Fargo Settles RMBS Suit by Union Central Life Insurance Co.

On February 8, 2012, Wells Fargo Bank N.A. settled a lawsuit brought against it by Union Central Life Insurance Co. Union Life had alleged that Wells Fargo had misstated the underwriting and due diligence standards used to issue the loans that were pooled and securitized. The claims against Wells Fargo totaled approximately $43 million. Complaint. The settlement was announced during a case status conference before Judge George B. Daniels of the Southern District of New York.

RMBS Suits Against Deutsche Bank Dismissed

On February 7, 2012, Judge Jed Rakoff of the Southern District of New York dismissed claims against Deutsche Bank that had been brought by Dexia SA and Teachers Insurance & Annuity Association arising out of the purchase of $1.3 billion in RMBS. Judge Rakoff issued a preliminary order finding that plaintiffs’ complaint did not meet the pleading requirement that claims of fraud must be pled with particularity. In its order, the Court distinguished between claims in connection with loans sponsored Deutsche Bank, which were dismissed without prejudice, and claims in connection with loans not sponsored by Deutsche Bank, which the Court dismissed with prejudice. Judge Rakoff stated that a more formal written opinion will be forthcoming. Order.