Barclays and MassMutual Settle RMBS Litigation

On March 29, Barclays Capital Inc. and Massachusetts Mutual Life Insurance Co. jointly moved pursuant to a confidential settlement agreement for dismissal of an action brought by MassMutual.  MassMutual brought claims under the Massachusetts Uniform Securities Act concerning $175 million in RMBS.  MassMutual alleged that Barclays had made false representations about the quality and risk of default of the underlying loans. Motion for Dismissal. Complaint.

Morgan Stanley Settles RMBS Litigation with FDIC for $63M

On January 29, Morgan Stanley and the Federal Deposit Insurance Corporation agreed to settle five suits encompassing state and federal claims alleging that Morgan Stanley made misrepresentations in offering residential mortgage-backed securities to three now-defunct banks.  Morgan Stanley will pay $63 million to the FDIC, as receiver for Colonial Bank of Montgomery, Alabama, Security Savings Bank of Henderson, New York, and United Western Bank of Denver, Colorado.  Morgan Stanley denied all liability regarding the claims, and the settlement agreement specified that the parties settled in order to avoid further litigation.  The settlement was reached in coordination with the Department of Justice.  Settlement and Release Agreement.

Morgan Stanley Settles RMBS Suits With NCUA

On December 10, 2015, the National Credit Union Administration (“NCUA”) announced Morgan Stanley’s agreement to pay $225 million to settle litigation brought in New York and Kansas federal courts by NCUA as liquidating agent of U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, and Southwest Corporate Federal Credit Union (the “Credit Unions”), all of which failed during the financial crisis.  In the settled claims – previously covered here and here – NCUA alleged that Morgan Stanley had materially misrepresented the collateral characteristics of RMBS it sold to the Credit Unions.  Morgan Stanley did not admit fault in the settlement. Press release.

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.