On March 26, Capital Ventures International and several UBS affiliates filed a stipulation of dismissal after reaching a settlement disposing of all claims in the action. The terms of the settlement are undisclosed. Capital Ventures had sued UBS for alleged violations of the Massachusetts Uniform Securities Act in connection with $131 million in RMBS that Capital Ventures allegedly purchased from UBS. Stipulation.
Massachusetts Uniform Securities Act
Securities Claim Against UBS Based on RMBS Credit Ratings Allegations Revived
On July 22, Judge Denise Casper of the United States District Court for the District of Massachusetts permitted plaintiff Capital Ventures International to pursue Massachusetts Uniform Securities Act claims against UBS Securities, LLC alleging that UBS made misrepresentations concerning credit ratings in connection with over $109 million in RMBS. The court had previously dismissed these claims, but permitted Capital Ventures to amend them, and UBS again moved to dismiss. Despite its conclusion that credit ratings are statements of opinion, the court held that Capital Ventures could pursue MUSA claims relating to those ratings because the complaint adequately alleged that UBS did not subjectively believe the opinions reflected by the credit ratings when it included them in the offering documents at issue. Specifically, Capital Ventures alleged that UBS knew the data regarding the loans on which the ratings allegedly were premised was faulty, and therefore could not have believed the ratings that were issued. Order.
District of Massachusetts Denies in Part JP Morgan’s Motion to Dismiss RMBS Investor Suit
On February 13, Judge Rya W. Zobel of the District of Massachusetts dismissed in part, but largely sustained, an investor suit brought by Capital Ventures International (CVI) against J.P. Morgan and certain of its subsidiaries in connection with four RMBS offerings underwritten by J.P. Morgan and Bear Stearns. CVI brought the suit under the Massachusetts Uniform Securities Act (MUSA), claiming that the defendants violated MUSA by making material misstatements in the offering materials. The court dismissed one of the claims against the RMBS sponsors, finding an insufficient relationship between the sponsors and CVI to support liability under section 410(a)(2) of MUSA. The court also dismissed one of the claims against the RMBS depositors for lack of control required under 410(b) of MUSA. The court otherwise denied the motion to dismiss with respect to all other parties and claims, finding (1) that there were sufficient allegations of material misstatements against the RMBS underwriters, including allegations concerning underwriting guidelines, appraisals and LTV/CLTV ratios, owner-occupancy status, and credit ratings, (2) the claims were not time-barred, (3) the depositors could be liable as issuers under SEC Rule 159A, and (4) sufficient allegations of control by the RMBS sponsors over the depositors. Decision.
California Federal Court Partially Dismisses RMBS Claims In Countrywide MDL Action
On April 16, 2012, Judge Mariana R. Pfaelzer of the Central District of California dismissed in part an RMBS action brought by Massachusetts Mutual Life Insurance Co. (“MassMutual”) against Countrywide, JPMorgan, Deutsche Bank, UBS, and various individual defendants. This case, which asserts claims under the Massachusetts Uniform Securities Act (“MUSA”), was transferred to the Countrywide MDL for pre-trial proceedings. In addressing defendants’ initial motions to dismiss on the issues of timeliness, standing and jurisdiction, Judge Pfaelzer found that the court lacked personal jurisdiction over the individual defendants who moved on this ground and dismissed all claims against them with prejudice. Judge Pfaelzer also found that only the Underwriter Defendants could be held liable as a seller under the MUSA, and dismissed the MUSA claims against the other defendants with prejudice. Judge Pfaelzer declined to dismiss the remaining claims based on the statute of limitations. Decision.
Investor Group Sues UBS for Mortgage-Backed Securities Losses
On November 2, 2011, Capital Ventures, an investor group, sued UBS in Massachusetts federal court, claiming that UBS Securities misled it into purchasing securities backed by faulty mortgage loans by misrepresenting the quality of those loans in the offering materials. Capital Ventures alleges it purchased more than $109 million worth of mortgage-backed securities from UBS over six separate transactions and that a significant portion of that value has been lost as the mortgages underlying the securities have defaulted. Capital Ventures alleges claims under the Massachusetts Uniform Securities Act. Complaint.
Mass. Mutual Life Insurance Files New RMBS Complaint
On May 23, 2011, Massachusetts Mutual Life Insurance Co. (“MassMutual”) filed a complaint in the U.S. District Court for the District of Massachusetts, alleging violations of the Massachusetts Uniform Securities Act in connection with MassMutual’s purchase of $13 million in RMBS from HSBC and its subsidiaries. MassMutual alleges that in marketing the sale of the RMBS, defendants misrepresented that the underlying loans were prudently underwritten and had certain characteristics, including specific loan-to-value ratios and owner-occupancy statistics. Complaint.
Massachusetts Mutual Life Insurance Co. Files Two New RMBS Actions
On May 6, 2011, Massachusetts Mutual Life Insurance Co. filed two complaints in the U.S. District Court for the District of Massachusetts, both alleging violations of the Massachusetts Uniform Securities Act in connection with MassMutual’s purchases of RMBS. The first action concerns RMBS sponsored by Impac Funding Corporation, and asserts claims against Impac, one of its affiliates, two of its officers who signed the relevant registration statements, and J.P. Morgan Securities as successor-in-interest to two of the RMBS underwriters. The second action concerns RMBS originated by non-party American Home Mortgage Investment Corp. (“AHM”), and asserts claims against one of the RMBS sponsors, several depositors and underwriters, and several of AHM’s and Bear Stearns’s officers who signed the relevant registration statements. MassMutual alleges that in marketing the sale of the RMBS, defendants misrepresented that the underlying loans were prudently underwritten and had certain characteristics, including specific loan-to-value ratios and owner-occupancy statistics. MassMutual v. Impac Complaint. MassMutual v. Goldman Complaint.
Mass Mutual Sues RBS Over $235 Million in RMBS Under Massachusetts’ Blue Sky Laws
On February 24, 2011, Massachusetts Mutual filed a complaint in the United State District Court for the District of Massachusetts against RBS Financial Products, a number of its affiliates (many of them also former Greenwich Capital entities), and certain former Greenwich Capital officers. The complaint alleges that defendants misrepresented the quality of the loans underlying $235 million worth of RMBS underwritten and sold by the corporate defendants to Mass Mutual. Plaintiff claims that defendants’ representations regarding underwriting standards, loan-to-value ratios, and rates of owner occupancy were materially false. The complaint seeks rescission and/or damages against the corporate defendants as primary violators of the Massachusetts Uniform Securities Act, and seeks to hold the officer defendants jointly and severally liable as controlling persons of the primary violators. Complaint.