On February 25, the National Credit Union Administration Board (“NCUA”) accepted an offer of judgment tendered by UBS Securities LLC (“UBS”) in the amount of $33,014,285 plus prejudgment interest, which will be calculated by the court. NCUA and UBS will attempt to agree on costs and fees also to be paid by UBS. Acting as the liquidating agent for Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union, NCUA’s complaint alleged that UBS made material misstatements in connection with the sale of 20 RMBS certificates, alleging more than $918 million in actual gross losses. UBS specified in the offer of judgment that its offer should not be construed as an admission of liability. Offer of Judgment. Complaint.
RMBS certificates
Eleven Banks Reach Settlement with Commonwealth of Virginia on RMBS Claims
On Friday, January 22, 2016, eleven banks, including Merrill Lynch, RBS, and Barclays, agreed to settle claims brought by the Commonwealth of Virginia in a 2014 action alleging misrepresentations as to the nature, quality, characteristics, and risk profile of RMBS certificates. The certificates were purchased by the Virginia Retirement System, an agency of the Virginia Commonwealth. In its complaint, the Commonwealth alleged injury of $383.91 million and demanded treble damages of $1.15 billion, plus a civil penalty of $5,000-$11,000 per violation. The settlement announced on January 22 is for $63 million. Press Release. Complaint.
Court Enters $806 Million Judgment in FHFA v. Nomura
On May 16, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York entered a judgment requiring Nomura and RBS to buy back, at a total cost of $806 million, seven RMBS certificates sold to Fannie Mae and Freddie Mac from 2005 to 2007. The judgment stemmed from Judge Cote’s May 11, 2015 Opinion finding Nomura and RBS liable for violations of the Securities Act of 1933, the D.C. Securities Act, and the Virginia Securities Act. For those certificates for which FHFA prevailed under multiple statutes, FHFA was permitted to, and did, elect the maximum available remedies. Judge Cote also ordered that FHFA is entitled to post-judgment interest, reasonable attorneys’ fees, and costs. Judgment.
Nomura Found Liable in RMBS Trial
On May 11, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York found Nomura Holdings Inc. liable for inaccurately characterizing the mortgage loan collateral backing seven RMBS certificates it sold to Fannie Mae and Freddie Mac between 2005 and 2007. The suit against Nomura is the last that remains of sixteen lawsuits originally filed against by FHFA against RMBS issuers and sellers alleging violations of Sections 12(a)(2) and 15 of the 1933 Securities Act and state securities laws. Judge Cote’s decision followed a nearly 4-week bench trial that concluded on April 9, 2015.
In a 361-page decision, Judge Cote found, among other things, that 45% to 59% of the sample loans were materially defective insofar as they deviated from relevant underwriting guidelines, and that 27% of the sample loans were subject to inflated appraisals. Judge Cote treated this as strong circumstantial evidence that the appraisers did not believe in the credibility of their appraisals at the time that they were made. Additionally, Judge Cote found that inadequacies in credit ratings of the offered certificates were due to inaccurate loan tapes Nomura provided to the rating agencies. Finally, Judge Cote found that Nomura’s due diligence practices were insufficient, and rejected Nomura’s argument that market conditions, and not the misrepresentations, caused the losses alleged. Judge Cote did not specify the amount of damages and asked the parties to submit a proposed judgment by May 15, 2015. Opinion and Order.
RMBS Claims Against Ratings Agencies Dismissed as Time-Barred
On March 27, 2015 Judge John Robert Blakely of the U.S. District Court for the Northern District of Illinois granted Standard & Poor’s Financial Services, LLC’s and Moody’s Investors Service, Inc.’s motion to dismiss claims brought by First National Bank and Trust Co. of Rochelle, Illinois arising out of First National’s purchase of certain RMBS certificates. First National asserted causes of action under the Illinois Consumer Fraud and Deceptive Business Practices Act, the Uniform Deceptive Trade Practices Act, as well as other common law misrepresentation claims, alleging that it had been induced to purchase the certificates in reliance upon misstatements by the ratings agencies. Judge Blakely dismissed the complaint as time-barred by the Illinois Securities Law’s five-year statute of repose. He first concluded that the ISL’s statute of repose applied to First National’s claims because the facts alleged, if proven, would have established a violation of the ISL sections on fraud or deceit in connection with the purchase or sale of securities, and because the ISL specifically provided for the injunctive relief requested by First National. Judge Blakely then found all claims untimely because the RMBS certificates at issue were purchased in February 2008, five years and four months before First National’s suit was filed. Order.
Court Grants in Part and Denies in Part JPMorgan’s Motion to Dismiss RMBS Action
On October 16, Judge Susan J. Dlott of the United States District Court for the Southern District of Ohio granted in part and denied in part several JPMorgan entities’ motion to dismiss a complaint filed by several Western & Southern Life Insurance entities relating to $202 million in RMBS certificates. Western & Southern asserted 14 causes of action, including claims for violations of the Ohio Securities Act, the Ohio RICO statute, the federal Securities Act of 1933, and for common law fraud, conspiracy, and tortious interference with contract. The court dismissed Ohio Securities Act claims as to certain certificates, finding them time barred under Ohio’s five-year statute of repose. The court declined to dismiss the remaining Ohio Securities Act claims as untimely, holding that when Western & Southern was put on notice of its claims for statute of limitations purposes was a question of fact. The court also held that Western & Southern adequately alleged falsity and scienter with respect to alleged misstatements concerning underwriting guidelines, appraisals, owner occupancy, credit ratings, and title transfer. As to the federal Securities Act claims, the court held that they were time barred under the applicable three-year statute of repose and that Western & Southern could not rely on American Pipe tolling to extend the period for filing its claims. The court dismissed the tortious interference with contract claim on the ground that the claim is not available against a party to the contract at issue. Finally, the Court held that the Ohio RICO claims were sufficiently pled. Order.
Allstate Sues Countrywide for Securities Fraud
On December 27, 2010, Allstate Insurance Company filed a complaint in the Southern District of New York against Countrywide Financial Corporation and several affiliates and individual officers alleging a variety of federal securities claims in connection with alleged material misstatements or omissions in the offering documents for several RMBS. Allstate seeks rescission and damages in connection with its alleged purchases of $700 million in RMBS certificates from Countrywide during the period from March 2005 to June 2007. Complaint.