S.D.N.Y. Dismisses Putative Class Action Against Novastar, Underwriters, Officers, and Credit Rating Agencies

N.J. Carpenters Health Fund v. Novastar Mortgage, Inc., No. 08 Civ. 5310 (S.D.N.Y. Mar. 31, 2011) (Batts, J.)

In this putative class action, investors brought claims under Sections 11, 12(a)(2) and 15 of the ’33 Act against the originator, depositor, directors and officers of the depositor, and underwriters of the securities, as well as various credit rating agencies. Judge Deborah Batts of the Southern District of New York granted defendants’ motions to dismiss, finding that plaintiffs failed to plead sufficient facts to support their allegations regarding Novastar’s underwriting practices. The Court also held that plaintiffs’ allegations concerning appraisals, loan-to-value ratios, and certificate ratings were non-actionable statements of opinion. The court granted leave to amend concerning the underwriting guidelines, but dismissed the remaining claims with prejudice. Decision.