Sixth Circuit Affirms Dismissal of RMBS Case Against Bear Stearns

On June 20, 2012, the Sixth Circuit affirmed an order by the Western District of Kentucky granting Bear Stearns’s motion to dismiss claims brought against it by Republic Bank & Trust Co. arising out of Republic Bank’s purchase of $52 million in RMBS. The Sixth Circuit’s ruling largely rested on Republic Bank’s failure to plead its claims with the required particularity. Specifically, the court found that allegations that prudent loan underwriting standards had not been followed and that property valuations were inaccurate were too general and not sufficiently tied to the loans backing the particular securities Republic Bank purchased. The court also found that many of the facts that Republic Bank alleged to have been misrepresented were in fact disclosed in the offering documents for the securities. Republic Bank admitted it had not read the offering documents prior to its purchases, conduct the court criticized as in dereliction of Republic Bank’s duty to exercise ordinary diligence. Opinion.