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.
Financial institutions, accounting firms, and public companies turn to Paul Rugani to advise them in connection with their most significant exposures. Paul has helped his clients achieve victories through motion practice, at trial, and on appeal. And his advocacy for clients before government regulators has successfully minimized or avoided potential enforcement action.
Legal 500 touts Paul as a recommended attorney for Securities Litigation, observing that he is “among the most creative and strategic lawyers” who always has “an eye on the end game.” Paul achieved American Lawyer Litigator of the Week recognition as part of a team that achieved a ground-breaking New York Court of Appeals victory that substantially reduced financial exposure in RMBS repurchase litigation.
Leader of Orrick's Securities Litigation practice and deputy leader of the Firm's Financial Services Litigation practice, Paul has extensive experience representing clients in securities class actions, shareholder derivative lawsuits, commercial contractual disputes and other complex litigation matters at both the trial and appellate levels, as well as in connection with internal, government and regulatory investigations. Paul also counsels domestic and foreign accounting firms on matters related to state CPA licensing and state board regulation.
Posts by: Paul Rugani
NCUA Sues HSBC For Alleged Breaches of Duties as Trustee for 37 RMBS Trusts
On March 20, the National Credit Union Administration Board, acting as liquidating agent for five failed credit unions, filed suit against HSBC USA in the Eastern District Court of Virginia. NCUA alleged that HSBC breached its duties as trustee for 37 RMBS trusts from which the credit unions had purchased $2.37 billion in certificates. In particular, NCUA alleges that HSBC failed to enforce loan originators’ repurchase obligations in connection with alleged breaches of representations and warranties about the loans in the trusts, failed to prudently address servicer or master servicer defaults, and failed to ensure proper conveyance of the loan files to the trusts. NCUA asserts claims for breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, breach of the covenant of good faith, violation of the Streit Act, and violation of the Trust Indenture Act. Complaint.
Appellate Court Affirms in Part Denial of Moody’s Motion to Dismiss Fraud Claims
On March 20, the Appellate Division, Fourth Department, of the Supreme Court of New York affirmed in part and reversed in part the lower court’s denial of Defendant Moody Investor Services, Inc.’s motions to dismiss two actions filed against it arising out of credit ratings Moody’s assigned to CDO certificates. The court held that Plaintiffs’ fraud claims were sufficiently pled because, although Moody’s credit ratings were statements of opinion, not fact, Plaintiffs adequately alleged that Moody’s did not believe its opinions when it issued the ratings. The court held that the trial court erred, however, in denying Moody’s motion to dismiss Plaintiffs’ negligent misrepresentation claims because Plaintiffs failed to plead that a special or privity-like relationship existed between Plaintiffs and Moody’s and failed to adequately allege that Moody’s knew the CDOs would be marketed to Plaintiffs. Opinion.
RBS Motion to Dismiss RMBS Fraud Claim Granted in Part
On March 20, U.S. District Judge Paul G. Gardephe of the Southern District of New York granted in part and denied in part Defendants’ motion to dismiss a complaint filed by several HSH Nordbank affiliates against several RBS affiliates relating to Plaintiffs’ investment in RMBS issued or underwritten by RBS. The court held that Plaintiffs sufficiently alleged fraudulent intent in connection with alleged misstatements concerning the underlying loans’ compliance with underwriting guidelines, but failed to do so in connection with alleged misstatements concerning the loans’ LTV and CLTV ratios, and owner occupancy rates, as well as the RMBS certificates’ credit ratings and the validity of the assignment of the mortgages to the RMBS trusts. The court thus allowed Plaintiffs’ fraud and aiding and abetting fraud claims to proceed as to alleged misstatements concerning compliance with underwriting guidelines only. The court separately dismissed Plaintiffs’ claims for negligent misrepresentation and fraudulent concealment due to the absence of privity, as well as Plaintiffs’ claim for rescission based on mutual mistake. Order.
Court Dismisses FDIC’s Amended Complaint for Untimeliness
On March 24, Judge Laura Taylor Swain of the United States District Court for the Southern District of New York granted Defendants’ motion to dismiss an action filed by the FDIC, as receiver for two failed banks, related to RMBS certificates that the banks purchased. The court held the FDIC’s federal Securities Act claims to be untimely because they were filed outside of the statute of repose period provided by Section 13 of the Securities Act. The court further held that the “Extender Provision” of FIRREA does not preempt the statute of repose set forth in Section 13. The court held that the Extender Provision was indistinguishable from a similar provision in CERCLA that the Supreme Court recently held, in CTS Corp. v. Waldburger, did not preempt statutes of repose. Order.
Court Approves RMBS Settlement, Rejecting Institutional Investors’ Attempts to Scuttle It
On March 12, 2015, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York approved a $69 million settlement between the plaintiffs and defendants in Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of America and dismissed the case with prejudice. Plaintiffs, a class of investors, had sued Bank of America and U.S. Bancorp in their capacity as trustees for 50 Washington Mutual RMBS. Plaintiffs alleged that the trustees breached the Trusts’ Governing Agreements and the duty of food faith and fair dealing, and violated the Trust Indenture Act. Judge Forrest’s approval of the settlement came one week after she denied certain institutional investors’ motion to intervene in the action for purposes of blocking the settlement. The institutional investors, led by BlackRock and PIMCO, currently are asserting derivative claims against U.S. Bank, as Trustee, on behalf of 843 RMBS Trusts, and asserted that the settlement excluded them while simultaneously releasing their claims as to RMBS Trusts that overlapped between the two actions. The Court disagreed, finding that although BlackRock and PIMCO were excused from the settlement, the settlement did not release the claims they were pursuing. Order Approving Settlement. Stipulation and Settlement. Order Re Motion to Intervene.
Morgan Stanley Reaches Agreement to End DOJ Investigation into MBS Deals
On February 25, 2015, Morgan Stanley announced that it reached an agreement in principle with the U.S. Department of Justice, Civil Division, and the U.S. Attorney’s Office for the Northern District of Califoirnia, Civil Division (collectively, the “Civil Division”) to resolve claims that the Civil Division intended to bring against Morgan Stanley related to residential mortgage-backed securities. As part of the settlement, Morgan Stanley agreed to pay the Civil Division $2.6 billion. The exact nature of the resolved claims and additional terms of the settlement agreement were not specified. 8-K.
Citigroup, Goldman, and UBS to Pay $235 Million Settlement in MBS Class Action
On February 13, 2015, the plaintiffs in New Jersey Carpenters Health Fund, et al., v. Residential Capital, LLC, et al., No. 08-cv-8781 (S.D.N.Y.) filed an unopposed motion for certification of the class and to approve a preliminary settlement. The complaint, originally filed in 2008, included claims for materially false and misleading statements in securities offering documents under the Securities Act of 1933 against Citigroup, Goldman Sachs, and UBS as underwriters for 16 mortgage-backed securities transactions in 2006 and 2007. The class consists of investors who purchased the certificates, with the majority of the settlement funds set aside for investors who purchased their certificates within ten days after the relevant initial offering. The proposed $235 million settlement does not include a $100 million settlement with Residential Capital, LLC that had previously been reached in the case. Motion.
RMBS Fraud Claims Against Bank of America Dismissed
On February 6, 2015, Judge Stanley Chesler of the United States District Court for the District of New Jersey granted in part and denied in part Bank of America’s motions to dismiss two related cases filed against it by several Prudential Insurance Company affiliates. Prudential asserted common law fraud, misrepresentation, and RICO claims against several Bank of America entities arising out of Prudential’s investment in $1.9 billion in RMBS. Judge Chesler dismissed Prudential’s fraud claim, holding that Prudential failed to adequately allege falsity and/or scienter in connection with alleged misstatements concerning occupancy status, appraisals, and credit ratings. He also held that, for the 21 securitizations at issue for which Bank of America served as underwriter only, Prudential failed to allege with the required specificity which Bank of America entity made which challenged representations. Judge Chesler dismissed both of Prudential’s negligent misrepresentation claims. He granted Prudential limited leave to amend in connection with the fraud claim relating to those securitizations for which Bank of America served as underwriter only. Opinion.
Goldman Sachs Settles RMBS Suit
On February 6, 2015, plaintiffs Union Central Life Insurance, Ameritas Life Insurance, and Acacia Life Insurance filed a letter with the court stating that they had reached an agreement with Goldman Sachs to settle claims arising out of the insurance companies’ investments in RMBS sponsored by Goldman Sachs. The details of the settlement are not public. The plaintiffs had asserted causes of action for violations of federal securities laws as well as for common law fraud, negligent misrepresentation, and unjust enrichment. Letter.