On June 29, Judge Lewis A. Kaplan of the Southern District of New York certified a class of investors, led by Vaszurele Ltd., in their action against Credit Suisse Securities (USA) LLC (“Credit Suisse”). The investors allege that Credit Suisse misrepresented the underwriting quality of loans originated by IndyMac Bank FSB in a $642 million RMBS offering. The court found plaintiffs met each element for class certification, rejecting Credit Suisse’s argument that the varying sophistication of the investors should bar certification of the class. Decision.
class certification
Class Certified, but at Reduced Size, in Washington Mutual RMBS Litigation
Judge Pechman of the U.S. District Court for the Western District of Washington issued an order on October 21, 2011 granting Plaintiffs’ motion to certify a class of investors in certain Washington Mutual RMBS on a substantially narrower basis than Plaintiffs had requested. The lawsuit, which brings claims under Section 11 of the Securities Act of 1933, involves 6 offerings that collectively contained 123 separate tranches of certificates. Plaintiffs, who purchased in only 13 of the tranches, sought to certify a class of all investors in any tranche of any of the 6 offerings. The court found that each tranche represents a different security and that Plaintiffs lacked standing to sue as to any tranche in which they had not purchased. Judge Pechman thus both denied class certification and granted judgment on the pleadings in favor of Defendants as to those tranches. As to the remaining 13 tranches in which Plaintiffs had purchased, the court found that class certification was appropriate. Decision.
SDNY Grants Class Certification to Investors in RMBS Suit Against Credit Suisse
Judge Paul A. Crotty in the U.S. District Court for the Southern District of New York certified a class of investors in a $2.4 billion suit against Credit Suisse for alleged misrepresentations in connection with the sale of RMBS. Credit Suisse argued that no class should be certified because several investors were sophisticated, had large claims against Credit Suisse, and could therefore bring individual claims. The court found, however, that “sophistication and size of certain class members are not bars . . . .” The court also rejected Credit Suisse’s argument that the proposed class was in conflict given its members’ investments in different tranches of RMBS, and that the wide availability of sufficient information about the RMBS collateral meant that the investors’ degree of knowledge regarding the falsity of the alleged misrepresentations should be determined on an individualized basis. The investors are suing under Sections 11, 12, and 15 of the Securities Act. Decision.
SDNY Denies Class Certification in Two Mortgage-Backed Securities Cases
On January 18, 2011, Federal District Court Judge Harold Baer of the Southern District of New York denied plaintiffs’ motion for class certification in two related RMBS cases. Plaintiffs had sought certification of a class of all purchasers of various RMBS in connection with their claims under Sections 11, 12(a)(2) and 15 of the Securities Act which alleged that the offering documents for the RMBS contained material misrepresentations. Judge Baer concluded that class certification was not justified because individual issues – including differences in the timing of purchases and sophistication among the investors – predominated over common ones. Judge Baer also found that the proposed class consisted of sophisticated investors with sufficient resources and incentives to pursue independent litigation should they choose to do so. Decision.