FDIC Files Five Lawsuits Against Bank Entities Over RMBS

On August 10, the FDIC in its capacity as receiver for Colonial Bank filed five lawsuits – three in Alabama state court, one in New York federal court, and one in California federal court – seeking $741 million in damages from a number of investment banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup, Inc., and others, for making allegedly false and misleading statements that induced Colonial Bank into buying mortgage-backed securities.  The FDIC alleges that the banks made numerous false and misleading statements in the offering documents for the RMBS regarding the credit quality of the mortgage loans underlying the securities.  The three Alabama cases each assert two causes of action under the Alabama Securities Act, as well as causes of action under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Securities Act).  The New York and California cases each assert causes of action under Sections 11 and 15 of the Securities Act.  

Complaint: Alabama – FDIC v Bank of America, et al. 
Complaint: Alabama – FDIC v Citigroup Mortgage Loan Trust, et al. 
Complaint: Alabama – FDIC v Countrywide Securities Corp, et al. 
Complaint: New York – FDIC v Chase Mortgage Finance Corp., et al. 
Complaint: California – FDIC v Countrywide Securities Corp, et al. 

German Bank Sues JP Morgan Over $2.1 Billion in RMBS

On November 21, 2011, German bank Bayerische Landesbank (“BayernLB”) filed a complaint in New York state court against JPMorgan Chase & Co. and several related entities, including several former Washington Mutual and Bear Stearns entities, seeking approximately $2.1 billion in damages in connection with its purchase of certificates in 57 RMBS offerings. BayernLB asserts causes of action for common law fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation, and successor and vicarious liability, based on allegations that JPMorgan concealed the poor quality of loans underlying those securities and provided misinformation to credit rating agencies. Complaint.

Knights of Columbus Seek Damages from Bank of New York Mellon

On August 16, 2011, the Knights of Columbus amended their complaint against Bank of New York Mellon in New York state court to seek damages from BNY Mellon as trustee of 18 RMBS trusts serviced by Countrywide Financial Corp. In an initial complaint filed in May, the Knights of Columbus sought an accounting for the 18 trusts. Alleging that information obtained after the filing of that complaint demonstrates that BNY Mellon has violated its contractual and other obligations, the amended complaint seeks to preserve plaintiff’s claims against BNY Mellon for breach of contract, breach of fiduciary duty, negligence, and unfair trade practices to the extent that those claims survive Bank of America’s proposed $8.5 billion settlement of Countrywide Financial Corp. representations and warranties claims. Complaint.

National Credit Union Administration Sues Goldman Sachs Over Sale of MBS

On August 9, 2011, the National Credit Union Administration Board (“NCUA”) sued Goldman Sachs in federal court in Los Angeles over Goldman’s sale of mortgage-backed securities to credit unions. NCUA claims that Goldman misrepresented the quality of the loans backing the securities in its offering documents. It also claims that the loans did not satisfy the underwriting guidelines Goldman included in its offering documents. The Complaint cites the Financial Crisis Inquiry Commission Report issued in January 2011 in support of its claims that mortgage loan originators disregarded prudent underwriting practices and securitizers like Goldman did not perform sufficient due diligence, leaving investors without access to critical information about the loans. NCUA alleges claims under Sections 11 and 12(a)(2) of the ’33 Act, Sections 25401 and 25501 of the California Corporate Securities Law of 1968, and Section 17-12a509 of the Kansas Uniform Securities Act. NCUA seeks more than $491 million in damages. NCUA has brought four actions against other RMBS issuers since June 20, 2011. Complaint.

Allstate Sues JP Morgan, WaMu and Bear Stearns Over Sale of RMBS

On February 16, 2011, several Allstate Insurance entities filed a complaint against a number of JP Morgan, Washington Mutual and Bear Stearns entities and certain Washington Mutual directors and officers in the Southern District of New York. Plaintiffs allege that defendants misrepresented the quality of the loans underlying over $757 million in RMBS they sold to Allstate. Allstate is represented by the Quinn Emanuel firm. Complaint.

SEC Files Complaint for Securities Fraud Against Former IndyMac Bank CFO

On February 11, 2011, the SEC filed a complaint in the Central District of California against IndyMac’s former Chief Financial Officer, S. Blair Abernathy, alleging violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act in connection with six IndyMac RMBS offerings in 2007 and several other public securities filings in 2008 on behalf of IndyMac Bancorp, Inc. The complaint alleges that, in 2007, Abernathy received monthly reports indicating that 12%-18% of IndyMac Bank’s loans contained misrepresentations, but that he failed to take reasonable steps to ensure that IndyMac’s RMBS offering documents included adequate disclosures in light of that information. It also alleges that Abernathy was negligent in failing to adequately disclose to investors the deteriorating financial condition of IndyMac Bancorp once he became its CFO in 2008. Complaint.