On June 8, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation extended the deadline for Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS to present their upcoming resolution plans to July 1, 2017, as a result of these entities engaging in restructuring in order to be in “compliance with the Federal Reserve Board’s Intermediate Holding Company (IHC) requirement[.]” Press release. Press release.
Credit Suisse
Class Certification Granted In $642M RMBS Suit Against Credit Suisse
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.
FDIC Brings Two RMBS Lawsuits Against Several Investment Banks and Related Entities
On May 18, 2012, the FDIC, in its capacity as receiver for two failed banks, filed two actions in the Southern District of New York arising out of the banks’ alleged purchase of RMBS. In the first suit, the FDIC asserts claims on behalf of Citizens National Bank and Strategic Capital Bank that arise out of the banks’ investment in ten RMBS certificates worth $140.5 million issued and/or underwritten by the defendants, including Bear Stearns, Citigroup, Credit Suisse, Merrill Lynch, and Deutsche Bank. Complaint. In the second suit, the FDIC asserts claims on behalf of Strategic Capital Bank arising out of the bank’s investment in five RMBS certificates worth $31 million underwritten by JP Morgan, Citigroup, Bank of America, and Deustche Bank. Complaint. In both suits, the FDIC alleged that the defendant banks violated Sections 11 and 15 of the Securities Act of 1933 by making material misstatements and omissions in the certificates’ registration statements regarding, among other things, the loan to value ratios of the mortgages underlying the certificates, the appraisal standards used in connection with the appraisals of the underlying properties, whether the borrowers intended to occupy the properties as their primary residences, and whether the originators complied with their underwriting guidelines when originating the underlying mortgages. The FDIC seeks a combined total of $77 million in damages, plus attorneys’ fees and costs.
Asset Management Fund Sues Bank of America, Merrill Lynch, Countrywide, and Others for $478 Million
On March 1, 2012, Asset Management Fund filed a summons with notice in New York state court against Bank of America, Merrill Lynch, Countrywide, Credit Suisse, Goldman Sachs, and others. Asset Management Fund alleges that it purchased $239 million in RMBS from defendants, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions. The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract. Asset Management Fund is seeking approximately $478 million in damages, including punitive damages, and alternatively seeks rescission. Summons.
German Bank Initiates Mortgage-Backed Security Action Against Credit Suisse
On November 10, 2011, IKB Deutsche Industriebank AG sued several Credit Suisse entities in the Supreme Court of New York, bringing claims for common law fraud, aiding and abetting fraud, and negligent misrepresentation, as well as claims under Sections 11, 12 and 15 of the Securities Act of 1933, in connection with nearly $215 million in RMBS allegedly purchased by IKB. To date, IKB has filed only a summons with notice. Without making any factual allegations, IKB seeks rescission and damages. Summons.
Allstate RMBS Suit Against Credit Suisse Remanded to New York State Court
Judge Buchwald of the U.S. District Court for the Southern District of New York issued an order on October 19, 2011, remanding a suit brought by Allstate against Credit Suisse and related entities arising out of alleged misrepresentations made in connection with over $200 million of RMBS allegedly purchased by Allstate. Defendants had removed the action on “related to bankruptcy” grounds on the basis that three of the originators of loans underlying Allstate’s certificates, against whom Defendants had potential claims for indemnification, had declared bankruptcy. The court found that because Defendants had not asserted any of the indemnification claims against the bankrupt originators, and because the time to do so in the relevant bankruptcy proceedings had passed, that Defendants had not shown a sufficient relation to those bankruptcy proceedings to justify the exercise of federal jurisdiction. The court further found that even if Defendants had shown that related to bankruptcy grounds existed, the court still would be required to remand the action on mandatory abstention grounds. Decision.
Monoline Insurer Assured Files Suit Against DLJ and Credit Suisse
On October 17, 2011, Assured Guaranty Municipal Corp. filed a lawsuit in the Supreme Court of New York against DLJ Mortgage Capital, Inc. and Credit Suisse Securities for breaches of mortgage representations and repurchase obligations in connection with six RMBS. Assured, which insured the securities, alleges that DLJ warranted and vouched for the quality of the loans and agreed to repurchase, substitute, or cure any loans that breached the warrantees. Assured also alleges that its forensic re-underwriting review revealed that 93% of the underlying loans did not meet the agreed-upon qualifications. Assured asserts claims for breach of contract and declaratory judgment. Complaint.
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.
Orrick Obtains Dismissal of Ambac’s Fraud Claim Against Credit Suisse
Ambac Assurance Corp. v. DLJ Mortgage Capital, Inc./ Credit Suisse, No. 600070/2010 (Sup. Ct. N.Y. Apr. 7, 2011) (Kornreich, J.)
Justice Shirley Kornreich of the Supreme Court of the State of New York dismissed Ambac Assurance Corp.’s claim that it was fraudulently induced to insure a Credit Suisse RMBS issuance. Among other things, the Court found that an allegedly fraudulent representation that the loans at issue conformed to underwriting guidelines was not actionable because Ambac had access to all relevant information and failed to investigate, and because Ambac failed to obtain a contractual representation or warranty. Other aspects of the fraud claim were dismissed as duplicative of Ambac’s contract claim, which alleges that certain loans did not meet applicable representations and warranties. Orrick represents Credit Suisse in this matter. Decision.
Plaintiffs Seeks Approval of $70 Million Settlement in Investor Class Action Against Credit Suisse
On March 10, 2011, lead plaintiffs in an investor class action against Credit Suisse Group AG and related individual defendants filed an unopposed motion in the US District Court for the Southern District of New York asking Judge Marrero to preliminarily approve a $70 million settlement in that action on behalf of all defendants. The investors had sued Credit Suisse for claims under Sections 10(b) and 20(a) of the Exchange Act, alleging that Credit Suisse had inflated its stock price by falsely representing to investors that the firm was successful in limiting the risk and losses of its RMBS and CDOs from the subprime and credit crises because it had exceptional risk management practices and internal controls. The proposed settlement class includes all purchasers of Credit Suisse American Depository Shares on the NYSE and all US residents who purchased Credit Suisse common stock on the Swiss Stock Exchange from February 15, 2007 through April 14, 2008 who have not otherwise timely opted out of the class. Notice. Settlement Agreement. Second Amended Class Complaint.