On August 26, Judge Mariana R. Pfaelzer of the U.S. District Court for the Central District Court of California dismissed with prejudice a suit brought by the Federal Deposit Insurance Corporation (FDIC) against Countrywide Securities Corporation, Countrywide Financial Corporation, Bank of America Corporation, Deutsche Bank Securities, Inc. and Goldman, Sachs & Co. In its amended complaint, the FDIC alleged that the offering documents for eight RMBS certificates that Guaranty Bank purchased between July 2005 and April 2006 contained material misstatements in violation of Sections 11 and 12(a)(2) of the Securities Act of 1933 and Article 581-33 of the Texas Securities Act. It also brought claims under Section 15 of the 33 Act against Countrywide. The FDIC was appointed as receiver for Guaranty Bank in August 2009 and filed suit on August 17, 2012. The court followed its earlier decisions in dismissing the FDIC’s claims as time-barred by the three year statute of repose under the ’33 Act. The court also held that the extender provision of FIRREA does not toll or pre-empt state statutes of repose, and therefore dismissed the FDIC’s claims under the Texas Securities Act as time-barred. Decision.
Judge Mariana R. Pfaelzer
Federal Court Dismisses $31 Million FDIC Suit as Time-Barred
On April 22, Judge Mariana R. Pfaelzer of the United States District Court for the Central District of California dismissed as time-barred the Federal Deposit Insurance Corporation’s (FDIC) $31 million suit against JPMorgan Chase & Co., Bank of America, Citigroup and Deutsche Bank AG related to the sale of RMBS originated by Countrywide. FDIC sued as receiver for Strategic Capital Bank. Judge Pfaelzer held that a reasonable investor in Countrywide securities could have sued before May 22, 2008, and therefore a reasonably diligent investor should have discovered alleged misstatements in the offering documents before that date. The Court held that the statute of limitations for later-filed federal claims was not tolled by an earlier action because it was filed in state court, and the plaintiff had not purchased any of the same tranches as Strategic Capital Bank. Decision.
Federal Judge Dismisses FDIC’s Securities Fraud Claims Against Countrywide
On April 8, U.S. District Judge Mariana R. Pfaelzer of the Central District of California dismissed the FDIC’s suit against Countrywide. FDIC, as the receiver for Colonial Bank, filed suit against Countrywide and Bank of America as its successor for violations of the 1933 Securities Act. FDIC alleged Countrywide made false statements in offering documents in connection with the issuance of residential mortgage-backed securities in violation of Sections 11 and 15 of the Act. Judge Pfaelzer held that each claim was barred by the statute of limitations of one year from when the plaintiff discovered, or a reasonably diligently investor would have discovered, the alleged misstatement. Judge Pfalezer held that a reasonably diligent plaintiff would have had adequate information to make such a discovery before August 14, 2008, and consequently the bank’s claims had expired by the time the FDIC was appointed receiver, one year later. Decision.
Impac Settles RMBS Suit Brought by Citigroup for $3.1 Million
On January 24, Impac Funding Corp. settled a lawsuit brought by Citigroup Global Markets Inc. alleging violations of Sections 18 and 20 of the Securities Exchange Act and negligent misrepresentation based on alleged misstatements in the Pooling and Servicing Agreement for an RMBS trust. Judge Mariana R. Pfaelzer of the Federal District Court for the Central District of California approved the settlement, which requires Impac to pay Citigroup $3.1 million in cash or securities of Impac Mortgage Holdings. Motion for Approval of Settlement. Order Approving Settlement.
$193 Million RMBS Suit Against Countrywide Dismissed as Untimely
On January 10, Judge Mariana R. Pfaelzer of the United States District Court for the Central District of California dismissed a $193 million suit brought by mutual fund Asset Management Fund against several Bank of America and several related entities, including Merrill Lynch and Countrywide Financial. The case initially was brought in New York Supreme Court and was removed to federal court and later transferred to be part of the Countrywide Multi-District Litigation. The plaintiffs brought claims for common law fraud, fraudulent concealment, negligent misrepresentation, and aiding and abetting the fraud of others. The court held that the suit, alleging misrepresentations regarding the underlying mortgage loans including compliance with underwriting rate of owner occupancy, ratio of LTV, and transfer of title, was untimely under all of the statutes of limitations that could apply. The court granted Asset Management Fund leave to replead as to the $10 million purchase of RMBS it allegedly made after March 1, 2007. Decision.
Federal Court Narrows FDIC Lawsuit Against Countrywide
On January 3, Judge Mariana R. Pfaelzer of the Central District of California ruled on motions to dismiss filed by defendants Countrywide, Bank of America, and UBS in an action brought against them by the Federal Deposit Insurance Corp. (FDIC) concerning $108.4 million in residential mortgage-backed securities. The Court’s order concerned the FDIC’s claims under Section 11-51-501(1)(b) of the Colorado Securities Act. The Court granted the motions with respect to alleged misstatements pertaining to owner-occupancy data and additional liens because the Offering Documents indicated that this data was self-reported by borrowers. It also granted the motion with respect to successor liability claims asserted against Bank of America. The Court denied the motions with respect to alleged misstatements pertaining to loan underwriting standards and appraisals. The Court also denied the motions with respect to defendants’ argument that the FDIC did not adequately allege reliance and causation, holding that those are not elements of the FDIC’s claim and thus not required to be pled. Opinion.
Court Dismisses Occupancy Status Claims Against Countrywide
On August 17, Judge Mariana R. Pfaelzer of the United States District Court for the Central District of California granted in part and denied in part the motion of Countrywide and Bank of America to dismiss an action brought by MassMutual in connection with its alleged purchase of RMBS. Judge Pfaelzer held that Countrywide could not be liable for accurately repeating borrower-provided occupancy information in its offering documents where the offering documents specifically attributed the statements about owner occupancy to the borrowers. Judge Pfaelzer further held that MassMutual failed to sufficiently plead Bank of America’s liability as a successor to Countrywide, thus warranting dismissing Bank of America from the suit. The court held, however, that MassMutual had sufficiently pled claims under the Massachusetts Uniform Securities Act for alleged misrepresentations as to loan-to-value ratios and originator compliance with underwriting guidelines. Decision.
Court Dismisses in Part AIG’s Claims Against Bank of America and Countrywide
On May 23, 2012, Judge Mariana R. Pfaelzer of the Central District of California dismissed with prejudice the majority of claims brought by AIG in a suit against Bank of America and Countrywide over the sale of RMBS certificates. Judge Pfaelzer held that because AIG purchased the securities at issue more than three years before filing suit, its federal securities claims were time-barred under the three-year statute of repose for claims under the Securities Act of 1933. Judge Pfaelzer determined that a majority of AIG’s common law claims, including negligent misrepresentation and fraud, were also time-barred under the relevant states’ statutes of limitation. The court found that certain additional common law claims were part of a tolling agreement that tolled claims between January 13, 2011 and August 5, 2011, and were thus timely. Order.
California Federal Court Partially Dismisses RMBS Claims In Countrywide MDL Action
On April 16, 2012, Judge Mariana R. Pfaelzer of the Central District of California dismissed in part an RMBS action brought by Massachusetts Mutual Life Insurance Co. (“MassMutual”) against Countrywide, JPMorgan, Deutsche Bank, UBS, and various individual defendants. This case, which asserts claims under the Massachusetts Uniform Securities Act (“MUSA”), was transferred to the Countrywide MDL for pre-trial proceedings. In addressing defendants’ initial motions to dismiss on the issues of timeliness, standing and jurisdiction, Judge Pfaelzer found that the court lacked personal jurisdiction over the individual defendants who moved on this ground and dismissed all claims against them with prejudice. Judge Pfaelzer also found that only the Underwriter Defendants could be held liable as a seller under the MUSA, and dismissed the MUSA claims against the other defendants with prejudice. Judge Pfaelzer declined to dismiss the remaining claims based on the statute of limitations. Decision.
Court Grants Unopposed Motion for Class Certification in $2.5 Billion Countrywide RMBS Lawsuit
On November 29, 2011, Judge Mariana R. Pfaelzer of the Central District of California issued an order certifying a class of Countrywide Financial Corp. investors in an action alleging that Countrywide made misrepresentations in connection with the sale of certain RMBS. On September 30, 2011, the plaintiffs and defendants stipulated to a proposed class that was consistent with the Court’s rulings on various motions to dismiss, which had significantly narrowed the scope of the potential class plaintiffs originally sought to represent. The Iowa Public Employees’ Retirement System was named lead plaintiff on behalf of a class of purchasers of eight different tranches of Countrywide RMBS. Order.