Merrill Lynch

Trustee Brings Putback Action Against Merrill Lynch

On December 18, 2012, U.S. Bank, acting in its capacity as Trustee for two Merrill Lynch RMBS trusts that issued over $1 billion in RMBS certificates, filed a complaint in New York Supreme Court against Merrill Lynch.  The Trustee alleges that Merrill Lynch breached representations and warranties concerning the borrowers’ income and employment, the borrowers’ debts and debt-to-income ratio at the time the mortgages were originated, property value and loan-to-value ratios, and the owner-occupancy rates of the underlying properties.  The Trustee asserts seven causes of action for breach of contract, anticipatory breach, and declaratory judgment, and seeks to require Merrill Lynch to repurchase the loans.  Complaint. 

Federal Court Orders Bayerische Landesbank RMBS Lawsuits Back to State Court

On July 16, Judge Lewis A. Kaplan of U.S. District Court for the Southern District of New York remanded suits brought by Bayerische Landesbank against Bear Stearns and Merrill Lynch to the Supreme Court of the State of New York, where they were originally filed. The lawsuits allege that Defendants knowingly made misrepresentations in RMBS offering materials concerning the underwriting standards used in connection with the underlying mortgage loans. Defendants sought removal to federal court on the ground that the cases were related to bankruptcy proceedings of the originators of some of the underlying mortgages. Judge Kaplan’s remand order indicated that a further written order may be forthcoming. Order. Notice of Removal.

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.

IKB Brings Two RMBS Lawsuits Against Bank of America and Related Entities

On May 15, 2012, IKB Deutsche Industriebank AG and an IKB affiliate filed two lawsuits against Bank of America and related entities in the New York Supreme Court. The first, in which several Countrywide entities are also defendants, arises out of IKB’s alleged investment in 29 RMBS certificates worth $200.3 million issued by Countrywide. The second, in which several Merrill Lynch entities are also defendants, arises out of IKB’s alleged investment in 13 RMBS certificates worth $56.2 million issued by Bank of America and Merrill Lynch. The summonses with notice filed in the suits are substantively identical. In each, IKB alleges that the offering materials for the RMBS in which it invested contained material misrepresentations and omissions regarding the underwriting standards used to originate the underlying mortgage loans, the statistical characteristics of the loans, the securities’ credit ratings, the legal validity of the assignment of the underlying mortgage loans to the issuing trusts, and the entitlement of the trusts to receive principal and interest payments on the loans. IKB asserts causes of action for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims. IKB seeks actual and punitive damages, rescissory damages, and fees and costs. IKB-BofA/Merrill Summons.  IKB-BofA/Countrywide Summons.

German Bank Sues Merrill Lynch In Connection With Sale of $324 Million in RMBS

German bank Bayerische Landesbank (“BayernLB”) filed suit against Merrill Lynch on May 2 in New York Supreme Court, claiming that Merrill Lynch knowingly made misrepresentations in its offering materials relating to $324 million in residential mortgage-backed securities. The complaint alleges that the offering materials falsely claimed that the mortgage loans had been underwritten to strict underwriting standards, and that Merrill Lynch misrepresented that it had conducted due diligence on the underlying loans before purchasing and securitizing them. BayernLB asserts claims for common law fraud, fraudulent inducement, and aiding and abetting fraudulent inducement, and seeks compensatory, rescissory, and punitive damages.  Complaint.

Ambac Files $856 Million RMBS Insurance Suit Against Bank of America and Merrill Lynch

On April 16, 2012, bankrupt insurer Ambac Financial Group filed suit against Bank of America as successor to Merrill Lynch, Merrill Lynch, and certain of its affiliates, in New York County Supreme Court. The complaint alleges that Merrill Lynch fraudulently induced Ambac into insuring $856 million in RMBS consisting of low-quality mortgages. Ambac alleges that Merrill Lynch misrepresented the quality of the loans, the underwriting guidelines followed, the due diligence performed, and the disclosures as to the loans, and that Ambac was required to pay out hundreds of millions of dollars in insured claims. The complaint includes claims for fraudulent inducement, breaches of representations and warranties, breach of contract, indemnification, and reimbursement. Complaint.

Dexia Sues Merrill Lynch Over $527 Million in RMBS

On March 29, 2012, Dexia filed suit against Merrill Lynch & Co. and related entities in the Supreme Court of the State of New York in connection with $527 million in RMBS it allegedly purchased in fifteen offerings in 2006 and 2007. Dexia alleges that Merrill Lynch made misrepresentations about and ignored the deficiencies in the underwriting standards and appraisal practices used by the originators of the loans underlying the RMBS, as well as that the credit ratings were inflated due to false information allegedly provided to the ratings agencies by Merrill. The causes of action alleged are fraud, aiding and abetting fraud, and negligent misrepresentation. Dexia, which is represented by the same counsel who represent LBW in its suit against Countrywide, seeks unspecified money damages and rescission. Complaint.

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.

Bank of America Settles MBS Case for $315 Million

On December 5, 2011, lead plaintiff Public Employees’ Retirement System of Mississippi moved in the Southern District of New York for approval of a $315 million settlement with Merrill Lynch. In the class action lawsuit, plaintiff asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, alleging that Merrill Lynch misrepresented the quality of the subprime mortgages underlying 84 different RMBS offerings. The proposed settlement was entered into after discovery had begun and following decisions of Merrill Lynch’s motion to dismiss and Plaintiff’s motion for class certification. Motion.

Texas Bank Sues Underwriters and Investment Advisor Over RMBS

On November 11, 2011, Town North Bank NA filed a complaint in the federal district court for the Northern District of Texas against UBS Financial Services Inc., Morgan Stanley & Co. LLC, Merrill Lynch & Co., LLC, J. P. Morgan Securities LLC as successor to Bear Stearns & Co., Inc., and Shay Financial Services, Inc. (Town North’s investment advisor). Town North seeks $113 million in damages, alleging that the defendants misrepresented that the mortgage loans underlying RMBS that it purchased complied with underwriting guidelines, overstated the borrowers’ capacity to repay their mortgage loans, and failed to disclose the quality of loans underlying the securities and their risk of loss. Town North asserts causes of action under Section 10(b) of the Securities and Exchange Act, state law fraud, and breach of fiduciary duty (against Shay Financial only). Complaint.