New Jersey Carpenters Health Fund

Citigroup, Goldman, and UBS to Pay $235 Million Settlement in MBS Class Action

On February 13, 2015, the plaintiffs in New Jersey Carpenters Health Fund, et al., v. Residential Capital, LLC, et al., No. 08-cv-8781 (S.D.N.Y.) filed an unopposed motion for certification of the class and to approve a preliminary settlement.  The complaint, originally filed in 2008, included claims for materially false and misleading statements in securities offering documents under the Securities Act of 1933 against Citigroup, Goldman Sachs, and UBS as underwriters for 16 mortgage-backed securities transactions in 2006 and 2007.  The class consists of investors who purchased the certificates, with the majority of the settlement funds set aside for investors who purchased their certificates within ten days after the relevant initial offering.  The proposed $235 million settlement does not include a $100 million settlement with Residential Capital, LLC that had previously been reached in the case.  Motion.

JP Morgan Settles RMBS Lawsuit for $500 Million

On February 1, JP Morgan Chase & Co. settled federal securities claims brought by investors led by the Public Employees’ Retirement System of Mississippi and the New Jersey Carpenters Health Fund related to Bear Stearns’ sale of $17.58 billion in residential mortgage-backed securities. The settlement is subject to approval by U.S. District Judge Laura Taylor Swain of the United States District Court of the Southern District of New York.  Settlement Agreement.

Second Circuit Affirms Denial of Class Certification in Actions by Pension Funds

On April 30, 2012, the United States Court of Appeals for the Second Circuit affirmed a lower court’s denial of class certification in two putative class action lawsuits brought by New Jersey Carpenters Health Fund and Boilermaker Blacksmith National Pension Trust against Goldman Sachs and the Royal Bank of Scotland, respectively. The pension funds asserted claims under Sections 11, 12, and 15 of the Securities Act of 1933 for purported misrepresentations and omissions in various MBS offerings. In a non-precedential summary order, the Second Circuit held that the court below had used the correct standard in finding that the suits will require individualized inquiries into plaintiffs’ knowledge of the alleged misstatements or omissions and therefore declined to certify the proposed classes as defined. Decision.

S.D.N.Y. Judge Preserves Plaintiffs’ Section 11 Claims Against Residential Capital

On April 28, 2011, Judge Harold Baer, District Judge in the Southern District of New York, granted in part and denied in part the defendants’ motion to dismiss in New Jersey Carpenters Health Fund, et al. v. Residential Capital, LLC et al. Plaintiffs are institutional investors who purchased mortgage-backed securities from Residential Capital LLC and its underwriters in 2006 and 2007. The complaint alleges that defendants violated Sections 11, 12(a)(2), and 15 of the ’33 Act by making misstatements about the value of the securities in the offering documents. The Court denied defendants’ motion to dismiss the section 11 claims, finding that the loss in value when the securities dropped from investment grade to junk status was a cognizable loss, even if the purchaser continues to hold the securities. The Court, however, granted defendants’ motion to dismiss the section 12(a)(2) claims because it found that, while the plaintiffs alleged the securities purchased and the date of purchase, they failed to allege that they directly purchased the securities from the defendants. The Court also granted defendants’ motion to dismiss the section 15 claims against the underwriters, holding that the complaint’s allegations that the underwriter defendants were “controlling persons” were conclusory. The Court further found that the claims were timely, and that the defendants had not shown that a reasonably diligent purchaser would have discovered the high delinquency rates when purchasing the securities. Decision.