putative class action

S.D.N.Y. Judge Finds Potential RMBS Plaintiffs’ Claims Against Indymac Time-Barred Under The Securities Act of 1933

On June 21, 2011, Judge Kaplan in the Southern District of New York denied several potential plaintiffs’ motions to intervene in this action against Indymac on the basis that the intervenors’ claims were time-barred. In this putative class action alleging misrepresentations and omissions in RMBS offering documents, the court had previously dismissed claims based on certain offerings, holding that the lead plaintiff lacked standing to assert claims based on certificates it had never purchased. In an effort to cure these standing issues, several new potential plaintiffs moved to intervene. The intervenors had argued that the ’33 Act statute of repose was tolled by the present lawsuit under the U.S. Supreme Court’s holding in American Pipe Construction Co. v. Utah. Judge Kaplan noted that although some cases had reached a different result, he agreed with Judge Castel’s recent ruling in Footbridge v. Countrywide that neither American Pipe tolling nor any other theory would suffice to toll the three-year statute of repose set forth in Section 13 of the ’33 Act. Decision.

S.D.N.Y. Denies Class Certification to Moody’s Investors

In re Moody’s Corporation Securities Litig., No. 07 civ. 8375 (S.D.N.Y. Mar. 31, 2011) (Daniels, J.)

Investors in stock of the ratings agency Moody’s brought this putative class action pursuant to Sections 10(b) and 20(a) of the ’34 Act, alleging that Moody’s made material misrepresentations and omissions when it assured investors that it was unaffected by any conflicts of interest in its “issuer-pays” rating business model and that it lied about its consideration of loan originator standards in rating mortgage-backed securities. The Court denied plaintiffs’ motion for class certification, finding that individual issues predominated on the issue of reliance. The court found that plaintiffs were not entitled to the fraud-on-the-market presumption of reliance because defendants proved there were no statistically significant stock price movements in response to the relevant alleged misstatements or corrective disclosures. Decision.

S.D.N.Y. Partially Grants and Partially Denies Motion to Dismiss RMBS Investor Putative Class Action Against J.P. Morgan Chase

On March 30, 2011, Judge John G. Koeltl of the Southern District of New York granted in part and denied in part a motion to dismiss an RMBS investor putative class action lawsuit asserting federal securities law claims against RMBS issuer J.P. Morgan Acceptance Corporation I (“JPMAC”) and certain of its affiliates, officers and directors. The court dismissed claims relating to several certificates because the putative class representative did not itself purchase those certificates. The court also dismissed plaintiff’s Section 12(a)(2) claim, finding plaintiff had failed to allege adequately that it purchased its Certificates in the initial public offering, as opposed to secondary market purchases, as would be required to state a claim under that section. As to the plaintiff’s Section 11 claim, the court sustained allegations that the offering materials for the RMBS certificates misrepresented or concealed deficient underwriting and appraisal practices and inflated loan-to-value ratios, but dismissed plaintiff’s allegation that the credit ratings for the certificates were misstated. The court sustained control-person liability claim under Section 15 against the officer and director defendants, but dismissed that claim against JPMAC’s parent corporation because the parent-subsidiary relationship, standing alone, is insufficient for pleading a Section 15 claim. Decision.

RMBS Complaint Filed Against Countrywide in Connecticut

On January 27, 2011, Putnam Bank filed a putative class action in the District of Connecticut accusing Countrywide Financial Corp. (now an affiliate of Bank of America) and several executives of selling RMBS backed by materially false statements and omissions. The putative class covers purchasers and acquirers of eight different series of RMBS certificates issued between 2006 and 2007. Plaintiffs seek compensatory and/or recessionary damages under both Federal and Connecticut Securities laws. Complaint.

In Nomura Action, First Circuit Affirms Dismissal on Standing Grounds and Reverses Dismissal for Inadequate Pleading

On January 20, 2011, the First Circuit Court of Appeals partially affirmed and partially reversed a District Court decision in a putative class action brought against eight RMBS trusts, their underwriters, the depositor and its officers. The court affirmed the dismissal of all claims related to those trusts whose certificates had not been purchased by any of the named plaintiffs, holding that plaintiffs thereby lacked standing to sue. The court affirmed the dismissal of claims relating to appraisal practices as inadequately pled. The court also affirmed the dismissal of claims relating to credit ratings, holding that such ratings were inactionable opinions. However, the court vacated the dismissal of claims relating to the lending banks’ underwriting practices, holding that plaintiffs’ allegation of defendants’ wholesale abandonment of underwriting standards was sufficient to defeat the motion to dismiss. Decision

Borrower Files Class Action Against EMC Mortgage Over Loan Modification Practices

On January 10, 2011, a putative class action was filed in the U.S. District Court for the Eastern District of Washington against loan servicer EMC Mortgage Corp. and its parent, Bear Stearns. The action is asserted on behalf of all EMC-serviced mortgagors in the State of Washington who have made payments pursuant to a temporary loan modification plan or repayment agreement while attempting to obtain a permanent loan modification (alleged to number in the “hundreds if not thousands”). It alleges that EMC has acted in bad faith, and engaged in improper accounting, bad recordkeeping, and misrepresentations during loan modification negotiations with mortgagors in the State of Washington. Specifically, the putative class representative alleges that, despite EMC’s repeated promises to modify her and other mortgagors’ loans and their compliance with the modification terms, EMC is improperly delaying permanent modification of the loans while at the same time charging excessive fees, inflating arrearages and continuing to threaten foreclosure. The Complaint alleges violations of the Washington Consumer Protection Act and EMC’s settlement with the Federal Trade Commission, along with claims for breach of contract, breach of the duty of good faith and fair dealing, promissory estoppel, and unjust enrichment. Complaint.