On February 6, the Second Circuit affirmed a trial court order dismissing repurchase and indemnification claims brought by the Federal Housing Finance Agency (“FHFA“), acting on behalf of U.S. Bank as Trustee, against GreenPoint Mortgage Funding Inc., predicated on allegations that mortgage loans sold by GreenPoint breached representations and warranties in the relevant loan purchase agreements. READ MORE
On April 22, 2015, the Second Circuit vacated and remanded a district court’s decision dismissing on statute of limitations grounds claims Woori Bank brought against Citigroup Global Markets arising out of Woori’s purchase of $25 million in collateralized debt obligations. Woori asserted claims for fraud, fraudulent inducement, negligent misrepresentation, and unjust enrichment, alleging that Citi made misrepresentations in connection with its sale of the CDO to Woori. The district court dismissed the action as time-barred, holding that Woori had knowledge of its claim prior to May 2009, the date after which an action would be time-barred under the applicable South Korean statute of limitations. The Second Circuit reversed. It held that the news reports and pitch materials on which the district court had relied to establish Woori’s knowledge were not sufficient to put it on notice of its specific claim against Citi because none of them suggested that Citi acted fraudulently in connection with the CDO at issue. Summary Order.
On September 6, 2012, the United States Court of Appeals for the Second Circuit reversed the dismissal of RMBS claims against Goldman Sachs and related entities based on lack of standing and failure to state a claim. The court addressed a named plaintiff’s standing to assert class claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 based on mortgage-backed securities from offerings or tranches it did not purchase. Reversing the district court’s decision, the Second Circuit held that plaintiffs have standing to represent classes of investors who purchased mortgage-backed securities from different tranches than those purchased by the named plaintiff, or even under different prospectus supplements, as long as the securities were backed by mortgages originated by the same lenders and the claims are based on “similar or identical misrepresentations in the Offering Documents.” The court also held that the plaintiff had adequately pled a decline in the value of the securities, despite the absence of any allegation that the relevant trusts had defaulted on any distribution of principal or interest. Decision.
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.
Freidus v. ING Groep N.V., No. 09 Civ. 1049 (S.D.N.Y. Mar. 29, 2011) (Kaplan, J.)
Following the court’s partial grant and partial denial of defendants’ motion to dismiss Section 11, 12, and 15 claims under the ’33 Act, plaintiffs moved for reconsideration of that ruling, arguing that Litwin v. Blackstone Group, L.P., No. 08-cv-03601, 2011 WL 447050 (2d Cir. Feb. 10, 2011) changed the standard of materiality and therefore a different result was warranted in this case. The court had originally dismissed plaintiffs’ claims against ING on the basis that there were no allegations showing that defendants’ disclosures concerning the quality of the Alt-A and RMBS securities at issue were false. The court granted the motion for reconsideration but returned the same result, finding that even under the new standard plaintiffs nonetheless failed to allege facts sufficient to make a plausible claim of a material misstatement. The court also noted that the allegedly misleading statement that ING “considered its subprime [and] Alt-A . . . exposure to be of limited size and of relatively high quality” was an inactionable statement of opinion. Decision.
On February 10, 2011, the Second Circuit Court of Appeals vacated ad remanded the dismissal of an action against the Blackstone Group that alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act in connection with Blackstone’s Registration Statement and Prospectus filed as part of its IPO. Plaintiffs had alleged that Blackstone violated the Securities Act when it failed to disclose the likely impact on its real estate investment private equity businesses from the decline in the residential mortgage market and certain other publicly-disclosed events concerning two of its equity investments. In reinstating the claims, the Second Circuit emphasized that public knowledge of the events did not excuse Blackstone from making disclosures about them because Item 303 of Regulation S-K requires issuers to disclose how such events might be reasonably expected to materially affect an issuer’s business. The Second Circuit also emphasized that materiality had to be assessed qualitatively, and that a material impact on one segment of Blackstone’s operations could require disclosure even if quantitatively immaterial to Blackstone as a whole. Appeal.
