U.S. Supreme Court

Court Reverses Itself and Dismisses RMBS Fraud Complaint Against Several Banks

On September 30, Judge Sam Lindsay of the U.S. District Court for the Northern District of Texas granted a motion to dismiss plaintiff Town North Bank’s amended complaint against UBS, Morgan Stanley, Merrill Lynch, and J.P. Morgan, among others. Town North Bank asserted claims under Section 10(b) of the Securities Exchange Act of 1934 and the Texas Securities Act. In March 2013, Judge Lindsay had denied the defendants’ motion to dismiss but reviewed the briefs anew when the defendants filed a motion for interlocutory appeal. Upon that review, Judge Lindsay sua sponte vacated the March 2013 order and granted the motion to dismiss. In particular, Judge Lindsay found claims related to certain of the alleged misstatements time barred under the applicable statute of repose found in 28 U.S.C. § 1658(b). As to the remaining statements, Judge Lindsay found that Town North Bank had not adequately alleged that the Defendants “made” the statements in light of the U.S. Supreme Court’s recent ruling in Janus Capital Group v. First Derivative Traders. The court also concluded that Town North Bank did not allege scienter with sufficient particularity because the amended complaint lacked factual allegations from which the court could reasonably infer that Defendants were aware of any false statements at the time they were made. Order.

U.S. Supreme Court Denies Countrywide’s Petition for Certiorari

On December 5, 2011, the United States Supreme Court denied a petition for certiorari in a California state court securities class action case against Countrywide Financial. In that case, plaintiffs allege that Countrywide made false and misleading statements about the quality of loans underlying RMBS. Countrywide argued that the case should be heard in federal court because plaintiffs asserted claims solely under the Securities Act of 1933, and the Securities Litigation Uniform Standards Act of 1998 establishes exclusive federal jurisdiction in certain ’33 Act cases. The California Court of Appeal had decided the case could properly be brought in state court. Order List.