Lawsuits involving mortgage-backed securities have been certified as class actions, made their way to appeals courts and been lost by the plaintiffs. But defendants have also had their fair share of unfavorable rulings.
A class action against Bank of America’s Merrill Lynch & Co. Inc. was certified by the U.S. District Court for the Southern District of New York, Shepherd Smith Edwards & Kantas LLP announced on June 29. A class of more than 1,800 MBS investors — including pension funds and other financial institutions — was certified in what is being dubbed “the first involving mortgage-backed securities nationwide.”
The lead plaintiff, the Mississippi Public Employees’ Retirement System, alleges that the defendants engaged in securities fraud by misleading them about the risks of the instruments. The “billions of dollars” in MBS were issued in 2006 and 2007 by Merrill Lynch.
A group of public pension funds that invested in Countrywide MBS filed a petition with the Supreme Court of the State of New York to intervene in a proposed $8.5 billion settlement between BofA and MBSÂ investors, Scott and Scott LLPÂ announced Wednesday. The group wants to utilize discovery to review documents, take deposition testimony and determine the fairness of the proposed settlement.
The investors are concerned that the deal was negotiated in private by large corporate investors who still do business with BofA and no public pension funds were among them. In addition, the group claims that the “payment waterfall” might not fairly compensate some categories of investors.
The Court of Appeal of the State of California, Second Appellate District, reversed a decision from the Los Angeles Superior Court in David H. Luther et al. v. Countrywide Financial Corp. The trial court had dismissed the case and ruled that the state court had no jurisdiction under the Securities Act of 1933. But the appeals court decided that it wasn’t necessary that “this class action, or all securities class actions must be brought in federal court.”
Countrywide Financial Corp. was successful in having a lawsuit that was filed by Allstate Corp. moved from a court in New York to U.S. District Court for the Central District of California because of separate litigation filed by the Maine State Retirement System that was already being tried in the same court, Bloomberg reported. U.S. District Judge Alvin K. Hellerstein reportedly wrote in his decision that coordination with the other case will efficiently utilize judicial resources.
Countrywide issuances are at the heart of a lawsuit filed by the Knights of Columbus against the Bank of New York Mellon, according to a Reuters article. The plaintiffs reportedly hold investments in two RMBS as part of a $17 billion total investment portfolio.
A June 21 statement from Robbins Geller Rudman & Dowd LLP indicated that a class action was filed in a federal court in Manhattan, N.Y., on behalf of an institutional investor against Deutsche Bank. The complaint alleges violations to the Securities Exchange Act of 1934 because the company concealed impaired mortgage-related securities.
Flagstar Bank was sued on April 7 in U.S. District Court for the Southern District of New York by Assured Guaranty Municipal Corp. over $900 million in MBS issued in 2005 and 2006, Crain’s Detroit Business reported. The bond insurer, which is partly owned by Wilbur Ross Jr., seeks $82.4 million in damages and faces a ruling tomorrow on Flagstar’s motion to dismiss.
MBIA Insurance Corp. plans to appeal the dismissal of its 2009 lawsuit against Credit Suisse by a New York judge, Reuters reported. MBIA claims that 15,000 residential second liens securitized in 2009 were fraudulently misrepresented.
Bloomberg reported that a lawsuit against MBIA should be re-instated, according to a motion submitted to the New York State Court of Appeals by plaintiffs that include Bank of America Corp. and UBS AG. The plaintiffs claim that an improper restructuring transferred $5 billion in cash and securities out of MBIA’s primary operating unit, MBIA Insurance, to another entity now known as National Public Finance Guarantee Corp.
Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co.
Case No. 08-CV-10841, June 16, 2011 (U.S. District Court in the Southern District of New York).
DAVID H. LUTHER et al., Plaintiffs and Appellants, v. COUNTRYWIDE FINANCIAL CORPORATION et al., Defendants and Respondents.
Case No. B222889, Super. Ct. No. BC380698 (THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT, DIVISION FIVE).
Allstate Insurance Co. v. Countrywide Financial Corp.
Case No. 10-cv-9591, (U.S. District Court, Southern District of New York; moved to U.S. District Court for the Central District of California).
Knights of Columbus v. The Bank of New York Mellon.
Case No. 651442-2011 (New York Supreme Court, New York County).
MBIA Insurance Corporation v. Credit Suisse Securities (USA) LLC et al.
Case No. 603751-2009 (Supreme Court of the State of New York, New York County).
ABN Amro Bank NV v. MBIA Inc.
Case No. 601475-2009, (New York state Supreme Court),
