Lehman Brothers MBS Litigation
Practice Area: Securities FraudIn Re: Lehman Brothers Securities and ERISA Litigation (“Lehman Brothers MBS Litigation”)
Cohen Milstein represents the Lead Plaintiff Locals 302 and 612 of the International Union of Operating Engineers – Employers Construction Industry Retirement Trust (the “Operating Engineers”), Plaintiff New Jersey Carpenters Health Fund (the “Carpenters Fund”) and Plaintiff Boilermakers-Blacksmith National Pension Trust (the “Boilermakers Trust”) in a securities class action lawsuit pending in the United States District Court for the Southern District of New York. The Defendants named in the action are certain officers and directors of Structured Asset Securities Corporation (“SASCo”) (the “Individual Defendants”) and the Nationally Recognized Statistical Ratings Organizations that rated the securities at issue, The Mc-Graw Hill Companies, Inc. (“S&P”) and Moody’s Investors Services, Inc. (“Moody’s”) (the “Ratings Agency Defendants”). Lehman Brothers, Inc., the parent company of the Issuer, SASCO, and SASCo itself are not named as Defendants to the action as a result of their respective filings for bankruptcy in September 2008 and February 2009, respectively.
Plaintiffs bring this action pursuant to the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77a, et seq., on their own behalf and as a class action on behalf of all persons and entities (the “Class”) who purchased or otherwise acquired interests in various Trusts (the “Issuing Trusts”), pursuant or traceable to two separate Registration Statements and accompanying Prospectuses filed with the Securities and Exchange Commission (the “SEC”) on September 16, 2005 and August 8, 2006 (the “Registration Statements”). Pursuant to the Registration Statements and the Prospectus Supplements incorporated therein (the “Offering Documents”), Defendants securitized, underwrote and sold to Plaintiffs and the Class $93.24 billion of Mortgage Pass-Through Certificates (the “Certificates”). The Certificates were issued in ninety-four (94) separate offerings which took place between September 29, 2005 and July 28, 2007 (the “Offerings).
The lawsuit alleges, inter alia, that Offering Documents contained material misstatements and omissions of material facts in violation of Sections 11, 12 and 15 of the Securities Act, including the failure to disclose that: (i) the mortgage loan collateral underling the Certificates was not originated in accordance with the stated mortgage loan underwriting guidelines set forth in the Registration Statement and the Prospectus Supplements (ii) Defendants failed to conduct adequate, and in some cases any, due diligence with respect to compliance with the stated mortgage loan underwriting guidelines; (iii) the stated credit enhancement did not support the investment grade ratings assigned to the Certificates in light of the true undisclosed and impaired quality of the mortgage collateral; (iv) there were material undisclosed conflicts of interest among the Defendants, including the undisclosed “ratings shopping practices” Defendants engaged in; and (v) the amount of credit enhancement provided to the Certificates was inadequate to support the AAA and investment grade ratings because those amounts were determined primarily by the Ratings Agency Defendants’ models which had not been updated in a timely manner. Soon after issuance of the Certificates, and as a result of massive increases in borrower delinquency, foreclosure, repossession and bankruptcy in the mortgage loans underlying the Certificates revealing the true defective nature of the collateral, the value of the Certificates collapsed.
Plaintiffs filed their Consolidated First Amended Securities Class Action Complaint on February 23, 2009. Defendants filed their respective motions to dismiss the Complaint on April 27, 2009. Thereafter, Plaintiffs’ filed their Opposition to Defendants’ motions on June 29, 2009, and Defendants’ replies are currently due on or before July 31, 2009.