Underwriters settlement brings total to $335 million in NJ Carpenters Health Fund-led case
(NEW YORK CITY – Feb. 19, 2015) A federal judge today granted preliminary approval to a $235 million settlement with the underwriters involved in the class action lawsuit brought by purchasers of mortgage-backed securities (MBS) issued by Residential Accredit Loans, Inc. (RALI). Led by the New Jersey Carpenters Health Fund, the settlement with underwriters Citigroup Global Markets Inc., Goldman Sachs & Co., and UBS Securities LLC, along with the previously approved $100 million settlement with RALI, its affiliates, and the individual Defendants in 2013, brings the total case settlement to $335 million.
"We are pleased with the preliminary approval of this settlement,” said Plaintiffs’ lead attorney Joel P. Laitman, of Cohen Milstein Sellers & Toll PLLC. “It was a long and complex litigation that lasted over six years. Plaintiffs overcame many obstacles including an initial denial of class certification and we believe the $335 million settlement provides a meaningful recovery to investors in the class.”
Added Cohen Milstein Managing Partner Steven J. Toll, whose firm was Lead Counsel in the consolidated class action, “This settlement will at long last give closure and substantial monetary relief to investors who suffered losses in connection with these RALI mortgage-backed securities. The perseverance of our litigation team was key to achieving this terrific result for the Class of investors we represented, and we are all grateful for their efforts.”
Preliminarily approved by Judge Katherine Failla, of the U.S. District Court for the Southern District of New York, the settlement – upon final approval – will mark the end of years of intense, complicated litigation over MBS offerings issued and sold to the New Jersey fund and other investors from 2006 through 2007 by RALI and certain of its affiliates.
The Plaintiffs alleged that the defendants, including the underwriters, committed Securities Act violations in connection with the public offerings of these MBS and systematically disregarded the applicable underwriting guidelines when originating the mortgage loans underlying the securities at issue. Further complicating the legal action, in May 2012, RALI and its affiliates sought voluntary Chapter 11 Bankruptcy. Despite this, in 2013, the plaintiffs were able to secure a $100 million settlement against RALI and its affiliates. That settlement amount is being held in escrow until the settlement with the underwriters receives final approval. Judge Failla will hold a final approval hearing on July 31, 2015.
The $235 million settlement with the underwriter defendants was reached in November 2014 after years of mediation before retired Judge Daniel Weinstein, a well-regarded national mediator.
In addition to Laitman and Toll, the Lead Plaintiffs are represented by attorneys Christopher Lometti, Michael Eisenkraft, Richard A. Speirs, Kenneth M. Rehns, and S. Douglas Bunch, all of Cohen Milstein Sellers & Toll PLLC.
For more information about the case, New Jersey Carpenters Health Fund, et al., v. Residential Capital, LLC, et al., visit /case-study/rali-mbs-litigation.