Overview
On November 4, 2014, a federal judge granted final approval to a $275 million cash settlement in the mortgage-backed (MBS) class action litigation against Royal Bank of Scotland (RBS) and others led by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension Trust, along with additional class representatives Iowa Public Employees’ Retirement System and Midwest Operating Engineers Pension Trust Fund.
In issuing her order approving the settlement, Judge Loretta A. Preska, of the U.S. District Court, Southern District of New York, commented that the case brought on behalf of the plaintiffs was “interesting and different” and that settlement on their behalf “was a job well done.” The Court’s approval of the settlement brings to a close the consolidated class action lawsuit brought in 2008 by the pension funds against RBS and other defendants for securities violations involving the packaging and sale of 14 public offerings of “Harborview” series MBS.
Case Background
Cohen Milstein represented Lead Plaintiffs in a securities class action lawsuit brought under the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77a, et seq., on its own behalf and as a class action on behalf of all persons and entities (the “Class”) who purchased or otherwise acquired interests in certain Harborview Mortgage Loan Trusts , pursuant to two Registration Statements and accompanying Prospectuses filed with the Securities and Exchange Commission by Greenwich Capital Acceptance, Inc. on March 31, 2006 (the “2006 Registration Statement”) and on March 23, 2007. RBS Securities, Inc. d/b/a RBS Greenwich Capital underwrote and sold to Plaintiffs and the Class Harborview Mortgage Loan Pass-Through Certificates. The Certificates were issued in fourteen (14) Offerings which took place between April 26, 2006 and October 1, 2007.
The complaint alleged that the Offering Documents contained material misstatements and omissions of material facts in violation of Sections 11 and 12 of the Securities Act, including the failure to disclose that: (i) the Certificate mortgage loan collateral was not originated in accordance with the loan underwriting guidelines stated in either the Registration Statements or the Prospectus Supplements, with the Originators having failed to conduct both a meaningful assessment of the borrowers’ creditworthiness or effective appraisal of the mortgaged properties; and (ii) Greenwich Capital failed to conduct adequate due diligence with respect to the Originators’ compliance with the loan underwriting guidelines stated in the Offering Documents.
Case Milestones
- On January 18, 2011, the District Court denied the First Class Certification Motion (the “First Class Certification Decision”). While the District Court found that Lead Plaintiffs had satisfied all of the Rule 23(a) factors, including numerosity, commonality, adequacy and typicality, it found pursuant to Rule 23(b)(3) that individual issues of knowledge predominated and that the class action device was not the superior method of adjudication, precluding class certification.
- On August 6, 2012, Lead Plaintiffs filed their renewed motion for class certification as to the two Offerings they purchased (the “Second Class Certification Motion”). Lead Plaintiffs restricted the temporal scope of the class to encompass only purchases prior to any downgrades of the certificates and eliminated the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation from the class definition. On October 15, 2012, the Court granted in part the Second Class Certification Motion and appointed Lead Plaintiffs as the class representatives for the two Offerings they purchased.
- On May 10, 2013, Plaintiffs filed a Consolidated Third Amended Securities Class Action Complaint, and on May 13, 2013 filed a Corrected Consolidated Third Amended Securities Class Action Complaint (“Third Amended Complaint”), which asserted claims in relation to the 14 remaining offerings in the case.
- On June 25, 2013, Lead Plaintiffs filed a motion to modify the class to encompass the additional reinstated offerings and add IPERS and Midwest OE as Additional Class Representatives. On December 27, 2013, the District Court granted the motion, expanding the class to encompass the 14 remaining offerings and appointing Midwest OE and IPERS as additional Class Representatives.
- On February 24, 2014, after extended discovery by both sides, the Parties reached a settlement.