April 25, 2019

By Joel P. Laitman

With the $165 million Novastar MBS Litigation settlement receiving final approval in March, Cohen Milstein is concluding the last of a dozen class actions in which it represented investors against the underwriters of mortgage-backed securities (MBS). After these risky securities collapsed in 2008 and 2009, the firm went toe-to-toe with deep-pocketed investment banks in a grinding series of complex cases that were novel and extraordinarily challenging to litigate. In the end, the MBS class actions allowed investors to recover significant portions of the money they lost, standing as a rebuke to critics who deride securities litigation as returning “pennies on the dollar” to victims of stock fraud. Cohen Milstein served as sole lead counsel in the case, New Jersey Carpenters Health Fund v. The Royal Bank of Scotland Group, PLC, et al., No. 08 Civ. 05310 (S.D.N.Y.). In all, the firm was sole lead counsel in five MBS class actions, co-lead counsel in four, and represented named plaintiffs in three others.

Among those MBS class actions where monies have been distributed, investors fared particularly well in three cases where Cohen Milstein served as sole lead counsel, receiving nearly a quarter to more than a third of their recognized losses after attorneys’ fees. Specifically, in New Jersey Carpenters Vacation Fund, et. al. v. The Royal Bank of Scotland Group, PLC, et. al., No. 08 Civ. 5093 (LAP) (S.D.N.Y. 2008) (“Harborview”), an MBS class action brought against underwriter RBS and its affiliates, 355 claimants recovered 33.9% of their recognized losses; in New Jersey Carpenters Health Fund, et. al. vs. DLJ Mortgage Capital, Inc., et. al., No. 08 Civ. 5653 (PAC) (S.D.N.Y. 2008) (“HEMT”), an MBS class action brought against the underwriter Credit Suisse and its affiliates, 153 claimants received 32.9% of their recognized losses; and in New Jersey Carpenters Health Fund, et. al. v. Residential Capital, LLC, et. al., No. 08 Civ. 8781 (HB) (S.D.N.Y. 2008) (“RALI”), an MBS class action brought against Citigroup Global Markets Inc., Goldman, Sachs & Co., and UBS Securities LLC, 355 claimants recovered 22.9% of their recognized losses.

Distribution of the Novastar settlement fund is pending, so it is too early to calculate the size of recovery in relation to investors’ recognized losses. But we expect investor recoveries will be in line with other MBS class actions where Cohen Milstein acted as sole lead counsel.