Union Pension Funds Damaged during Financial Crisis Finally Receive Compensation after Multiyear Class Action Lawsuit
NEW YORK – Unionized workers and other individual and institutional investors achieved a $165 million all-cash settlement today in connection with losses from securities issued by NovaStar Mortgage Inc., a major subprime lender prior to the housing crisis, and several top Wall Street banks. If approved by the U.S. District Court in the Southern District of New York, the settlement will bring this nine-year class action lawsuit to a close.
In the years leading up to the financial crisis, NovaStar specialized in authorizing risky residential mortgage loans that banks underwrote and packaged into investment portfolios called mortgage-backed securities (MBS). The class action lawsuit settled today charged NovaStar, the Royal Bank of Scotland, Wells Fargo and Deutsche Bank with misleading investors into believing that the securities they bought were safer than they proved to be. The suit argued the company hid how it systematically disregarded its own underwriting guidelines to increase the number of mortgages it could originate and incentivized its employees to make noncompliant loans to extremely risky borrowers.
The New Jersey Carpenters Health Fund, the lead plaintiff in the case, and Iowa Public Employees’ Retirement System, a class representative, were among many worker pension funds that bought mortgage-backed securities from NovaStar in 2006. When these securities were downgraded to junk bond status, the Funds took a painful financial hit.
"After years of hard-fought litigation – which included a dismissal, an appeal, and even the bankruptcy of some of the defendants – thousands of workers will finally get some financial relief,” said Steven J. Toll, Managing Partner at Cohen Milstein Sellers & Toll, which represented the plaintiffs in this class action. “We will continue to seek justice for those who suffered because of irresponsible lending and investments that burst the housing bubble and crashed our economy."
"This has been a long, complex process, and our clients and the attorneys on the case have overcome significant obstacles in reaching this settlement," said the plaintiffs’ lead attorney, Joel P. Laitman of Cohen Milstein Sellers & Toll. "This settlement will give closure and monetary relief to investors who suffered losses in connection with these NovaStar MBS."
While there have been many lawsuits filed nationwide against banks and lenders over mortgage securities Cohen Milstein Sellers & Toll PLLC, the lead law firm representing the plaintiffs in the NovaStar case, has served as lead counsel in many of the most significant of these MBS class action suits. . In the past three years alone, representing numerous public and Taft-Hartley retirement systems, it has recovered nearly $2 billion in settlements from institutions such as Countrywide, Lehman Brothers, Credit Suisse, UBS, Citigroup, Goldman Sachs and Bear Stearns.
In addition to Laitman and Toll, counsel for plaintiffs in New Jersey Carpenters Health Fund v. Royal Bank of Scotland, PLC, et al., No. 08-cv-5310-DAB, include Christopher Lometti, Michael Eisenkraft, and Times Wang of Cohen Milstein Sellers & Toll PLLC.
About Cohen Milstein Sellers & Toll PLLC
Founded in 1969, Cohen Milstein Sellers & Toll PLLC is recognized as one of the premier law firms in the country handling major, complex plaintiff-side litigation. With more than 90 attorneys, Cohen Milstein has offices in Washington, D.C., Chicago, Ill., New York, N.Y., Palm Beach Gardens, Fla., Philadelphia, Pa., and Raleigh, N.C. For additional information, visit www.cohenmilstein.com or call 202.408.4600.