Archives: Structured Products

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Second Circuit Affirms $806 million Judgment Against Nomura and RBS

Last month, the U.S. Court of Appeals for the Second Circuit upheld a 2014 ruling holding issuers of residential mortgage-backed securities (RMBS) liable for securities fraud. In the opinion by U.S. Circuit Judge Richard C. Wesley, the court emphasized the policies underlying the passage of the Securities Act of 1933 and related state laws, which aim … Continue Reading

RBS Settles RMBS Claims in FHFA Settlement

On July 12, 2017, the Royal Bank of Scotland (RBS) and the Federal Housing Finance Agency (“FHFA”) announced an agreement to settle claims arising out of RBS’s sale of allegedly faulty residential mortgage-backed securities (“RMBS”).  RBS will pay $5.5 billion to settle the claims. The FHFA, as conservator of Fannie Mae and Freddie Mac, filed … Continue Reading

Credit Suisse and UBS Settle RMBS Claims with National Credit Union Administration

On May 1 and 3, UBS Securities LLC and Credit Suisse Securities USA LLC announced settlements of significant claims brought against them by the National Credit Union Administration (“NCUA”), the federal agency serving as liquidation agent for credit unions that folded during the economic crisis. Credit Suisse will pay $400 million and UBS $445 million to … Continue Reading

RMBS Cases Seeking $3.7 Billion Dismissed for Lack of Standing

On Wednesday, April 12, Justice Ramos of the Commercial Division of the New York Supreme Court dismissed with prejudice four lawsuits filed by Royal Park Investments SA/NV (“Royal Park”).  The lawsuits alleged fraud and negligent misrepresentation with respect to residential mortgage-backed securities (“RMBS”) sold to Fortis NV/SA (“Fortis”) – formerly an independent Belgian bank that … Continue Reading

Appellate Decision on Loss Causation Is a Warning to RMBS Fraud Plaintiffs

Investment advisor TCW Asset Management Company (“TCW”) scored a major victory last week when an appellate court dismissed a $128 million RMBS fraud suit that was filed against it by two Australian-based Cayman Island hedge funds: Basis Pac-Rim Opportunity Fund (Master) and Basis Yield Alpha Fund (Master) (together, “Basis”).  Basis sued TCW for alleged fraud … Continue Reading

Trustee Seeks Revival of Morgan Stanley Putback Claims

Attorneys for Deutsche Bank National Trust Co. argued recently to a First Department panel that several of the RMBS putback claims that it was pursuing as trustee against Morgan Stanley should be revived after they were dismissed in April for being untimely.  The claims were originally commenced when the Federal Housing Finance Agency filed summonses … Continue Reading

Dismissal Affirmed in CIFG’s $100M CDO Suit Against Bear Stearns

On November 29, a five-judge panel of New York’s Appellate Division affirmed the dismissal of CIFG Assurance North America, Inc.’s (“CIFG”) claims against Bear Stearns & Co. (now known as J.P. Morgan Securities LLC (“J.P. Morgan”)) based on alleged material misrepresentations in connection with an insurance contract.  However, the panel found that CIFG’s claims should … Continue Reading

First Department Reverses Dismissal of RMBS Claims Against Morgan Stanley and Credit Suisse

Earlier last month, the Appellate Division, First Department, reversed a trial court’s dismissal of investment fund Phoenix Light’s $700 million residential mortgage-backed securities (RMBS) fraud suits against Credit Suisse and Morgan Stanley. In a brief opinion, the appellate court held that Phoenix Light’s allegations that it relied on defendants’ misrepresentations and omissions in their respective … Continue Reading

National Credit Union Administration Settles RMBS Claims Against RBS for $1.1 Billion

The National Credit Union Administration (NCUA) and the Royal Bank of Scotland (RBS) have reached a $1.1 billion agreement to settle two separate federal cases that arose out of RBS’s sale of residential mortgage-backed securities (RMBS) to two corporate credit unions that later failed and were placed into NCUA conservatorship.  The two complaints, pending in … Continue Reading

No Bankruptcy Automatic Stay for Banks in $7.7B NovaStar MBS Fraud Action

U.S. Southern District Judge Deborah A. Batts shut down underwriter defendants’ attempt to avoid proceeding with discovery in a $7.7 billion mortgage-backed securities fraud action, by arguing that an automatic bankruptcy stay applied to the underwriter defendants in addition to the debtor defendants. The current discovery dispute arises from a proposed class action lawsuit against … Continue Reading

National Credit Union Administration Succeeds in RMBS Appeal to Ninth Circuit

The U.S. Court of Appeals for the Ninth Circuit recently reversed a trial court’s dismissal of the National Credit Union Administration’s (NCUA’s) residential mortgage-backed securities (RMBS) fraud claims against Nomura Home Equity Loan Inc.  The appellate court held that the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) extended all applicable deadlines for … Continue Reading

MassMutual Agrees to Settle $235 Million RMBS Suit Against RBS

Massachusetts Mutual Life Insurance Company (MassMutual) and RBS Securities Inc. (RBS) have reached a confidential agreement to settle MassMutual’s claims that RBS misrepresented the quality of $235 million in residential mortgage-backed securities (RMBS) sold to MassMutual between 2005 and 2007. MassMutual’s complaint alleges that RBS Financial Products Inc. (then operating as Greenwich Capital Financial Products … Continue Reading

Morgan Stanley Cannot Avoid Litigating Its Alleged RMBS Misconduct

Morgan Stanley continues to face the legal consequences of its actions leading up to and during the financial crisis. On August 11, the First Department of the Appellate Division in New York issued two decisions against the bank, both holding that claims against Morgan Stanley for its alleged misconduct involving residential mortgage backed securities (“RMBS”) … Continue Reading

Lehman Continues to Defend $3 Billion Suit over Credit-Default Swap Transactions

On April 19, Lehman Brothers Special Financing (“LBSF”), a subsidiary of Lehman Brothers Holdings Inc. (“LBHI”), filed its opposition to a motion to dismiss its breach-of-contract claims related to the Pyxis transaction, one of many credit-default swap (“CDS”) transactions that were terminated as a result of LBHI’s bankruptcy. LBSF argued that the cancellation of its … Continue Reading

California Brings RMBS Suit Against Morgan Stanley

Earlier this month, California Attorney General Kamala Harris filed suit against Morgan Stanley in San Francisco Superior Court, alleging violations of the California False Claims Act and other state laws.  Brought on behalf of the California Public Employees Retirement System—the nation’s largest pension fund—and the California State Teachers Retirement System, the suit alleges that Morgan … Continue Reading

Court Rejects Claims Against JP Morgan by WaMu Bondholders

A federal judge in Washington, DC, has dismissed with prejudice a tortious interference claim brought by Washington Mutual bondholders against JPMorgan Chase & Co. for allegedly hatching a scheme to drive down WaMu’s value and force it into receivership. The FDIC took over WaMu in 2008 and sold certain of its assets and liabilities to JPMorgan … Continue Reading

Bank of New York Mellon Fails in Bid to Dismiss $1.2 Billion RMBS Suit

Royal Park Investments SA/NV (“Royal Park”), a Belgian investment fund, filed a class action on behalf of itself and similarly situated investors against Bank of New York Mellon Corporation (“BNYM”).  The complaint alleged that BNYM breached its obligations as a trustee of $1.12 billion in residential mortgage-backed securities (“RMBS”) when it failed to cure, substitute, … Continue Reading

Second Circuit Revives Simmtech Derivatives Suit against Citi

On February 23, the U.S. Court of Appeals for the Second Circuit vacated the district court’s dismissal of a fraud case brought by Simmtech Co. Ltd. — a Korean circuit board manufacturer — against Citigroup Inc. and certain of its affiliates.  Between 2006 and 2008, Simmtech purchased “knock in knock out” derivatives contracts (commonly known … Continue Reading

Virginia Settles RMBS Fraud Cases with Wall Street

Last week, 11 Wall Street banks agreed to pay more than $63 million to settle claims brought against them by the Commonwealth under the Virginia Fraud Against Taxpayers Act. Brought by the Virginia attorney general, the suit originally sought $1.15 billion against the banks for alleged misrepresentation of the quality of residential mortgage-backed securities (“RMBS”) … Continue Reading

Goldman Sachs Announces $5 Billion Settlement With DOJ

Goldman Sachs announced yesterday that it has agreed in principle to a $5.06 billion settlement with the U.S. Department of Justice (“DOJ”), which would resolve claims stemming from several state and federal investigations concerning the investment banking giant’s underwriting and sale of residential mortgage-backed securities (“RMBS”) from 2005 to 2007.  To date, the DOJ has … Continue Reading
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