UBS and Capital Ventures Settle RMBS Dispute
On March 26, Capital Ventures International and several UBS affiliates filed a stipulation of dismissal after reaching a settlement disposing of all claims in the action. The terms of the settlement are undisclosed. Capital Ventures had sued UBS for alleged violations of the Massachusetts Uniform Securities Act in connection with $131 million in RMBS that Capital Ventures allegedly purchased from UBS. Stipulation.
Court Dismisses FDIC's Amended Complaint for Untimeliness
On March 24, Judge Laura Taylor Swain of the United States District Court for the Southern District of New York granted Defendants' motion to dismiss an action filed by the FDIC, as receiver for two failed banks, related to RMBS certificates that the banks purchased. The court held the FDIC's federal Securities Act claims to be untimely because they were filed outside of the statute of repose period provided by Section 13 of the Securities Act. The court further held that the "Extender Provision" of FIRREA does not preempt the statute of repose set forth in Section 13. The court held that the Extender Provision was indistinguishable from a similar provision in CERCLA that the Supreme Court recently held, in CTS Corp. v. Waldburger, did not preempt statutes of repose. Order.
RBS Motion to Dismiss RMBS Fraud Claim Granted in Part
On March 20, U.S. District Judge Paul G. Gardephe of the Southern District of New York granted in part and denied in part Defendants' motion to dismiss a complaint filed by several HSH Nordbank affiliates against several RBS affiliates relating to Plaintiffs' investment in RMBS issued or underwritten by RBS. The court held that Plaintiffs sufficiently alleged fraudulent intent in connection with alleged misstatements concerning the underlying loans' compliance with underwriting guidelines, but failed to do so in connection with alleged misstatements concerning the loans' LTV and CLTV ratios, and owner occupancy rates, as well as the RMBS certificates' credit ratings and the validity of the assignment of the mortgages to the RMBS trusts. The court thus allowed Plaintiffs' fraud and aiding and abetting fraud claims to proceed as to alleged misstatements concerning compliance with underwriting guidelines only. The court separately dismissed Plaintiffs' claims for negligent misrepresentation and fraudulent concealment due to the absence of privity, as well as Plaintiffs' claim for rescission based on mutual mistake. Order.
Appellate Court Affirms in Part Denial of Moody's Motion to Dismiss Fraud Claims
On March 20, the Appellate Division, Fourth Department, of the Supreme Court of New York affirmed in part and reversed in part the lower court's denial of Defendant Moody Investor Services, Inc.'s motions to dismiss two actions filed against it arising out of credit ratings Moody's assigned to CDO certificates. The court held that Plaintiffs' fraud claims were sufficiently pled because, although Moody's credit ratings were statements of opinion, not fact, Plaintiffs adequately alleged that Moody's did not believe its opinions when it issued the ratings. The court held that the trial court erred, however, in denying Moody's motion to dismiss Plaintiffs' negligent misrepresentation claims because Plaintiffs failed to plead that a special or privity-like relationship existed between Plaintiffs and Moody's and failed to adequately allege that Moody's knew the CDOs would be marketed to Plaintiffs. Opinion.
NCUA Sues HSBC For Alleged Breaches of Duties as Trustee for 37 RMBS Trusts
On March 20, the National Credit Union Administration Board, acting as liquidating agent for five failed credit unions, filed suit against HSBC USA in the Eastern District Court of Virginia. NCUA alleged that HSBC breached its duties as trustee for 37 RMBS trusts from which the credit unions had purchased $2.37 billion in certificates. In particular, NCUA alleges that HSBC failed to enforce loan originators' repurchase obligations in connection with alleged breaches of representations and warranties about the loans in the trusts, failed to prudently address servicer or master servicer defaults, and failed to ensure proper conveyance of the loan files to the trusts. NCUA asserts claims for breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, breach of the covenant of good faith, violation of the Streit Act, and violation of the Trust Indenture Act. Complaint.
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