1st Circuit Affirms In Part, Reverses In Part Nomura Subprime Securities Suit Dismissal

As a result of the First Circuit's January 20, 2011 opinion, the plaintiffs in the Nomura Asset Acceptance Corporation mortgage-backed securities lawsuit have managed to revive a slender portion of their case, albeit on a rather precarious basis. The First Circuit otherwise affirmed the lower court's dismissal of the remainder of their case.

The First Circuit's opinion could be influential in other mortgage-backed securities suits, particularly on questions surrounding the standing of claimants to assert claims based on offerings in which they did not purchase securities.

The First Circuit's January 20 opinion can be found here.


As discussed here, purchasers of mortgage pass-through certificates filed this action in March 2008 against Nomura Asset Acceptance Corporation, certain of its directors and officers, the eight mortgage trusts that had issued the certificates, and the offering underwriters who had supported the 2005 and 2006 public offerings of the certificates.

On September 30, 2009, District of Massachusetts Judge Richard G.Stearns granted the defendants' motions to dismiss, as discussed here. Judge Stearns held that the plaintiffs lacked standing to assert claims in connection with the six out of the eight offerings in which the named plaintiffs had not purchased certificates. Judge Stearns found that the plaintiffs had not adequately pled claims with respect to the two remaining offerings.

With respect to the plaintiffs' allegations concerning the mortgage originators' underwriting standards, Judge Stearns found that the offering documents contain a "fusillade of cautionary statements" that "abound with warnings about the potential perils." Judge Stearns noted that plaintiffs' contention that they were not "on notice" of those perils "begs credulity."

The plaintiffs appealed.

Read the article in its entirety at the D&O Diary, a blog by Kevin LaCroix.