Not a Lexis+ subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
LOS ANGELES — (Mealey’s) A federal judge in California on Dec. 6 granted final approval of a record-setting $500 million securities class action settlement in three related actions against Countrywide Financial Corp. for misrepresenting the investment qualify of mortgage-backed securities (MBS) it offered to investors (David H. Luther v. Countrywide Financial Corp., No. 12-5125; Western Conference of Teamsters Pension Plan v. Countrywide Financial Corp., No. 12-5122; and Maine State Retirement System v. Countrywide Financial Corp., No. 10-0302, C.D. Calif.; See April 2013, Page 6).
U.S. Judge Marianna R. Pfaelzer of the Central District of California granted final approval of the settlement, ruling that it met the Federal Rule of Civil Procedure 23(a) requirements for numerosity, commonality, typicality and adequacy, as well as the Rule 23(b)(3) requirements and the Rule 23e(2) requirements that the settlement be fair, reasonable and adequate.
Under the terms of the settlement, Countrywide will pay $500 million, plus interest, to investors on claims that it and several of its related entities misrepresented the investment quality of 429 MBS it offered, as well as an attorneys’ fee award of $85 million, representing 17 percent of the total settlement, and nearly $3 million in litigation expenses.
Judge Pfaelzer rejected the objections of two groups of investors, the Federal Deposit Insurance Corp., as receiver for 19 failed banks, and 16 collateralized debt obligation entities and other institutional investors.
In David H. Luther v. Countrywide Financial Corp. (See December 2011, Page 12), shareholder David H. Luther filed his class action lawsuit in the Los Angeles County Superior Court on behalf of all purchasers of Countrywide Home Loans Servicing LP common stock from January 2005 to June 2007. He alleged that Countrywide, its subsidiaries, executive officers and third-party investment banks violated Sections 11, 12(a)(2) and 15 of the Securities Act by issuing a series of false and misleading statements with regard to certain information about the underlying mortgages and borrowers of those mortgages for certain MBS.
On Dec. 14, 2007, the defendants removed the action to the District Court. Luther moved to remand the action to the state court on Jan. 10, 2008. Judge Pfaelzer granted Luther’s motion, ruling that the Class Action Fairness Act (CAFA) does not trump Section 22(e) of the Securities Act, which prohibits claims filed in state court that arise under the act from being removed to federal court. The defendants then appealed to the Ninth Circuit U.S. Court of Appeals, which affirmed.
Upon remand, the defendants demurred, contending that the trial court lacked jurisdiction under the Securities Act, as amended by the Securities Litigation Uniform Standards Act (SLUSA) in 1998.
The trial court agreed, and lead plaintiffs State of Vermont Employee Pension Funds, Maine State Retirement System, Pension Trust Fund for Operating Engineers, Washington State Plumbing and Pipefitting Pension Trust and Mashreq Bank appealed to the Second District California Court of Appeal, Division 5, which reversed, holding that the amended language of the Securities Act does not preempt the lead plaintiffs from bringing their claims in the state court, stating that “[w]e ‘do not read statutes in little bites,’ and cannot endorse such a limited reading of section 77v” of the Securities Act.
The appellate court denied the defendants’ motion for rehearing on June 17, and the California Supreme Court denied review on Sept. 14.
The defendants then filed a petition for writ of certiorari in the Supreme Court, which denied review on Dec. 5, 2011.
In addition to Luther, shareholders in Western Conference of Teamsters Pension Plan v. Countrywide Financial Corp. and Maine State Retirement System v. Countrywide Financial Corp. are also subject to the terms of the settlement.
The lead plaintiffs in Luther and Western Conference of Teamsters are represented by Spencer A. Burkholz, Thomas E. Egler, Scott H. Saham, Nathan R. Lindell and Ashley M. Robinson of Robbins Geller Rudman & Dowd in San Diego and Andrew L. Zivitz, Sharan Nirmul, Kimberly Justice and Jennifer L. Joost of Kessler Topaz Meltzer & Check in Radnor, Pa.
The lead plaintiffs in Maine State Retirement System are represented by Michael Goldberg and Lionel Z. Glancy of Glancy Binkow & Goldberg in Los Angeles; Steven J. Toll, Julie Goldsmith Reiser and Joshua S. Devore of Cohen Milstein Sellers & Toll in Washington, D.C.; Joel P. Laitman, Christopher Lometti, Richard Speirs and Daniel B. Rehns of Cohen Milstein Sellers & Toll in New York; and Ira M. Press and Randall K. Berger of Kirby McInerney in New York.
The Countrywide defendants are represented by Brian E Pastuszenski, Inez H. Friedman-Boyce, Brian C. Devine and Michele E. Connolly of Goodwin Procter in Boston and John O. Farley of Goodwin Procter in Los Angeles.
Mealey's is now available in eBook format!
For more information about LexisNexis products and solutions connect with us through our