LOS ANGELES - (Mealey's) Countrywide Financial Corp. will
pay $500 million to shareholders in three related securities class action
lawsuits to settle claims that it misrepresented the investment quality of
mortgage-backed securities (MBS) in what is being called the largest-ever MBS
class action recovery under the Securities Act of 1933, according to a press release
issued by class counsel April 17 (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.; January
2012, Page. 6).
According to the press release, under the terms of the
settlement, Countrywide will make the $500 million cash payment to shareholders
in exchange for a full release of all claims against it.
The settlement is subject to court approval.
In Luther (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
On Dec. 14, 2007, the defendants removed the action to
the U.S. District Court for the Central District of California. Luther
moved to remand the action to the state court on Jan. 10, 2008. Judge
Marianna R. 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
The appellate court denied the defendants' motion for
rehearing on June 17, and the California Supreme Court denied review on Sept.
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
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