Bid Fails to Ship Mortgage-Securities Cases to Kansas
Seven lawsuits filed by the National Credit Union Administration Board will move forward against banks that sold residential mortgage-backed securities (RMBS) after a federal judicial panel refused to coordinate them with similar cases in Kansas.
The board, an independent government regulatory agency, brought the suits last year on behalf of four liquidated credit unions that had purchased the securities. They accuse the defendant banks, as underwriters and issuers, of misstating the risks of those offerings.
The banks moved to coordinate the new cases, all filed in the Southern District of New York, before U.S. District Judge John Lungstrum in Kansas, who at the time was overseeing nine similar actions brought by the board. The board opposed coordination.
The U.S. Judicial Panel on Multidistrict Litigation refused to grant coordination on Feb. 12.
"While these actions share some general common factual questions as to several RMBS offerings, they involve different RMBS certificates purchased by different credit unions from different defendants," wrote U.S. District Judge John Heyburn, the panel’s chairman.
Given the panel’s order, U.S. District Judge Denise Cote of the Southern District of New York, overseeing the board’s new cases, has scheduled a pretrial conference for March 4.
Lawyers for the defendants—Credit Suisse Securities (USA) LLC, Credit Suisse First Boston Mortgage Securities Corp., Barclays Capital Inc., UBS Securities LLC, RBS Securities Inc., RBS Acceptance Inc., Wachovia Capital Markets LLC, Morgan Stanley & Co. Inc. and Morgan Stanley Capital 1 Inc.—did not respond to requests for comment.
Board spokesman John Fairbanks said in an email to The National Law Journal: "We believe it was the right decision and we look forward to having these cases move ahead."
The board filed the lawsuits on Sept. 23 over nearly $2.4 billion in mortgage-backed securities. The banks, in an Oct. 11 motion, moved to coordinate the new litigation with older cases pending in Kansas, arguing that the board was the plaintiff in all the actions, many of which involved the same defunct credit unions and same defendants. Moreover, Lungstrum already has dismissed some of the securities at issue in the Kansas cases, they argued. They accused the board of forum shopping in bringing its new cases in New York.
In a Nov. 6 response, the board’s attorney, David Frederick, a partner at Washington’s Kellogg, Huber, Hansen, Todd, Evans & Figel, called the forum-shopping accusation meritless. He argued that the coordination request "rings hollow" and pushed for a discovery and scheduling plan not unlike the one Cote implemented in residential mortgage-backed securities cases brought against banks by the Federal Housing Finance Agency, which serves as conservator of Freddie Mac and Fannie Mae.