NEW JERSEY CARPENTERS HEALTH FUND, NEW JERSEY CARPENTERS VACATION FUND And BOILERMAKER BLACKSMITH NATIONAL PENSION TRUST, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
RESIDENTIAL CAPITAL, LLC, et al., Defendants. NEW JERSEY CARPENTERS VACATION FUND And BOILERMAKER BLACKSMITH NATIONAL PENSION TRUST, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
THE ROYAL BANK OF SCOTLAND GROUP, PLC, et al., Defendants.
OPINION AND ORDER
HAROLD BAER, Jr., District Judge.
Before this Court are motions to modify the certified classes to encompass additional offerings and designate additional class representatives submitted by lead plaintiffs for two cases, 08 Civ. 5093 (the "Harborview" case) and 08 Civ. 8781 (the "RALI" case) (collectively "Plaintiffs"), pursuant to Fed.R.Civ.P. 23(c)(1)(C). Plaintiffs bring claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k(a), 77 l (a)(2) & 77o, alleging that the defendants in both cases ("Harborview Defendants" and "RALI Defendants") made false and misleading statements in the offering documents of mortgage-backed securities ("MBS") with respect to their compliance with underwriting guidelines. For the reasons set forth below, Plaintiffs' motions to modify the class and designate new class representatives are GRANTED in part and DENIED in part.
"It is well-established that a court has the inherent power and discretion to redefine and modify a class in a way which allows maintenance of an action as a class action." In re Methyl Tertiary Butyl Ether (MTBE) Products Liab. Litig. , 241 F.R.D. 435, 438 (S.D.N.Y. 2007) (internal citations and quotation marks omitted); see also Sumitomo Copper Litig. v. Credit Lyonnais Rouse, Ltd. , 262 F.3d 134, 139 (2d Cir. 2001) ("[D]istrict court is often in the best position to assess the propriety of the class and has the ability... to alter or modify the class, create subclasses, and decertify the class whenever warranted."). In my prior opinions, I found that Plaintiffs satisfied the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy, see N.J. Carpenters Health Fund v. Residential Capital, LLC , 272 F.R.D. 160 (S.D.N.Y. 2011), aff'd , 2012 WL 1481519 (2d Cir. Apr. 30, 2012)(" N.J. Carpenters I" ), and that the Rule 23(b) requirements of predominance and superiority were met, N.J. Carpenters Health Fund v. Residential Capital, LLC , 08 CV 8781 HB, 2012 WL 4865174 (S.D.N.Y. Oct. 15, 2012), modified in part , 288 F.R.D. 290 (S.D.N.Y. 2013)(" N.J. Carpenters II "). Ultimately, in each case, I certified a class of "initial purchasers who bought the securities directly from the underwriters or their agents no later than ten trading days after the offering date." N. J. Carpenters Health Fund v. Residential Capital, LLC , 288 F.R.D. 290, 296 (S.D.N.Y. 2013)(" N.J. Carpenters III "). Plaintiffs' present motions to modify the classes and designate additional class representatives stem from those decisions, as well as this Court's prior decisions on Plaintiffs' and Defendants' Motions for Reconsideration, N.J. Carpenters Health Fund v. Residential Capital, LLC , 08 CV 8781 HB, 2013 WL 1809767 (S.D.N.Y. Apr. 30, 2013)(" N.J. Carpenters VI "); N.J. Carpenters Health Fund v. Residential Capital, LLC , 08 CV 8781 HB, 2013 WL 6669966 (S.D.N.Y. Dec. 18, 2013).
I presume familiarity with those opinions and incorporate my prior analysis and determinations regarding Rule 23 (a) and (b) by reference. I examine below only whether the modification of the classes to incorporate the new offerings and the designation of new class representatives impacts those rulings that I have already made with respect to the class certification requirements. In the Harborview case, Plaintiffs seek to add ten new offerings to the two offerings already in the class,  and designate two institutional investors, Iowa Public Employees Retirement Systems and Midwest Operating Engineers Pension Trust Fund, as class representatives. The proposed Harborview Offerings were all issued under the same two Registration Statements as were the Original Harborview Offerings. See ¶ 1 Harborview Consolidated Third Amended Complaint ("HTAC"). Additionally, all offerings were underwritten and sold by the same entity, RBS, and all offerings had the same Sponsor, Seller and Depositor. See HTAC ¶¶ 2, 3, 6. In the RALI case, Plaintiffs seek to add thirteen new offerings to the four RALI offerings already in the class,  and to designate Local 74 USWU Welfare Fund as a class representative. The proposed RALI Offerings were all issued pursuant to the same two Registration Statements filed with the SEC by RALI. See ¶ 1 RALI Consolidated Third Amended Complaint ("RTAC"). Additionally, all offerings were underwritten and sold by Citigroup, Goldman Sachs & Co. or UBS, and all offerings had the same Sponsor, Seller and Depositor. See RTAC ¶ 3. In RALI, Plaintiffs also propose a new class definition based on the current expanded factual record. At the outset, as I reread Defendants' papers and this opinion, I was reminded of a thought ascribed to Albert Einstein, it goes like this, insanity is doing the same thing over and over and expecting different results.
1. Rule 23(a) Requirements
In each of my prior opinions, I have held that plaintiffs satisfied numerosity. See N.J. Carpenters I , F.R.D. 160, 163-164 (S.D.N.Y. 2011); N.J. Carpenters II , 08 CV 8781 HB, 2012 WL 4865174 at *1 (S.D.N.Y. Oct. 15, 2012) modified in part , 288 F.R.D. 290 (S.D.N.Y. 2013). Here, where the classes have been expanded, Plaintiffs plainly meet numerosity requirements. Defendants in both cases argue differently, they contend that each individual offering constitutes a subclass and looked at that way, numerosity fails. Not so. See N. J. Carpenters II , 08 CV 8781 HB, 2012 WL 4865174 at *1 n. 1 (S.D.N.Y. Oct. 15, 2012), N.J. Carpenters III , 288 F.R.D. 290 (S.D.N.Y. 2013). Defendants suggest that in my prior order I certified subclasses, again not so. While my prior opinion was clear, to dispel any misunderstanding, I'll put it in italics this time: I certified one class in each case. N.J. Carpenters III, 288 F.R.D. 290, 296 (S.D.N.Y. 2013). ("I adopt Plaintiffs' proposal and modify the class definition in both cases as follows: initial purchasers who bought the securities directly from the underwriters or their agents no later than ten trading days after the offering date."). This is now the third time that I have articulated my view on numerosity. Indeed, the numerosity of the class has only increased with the inclusion of additional offerings; thus Plaintiffs in both cases continue to satisfy this requirement.
Similarly, while I have found that Plaintiffs satisfied commonality in each of my prior class certification decisions, Defendants argue that commonality is now defeated; again, not so. In Wal-Mart Stores, Inc. v. Dukes , 131 S.Ct. 2541, 2551 (2011)(" Wal-Mart "), the Court wrote, "What matters to class certification... is not the raising of common questions-even in droves-but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation."(ellipsis and emphasis in original)(internal quotation marks and citations omitted). Here, Plaintiffs have demonstrated that the common questions at issue, Defendants' compliance with underwriting guidelines and due diligence requirements and nondisclosure of adverse information, will "generate common answers apt to drive the resolution of the litigation." Id. Indeed, as Judge Rakoff noted in another MBS case, "the Supreme Court's clarifying language in Wal-Mart has no effect on the commonality determination in this case. The common questions presented by this case-essentially, whether the Offering Documents were false or misleading in one or more respects-are clearly susceptible to common answers." Pub. Employees' Ret. Sys. of Mississippi v. Merrill Lynch & Co., Inc., 277 F.R.D. 97, 106 (S.D.N.Y. 2011)(" Merrill Lynch "). The addition of new offerings and new class representatives does not disturb this analysis. Thus, consistent with my prior class certification opinions, commonality is satisfied.
I have previously held that typicality was satisfied, N.J. Carpenters I , 272 F.R.D. 160, 165-168 (S.D.N.Y. 2011), aff'd , 2012 WL 1481519 (2d Cir. Apr. 30, 2012), and neither the proposed Offerings nor the new class representatives changes my consideration of this issue.