United States District Court, S.D. New York
February 5, 2015
NEW JERSEY CARPENTERS HEALTH FUND, on behalf of itself and all others similarly situated, Plaintiff,
ROYAL BANK OF SCOTLAND GROUP, PLC, et al., Defendants
For New Jersey Carpenters Health Fund, on Behalf of Itself and All Others Similarly Situated, Lead Plaintiff: Christopher Lometti, LEAD ATTORNEY, Daniel Brett Rehns, Kenneth Mark Rehns, Michael Benjamin Eisenkraft, Cohen Milstein Sellers & Toll P.L.L.C., New York, NY; Joshua Seth Devore, Steven Jeffrey Toll, PRO HAC VICE, Stephen Douglas Bunch, LEAD ATTORNEY, Matthew B. Kaplan, Cohen Milstein Sellers & Toll PLLC (DC), Washington, DC; Frank Rocco Schirripa, Schoengold & Sporn, P.C., New York, NY; Richard A Speirs, Zwerling, Schachter & Zwerling (Madison Avenue) New York, NY.
For The Royal Bank of Scotland Group, plc, Greenwich Capital Holdings, Inc., Defendants: James Gaal Gamble, Thomas C. Rice, LEAD ATTORNEYS, Christopher Jon Lucht, Simpson Thacher & Bartlett LLP (NY), New York, NY.
For Greenwich Capital Markets, Inc., doing business as RBS Greenwich Capital, Wachovia Capital Markets, LLC, sued herein as Wachovia Securities, LLC, Deutsche Bank Securities, Inc., Defendants: Alan Craig Turner, James Gaal Gamble, Thomas C. Rice, LEAD ATTORNEYS, Christopher Jon Lucht, Jason Robert Meltzer, Simpson Thacher & Bartlett LLP (NY), New York, NY.
For NovaStar Mortgage Funding Trust, Series 2006-3, NovaStar Mortgage Funding Trust, Series 2006-4, NovaStar Mortgage Funding Trust, Series 2006-5, NovaStar Mortgage Funding Trust, Series 2006-6, NovaStar Mortgage Funding Corporation, Scott F, NovaStar Mortgage Funding Trust, Series 2006-3, NovaStar Mortgage Funding Trust, Series 2006-5, NovaStar Mortgage Funding Trust, Series 2006-6, NovaStar Mortgage Funding Corporation, Scott F, Defendants: Steven J. Fink, LEAD ATTORNEY, Orrick, Herrington & Sutcliffe LLP (NYC), New York, NY; William F. Alderman, PRO HAC VICE, Orrick, Herrington & Sutcliffe, San Francisco, CA.
For NovaStar Mortgage Funding Trust, Series 2007-1, NovaStar Mortgage Funding Trust, Series 2007-2, NovaStar Mortgage FundingTrust, Series 2006-4, NovaStar Mortgage Funding Trust, Series 2007-1, NovaStar Mortgage Funding Trust, Series 2007-2, Defendants: William F. Alderman, PRO HAC VICE, Orrick, Herrington & Sutcliffe, San Francisco, CA.
For Hartman Gregory S. Metz, Defendant: Steven J. Fink, Orrick, Herrington & Sutcliffe LLP (NYC), New York, NY.
For W. Lance Anderson, Scott F. Hartman, Novastar Mortgage Inc., Novastar Mortgage Funding Corporation, Scott F. Hartman, Gregory S. Metz, Defendants: Steven J. Fink, LEAD ATTORNEY, Orrick, Herrington & Sutcliffe LLP (NYC), New York, NY; William F. Alderman, PRO HAC VICE, LEAD ATTORNEY, Orrick, Herrington & Sutcliffe, San Francisco, CA.
For Mark A. Herpich, Defendant: William F. Alderman, PRO HAC VICE, LEAD ATTORNEY, Orrick, Herrington & Sutcliffe, San Francisco, CA; Lyndsey J Conrad, PRO HAC VICE, Husch Blackwell Sanders, LLP (KC), Kansas City, MO.
For RBS Securities, Inc., Wells Fargo Advisors, LLC, formerly known as Wachovia Securities LLC, Defendants: Alan Craig Turner, James Gaal Gamble, LEAD ATTORNEY, Jason Robert Meltzer, Thomas C. Rice, Simpson Thacher & Bartlett LLP (NY), New York, NY.
MEMORANDUM & ORDER
Deborah A. Batts, United States District Judge.
Plaintiff New Jersey Carpenters Health Fund (" Plaintiff") brings this putative class action alleging material misrepresentations in the offering materials pertaining to certain mortgage-backed securities. Plaintiff has moved for Reconsideration of this Court's March 31, 2011 Order dismissing certain of its claims on standing grounds. See New Jersey Carpenters Health Fund v. Royal Bank of Scotland Group, PLC, 709 F.3d 109 (2d Cir. 2013) (remanding the case for reconsideration under the standard set forth in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012)). For the reasons below, Plaintiff's Motion for Reconsideration is GRANTED and the Order dismissing such claims is VACATED.
The Court assumes the Parties' familiarity with the factual background of this matter as fully set forth in the Court's Orders of March 31, 2011 (the " 2011 Order") and March 29, 2012 (the " 2012 Order").
The Court, in the 2011 Order, dismissed for lack of standing Plaintiff's claims in the First Consolidated Amended Securities Class Action Complaint (" FAC") related to securities it did not personally invest in. Plaintiff subsequently filed a Second Amended Complaint (" SAC") asserting claims related to the NovaStar Funding Trust Series 2007-2, in which it invested. The Court dismissed the SAC on the ground that it was " not sufficiently specific to state a claim upon which relief can be granted." (2012 Order at 12.)
On March 1, 2013, the Second Circuit reversed this Court's dismissal of the SAC and remanded the case for reconsideration of the 2011 Order as to standing, based on the intervening Second Circuit decision in NECA-IBEW.
See New Jersey Carpenters Health Fund, 709 F.3d 109. In NECA-IBEW, the Second Circuit held that a plaintiff who purchased one or more securities issued pursuant to a single shelf registration statement may have standing, as the representative of a putative class, to bring claims on behalf of purchasers of securities issued under the same shelf registration statement -- but in which it did not invest -- where those claims would implicate " the same set of concerns." NECA-IBEW, 693 F.3d at 162-64.
The standard for granting a motion to reconsider " is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked -- matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., 70 F.3d 255, 257 (2d Cir. 1995). Reconsideration is also appropriate when there has been a change in controlling law. King County, Washington v. IKB Deutsche Industriebank AG, 863 F.Supp.2d 317, 319 (S.D.N.Y. 2012).
It is plain, as other Courts in the Southern District have acknowledged, that NECA-IBEW represents a change in controlling law pertaining to Plaintiff's standing to bring a putative class action. See, e.g., New Jersey Carpenters Health Fund v. DLJ Mortg. Capital, Inc., 2013 WL 357615, at *4 (S.D.N.Y. Jan. 23, 2013).
Moreover, it is clear that Plaintiff has class standing under a NECA-IBEW analysis. NMI originated or acquired the mortgages backing the six securities offerings at issue here; the mortgages were, according to the relevant offering documents, originated pursuant to NMI's underwriting guidelines; and the misstatements and omissions alleged by Plaintiff appear in nearly identical form in the offering documents pertaining to each of the six offerings. (See Pl. Mem. at 5-7; Laitman Decl. Exs. A & B.) At this stage, nothing more is required to demonstrate class standing under NECA-IBEW.
Defendants contend that the dismissed offerings do not implicate the " same set of concerns" as those that have arisen or will arise regarding Series 2007-2, in which Plaintiff invested, based on a litany of purported distinctions: variance in the proportion of loans originated through NMI agents versus independent brokers or third-party lenders; differences in the types of loans within each offering and their subsequent performance; and changes regarding stated underwriting standards, the disclosure of risk to investors, and prevailing economic and market conditions. (NovaStar Def. Mem. at 5-14; Underwriter Def. Mem. at 11-14.) Those arguments are premature and do not impact the class standing analysis under NECA-IBEW. Indeed, the distinctions that Defendants raise may ultimately prove significant enough to preclude the certification of a class based on Plaintiff's claims, but Plaintiff is entitled to discovery on those issues and the Court's consideration properly must be reserved for the class certification stage.
Additionally, the Underwriter Defendants argue that the SAC essentially concedes that " NovaStar followed its guidelines" in the period immediately prior to three of the dismissed offerings. (See Underwriter Def. Mem. at 9-11.) The Court is not persuaded by Underwriter Defendants' opportunistic reading of the SAC. As an initial matter, it does not follow from Plaintiff's allegations regarding increased pressure to deviate from underwriting guidelines in late 2006 and 2007 that such guidelines were followed prior to that time. More importantly, the FAC -- the pleading at issue in the 2011 Order under reconsideration -- alleges that the NovaStar Defendants' practices did not conform to their underwriting guidelines throughout the relevant period. See, e.g., FAC ¶ ¶ 164-78. The Underwriter Defendants' argument is therefore without merit.
Accordingly, Plaintiff's Motion for Reconsideration is GRANTED and the 2011 Order's dismissal of Plaintiff's claims under the NovaStar Funding Trust Series 2006-3, 2006-4, 2006-5, 2006-6 and 2007-1 is VACATED. Plaintiff shall file a Third Amended Class Action Complaint consistent with this Order within 30 days, and Defendants shall Answer Plaintiff's Third Amended Class Action Complaint within 30 days of its filing.