Maine State Retirement System v. Countrywide Financial Corp.
722 F. Supp. 2d 1157
C.D. Cal.2010Background
- From 2005 to 2007 Countrywide originated and purchased residential mortgages and HELOCs through CHL, totaling about $1.4 trillion for securitization into MBS.
- Plaintiffs allege the Offering Documents for 427 separate MBS offerings contained false or misleading statements or omissions related to loan origination practices.
- IPERS was appointed Lead Plaintiff on May 14, 2010; an Amended Consolidated Class Action Complaint was filed July 13, 2010, and motions to dismiss followed.
- The court dismissed the action without prejudice for standing and statute of limitations, with leave to amend to address pleading defects.
- Luther v. Countrywide and Washington State cases in state court preceded this action and raised tolling under American Pipe; the court discusses tolling applicability.
- JPMorgan Chase & Co. was dismissed as a defendant because it could not be a successor-in-interest to Bear Stearns for the relevant underwriting claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue for purchased versus non-purchased offerings | Plaintiffs argue standing to pursue claims against all 427 offerings. | Defendants contend standing is limited to offerings actually purchased by named plaintiffs. | Standing limited to 81 offerings actually purchased; amend to plead only purchased securities. |
| American Pipe tolling and statute of limitations | Tolling applies to preserve claims during state litigation. | Tolling is limited by standing and should not extend claims lacking standing. | Tolling applies only to claims where named plaintiffs had standing. |
| Adequacy of tolling pleading | Plaintiffs rely on Luther/Washington State tolling to preserve timeliness. | AC insufficient to show which tolling applies to which securities and claims. | AC未 adequately plead tolling basis; must specify tolling source per security and accrual date. |
| Statute of limitations and repose applicability to securities | Tolling can extend the period for limitations on numerous offerings. | Most claims are time-barred by discovery and three-year repose for many offerings. | One-year and three-year limits apply; many offerings barred; require per-security pleading to determine which are time-barred. |
| JPMorgan as successor-in-interest | JPMorgan is successor to Bear Stearns and liable for underwriting. | Bear Stearns did not merge into JPMorgan; no vicarious liability. | JPMorgan appropriately dismissed; no successor liability. |
Key Cases Cited
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (U.S. 1974) (tolls statute of limitations for class actions.)
- Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345 (U.S. 1983) (extends tolling to individual class members.)
- In re Wells Fargo Mortgage-Backed Certificates Litigation, 712 F. Supp. 2d 958 (N.D. Cal. 2010) (standing and tolling in MBS actions; tracing requirements.)
- In re Lehman Bros. Secs. and ERISA Litig., 684 F. Supp. 2d 485 (S.D.N.Y. 2010) (tolling and standing in MBS suits.)
- In re Countrywide Fin. Corp. Secs. Litig., 2009 WL 943271 (C.D. Cal. 2009) (statute of repose/tracing and timing considerations for shelf registrations.)