New Jersey Carpenters Health Fund v. Royal Bank of Scotland Group, PLC
709 F.3d 109
| 2d Cir. | 2013Background
- Fund alleges theNMFC six trusts’ offering documents misstated underwriting standards NMI supposedly abandoned.
- Allegations rely on (i) high early-default rates, (ii) rating downgrades after new, looser underwriting methodologies, and (iii) former NMFI/NMI employees’ statements about systematic disregard of underwriting guidelines.
- District court dismissed for failure to state a claim and held Fund lacked standing to pursue claims based on securities it did not invest in.
- This Court reversed in part, vacated in part, and remanded, directing reconsideration of standing under NECA-IBEW v. Goldman Sachs.
- On appeal, the panel held the SAC plausibly alleged misstatements/omissions under §§11 and 12(a)(2) and that misstatements were not immaterial as a matter of law.
- The case was remanded for further proceedings consistent with NECA-IBEW guidance on class standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the SAC plausibly states misstatements/omissions under §§11 & 12(a)(2). | Fund: allegations link to abandonment of underwriting guidelines. | Defendants: evidence insufficient to tie misstatements to specific loans. | Yes; claims plausible under §§11 & 12(a)(2). |
| Whether the alleged misstatements were material under Basic and related standards. | misstatements materially affected the total mix of information for investors. | risks disclosed in prospectus negate materiality. | Not immaterial as a matter of law; materiality exists. |
| Whether the claims based on Series 2007-2 may be implicated by claims related to other trusts. | assertions tied to same underwriting concerns across trusts. | differences among trusts undermine cross-trust claims. | District court error to dismiss; related claims proceed consistent with NECA-IBEW guidance. |
| Standing to sue on securities Fund did not invest in, under NECA-IBEW. | Fund should represent class with same concerns; invested in some securities. | standing lacking for non-invested securities. | Vacated; remanded to apply NECA-IBEW to determine standing. |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (materiality requires substantial likelihood disclosure would alter total mix)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard)
- Twombly, 550 U.S. 544 (U.S. 2007) (pleading must show plausible claim; conclusory assertions insufficient)
- Nomura Asset Acceptance Corp. v. Bar, 632 F.3d 762 (1st Cir. 2011) (adequacy of underwriter-guideline allegations in §11/12(a)(2) claims)
- Litwin v. Blackstone Grp., 634 F.3d 706 (2d Cir. 2011) (notice-pleading standard for §11/12(a)(2) claims)
- NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) (standing for class plaintiffs under same-seller, same-concern theory)