Citing the Second Circuit’s recent decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012), Judge Baer yesterday granted plaintiffs’ motion for reconsideration in two cases based on allegedly fraudulent statements in connection with the sale of mortgage backed securities. The order reinstated claims he had previously dismissed because they related to securities that the named plaintiffs had not actually purchased. In the prior orders, Judge Baer had granted the motion of Royal Bank of Scotland, Citigroup, UBS and others on Article III standing grounds. Judge Baer explained the reason for his decision to grant the motion for reconsideration:
Contrary to this Court’s earlier analysis on Plaintiffs’ standing vis-à-vis the offerings whose certificates they had not purchased, the Second Circuit held in NECA that “‘class standing’—that is, standing to assert claims on behalf of purchasers of Certificates from other Offerings, or from different tranches of the same Offering—does not turn on whether [the plaintiff] would have statutory or Article III standing to seek recovery for misleading statements in those Certificates’ Offering Documents.” 693 F.3d at 158. Instead, the Circuit held that “a plaintiff has class standing if he plausibly alleges (1) that he ‘personally has suffered some actual . . . injury as a result of the putatively illegal conduct of the defendant,’ and (2) that such conduct implicates ‘the same set of concerns’ as the conduct alleged to have caused injury to other members of the putative class by the same defendants.” 693 F.3d at 162 (quoting Blum v. Yaretsky, 457 U.S. 991, 999 (1982); Gratz v. Bollinger, 539 U.S. 244, 267 (2003)). Noting that each offering was “backed by a distinct set of loans issued by a distinct set of originators,” the Circuit explained that “in the context of §§ 11 and 12(a)(2) claims alleging misstatements about origination guidelines . . . differences in the identity of the originators backing the Certificates matters for the purposes of assessing whether those claims raise the same set of concerns” because the proof of alleged injuries would “center on whether the particular originators of the loans backing the particular Offering from which a Certificate-holder purchased a security had in fact abandoned its underwriting guidelines.” Id. at 163 (emphasis in original). In short, the Circuit held that “plaintiff has class standing to assert the claims of purchasers of certificates backed by mortgages originated by the same lenders that originated the mortgages backing plaintiff’s certificates.” Id. at 148-149.
Under the facts of both cases, Judge Baer reinstated the claims of plaintiffs who participated in an additional 49 total offerings, which, according to AmLaw Litigation Daily, could reach nearly $50 billion in total liability. Interestingly, Judge Baer had denied the plaintiffs’ motion for reconsideration only a few months earlier, even though the Second Circuit’s NECA decision had already been issued. Judge Baer denied that motion without prejudice to renewal if the Supreme Court denied cert. When it did, he granted the motion for reconsideration.