Broker-Dealer Litigation - Greenberg Traurig LLP

that a mutual fund’s share price is determined by a statutorily defined formula that would not be
affected by the alleged misrepresentations. The loss suffered by plaintiffs was, therefore, not at
all due to a correction for the alleged misrepresentations, but solely due to a decline in the
economy at large. The court agreed and dismissed plaintiffs’ claim for failure to show loss
causation.
In re Wachovia Equity Sec. Litig., 753 F. Supp.2d 326 (S.D.N.Y. 2011).
The court denied defendants’ motion to dismiss under Section 12 of the Securities Act of
1933. Defendants argued that plaintiffs had failed to allege an actionable misstatement or
omission of fact under Section 12. Plaintiffs alleged that defendants had misrepresented loan-tovalue
ratios for a residential mortgage portfolio reported by defendants in offering documents.
According to plaintiffs, appraisers used by defendants reported inflated appraisal values that
resulted in the misrepresentations. The court acknowledged that appraisals are arguably
subjective opinions rather than facts. But because the appraisals affected the loan-to-value ratios
that were featured in the offering documents as facts, the court held that plaintiffs sufficiently
alleged a material misrepresentation of fact, declining to dismiss the claims under a “blanket
subjective opinion rule.”
N.J. Carpenters Health Fund v. Residential Capital, LLC, 272 F.R.D. 160 (S.D.N.Y. 2011).
The court denied plaintiffs’ motions for class certification for purchasers of mortgagebacked
securities. Plaintiffs claimed violations of Section 12(a)(2) of the Securities Exchange
Act of 1933, among other claims, alleging that the offering documents were misleading as to
whether the residential mortgages comprising the securities were built in conformity with proper
underwriting guidelines. In finding the Rule 23(a) requirements met for class certification, the
court rejected the defendants’ argument that there could be no typicality for class members who
purchased different tranches of certificates. The court held that the “heart” of plaintiffs’ Section
12 claims was the alleged disregard of the loan underwriting guidelines, which impacted all
proposed class members in the same manner, irrespective of which tranche they purchased. The
court also held that even though some class members had only Section 11 claims and not Section
12(a) claims because the purchases had not been made from an initial public offering, the class
could still be certified to represent all members. Nevertheless, the court denied class certification
on the grounds that plaintiffs did not meet the Rule 23(b)(3) predominance requirement because
class members had different levels of knowledge with regard to whether loan originators were
“loosening and lowering” underwriting guidelines depending on the class members’
sophistication and when they purchased the certificates.
In re Kummerfeld, 44 B.R. 28 (Bankr. S.D.N.Y. 2011)
The bankruptcy court issued an order on the parties’ cross motions for summary
judgment, finding that the debtor’s primary violation of the securities laws, including a violation
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