Fort Worth Employees’ Retirement Fund v. J.P. Morgan Chase & Co.
Largest Recovery Ever Achieved on a Percentage Basis in a Class Action Brought on Behalf of Purchasers of RMBS
On December 4, 2015, the Honorable J. Paul Oetken granted final approval of a $388 million settlement on behalf of J.P. Morgan residential mortgage-backed securities (“RMBS”) investors. The settlement represents, on a percentage basis, the largest recovery ever achieved in a class action brought on behalf of purchasers of RMBS. It stands as a significant recovery for investors who lost money as a result of investments in RMBS, and was achieved by lead plaintiffs and class representatives Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California. “We’re pleased with the record-setting recovery for our participants and the class,” said Ed Smith, Fund Manager for Northern California Laborers. “Our lawyers at Robbins Geller were tireless in their efforts, and the result is a significant victory for the class.”
The case dates back to 2009, when a class action complaint was filed against J.P. Morgan affiliates for packaging faulty residential mortgage loans and selling the RMBS to unsuspecting investors. The complaint alleged that offering documents relating to RMBS issued by J.P. Morgan misrepresented and omitted critical information about the true credit quality of the underlying loan collateral. Specifically, plaintiffs alleged that the offering documents contained misrepresentations and omitted material facts concerning (i) adherence to underwriting standards governing the loans supporting the RMBS; (ii) the process used to value the properties that secured the loans supporting the RMBS; and (iii) the true loan-to-value and debt-to-income ratios of the loans securing the RMBS. The falsity of defendants’ statements was not revealed until the underlying mortgage assets defaulted at an unprecedented rate and investors suffered massive losses as a result.
In light of the undeveloped law in the RMBS context, Robbins Geller attorneys faced a series of novel legal challenges throughout the litigation. For example, in March 2011, the court granted in part defendants’ motion to dismiss plaintiffs’ claims, finding that because the lead plaintiff purchased in only one of the RMBS at issue, it did not have standing to bring claims relating to other RMBS alleged in the complaint. The following year, however, the Second Circuit decided NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) – an appeal briefed and argued by Robbins Geller attorneys – and issued a groundbreaking opinion establishing that an investor has standing to bring claims related to RMBS it did not purchase as long as the RMBS share common mortgage loan originators. In light of the NECA-IBEW opinion, plaintiffs successfully moved for reconsideration of the court’s earlier dismissal, resulting in the reinstatement of claims relating to the previously dismissed RMBS. Hundreds of additional investors who purchased billions of dollars of faulty RMBS would have been denied recovery absent the deft work of Robbins Geller appellate and litigation attorneys.
In the face of significant procedural and legal obstacles, Robbins Geller attorneys also obtained an unprecedented class certification order that certified the most broadly defined plaintiff class in any RMBS class action to date. Prior to the court’s September 30, 2014 class certification order, few certified classes of RMBS purchasers included investors in more than one RMBS offering, and those that did were limited to cases featuring a plaintiff who purchased in each of the alleged RMBS or to class members who purchased the relevant securities within just a few weeks. In contrast, the class certified in this action encompassed investors in nine RMBS offerings who purchased over a period of several years – a pioneering victory that allowed many more investors to recover for their losses than previously possible. The court’s appointment of Northern California Laborers and Southern California Laborers as class representatives, even though they had not purchased in all of the nine certified RMBS, was also made possible by the NECA-IBEW decision.
The $388 million recovery stands alone as the highest percentage of face value recovered in any of the 16 comparable RMBS purchaser class action settlements obtained to date and is more than two and a half times greater than the average percentage recovery in previous RMBS class action settlements.
This remarkable result was achieved only after six years of aggressive litigation and an extensive investigation into all facets of defendants’ faulty securitization practices – a process that resulted in the production of over 80 million pages of documents from defendants and third parties, more than 40 witness depositions, and consultation with experts in diverse and complex fields such as mortgage reunderwriting, securitization due diligence, statistics and economics. “We were prepared to go to trial, and we almost had to against J.P. Morgan,” said Robbins Geller partner Luke O. Brooks, one of the lead attorneys on the case. “Ultimately, the skill of our litigation team and our willingness to take the case deep paid off with an extraordinary result.”
The Robbins Geller team responsible for this record-breaking achievement consisted of partners Daniel S. Drosman, Luke O. Brooks, Lucas F. Olts, Nathan R. Lindell and Darryl J. Alvarado and associate Hillary B. Stakem, as well as a team of highly skilled and dedicated staff attorneys and support staff.
Fort Worth Employees’ Retirement Fund v. J.P. Morgan Chase & Co., et al., No. 1:09-cv-03701-JPO (S.D.N.Y.).