| NEW YORK
NEW YORK Dec 27 A Manhattan federal judge on
Friday expanded the scope of class-action litigation accusing
banks of concealing the risks of more than $34 billion of
mortgage-backed securities prior to the financial crisis.
U.S. District Judge Harold Baer said investors may now
pursue claims as a group against Citigroup Inc, Goldman
Sachs Group Inc and UBS AG over an estimated
$11.9 billion of securities.
Those offerings were linked to the RALI Mortgage
Asset-Backed Pass-Through Certificates, which were issued in
2006 and 2007 by the former Residential Capital LLC. One
offering was the subject of a partial $100 million settlement
Baer also said investors may pursue a similar case against
Royal Bank of Scotland Group Plc over an estimated $22.5
billion of securities in 12 offerings linked to the Harborview
Mortgage Loan Trusts, which were also created in 2006 and 2007.
The judge also named the Iowa Public Employees Retirement
Systems and Illinois' Midwest Operating Engineers Pension Trust
Fund as class representatives in the Harborview case.
Lawyers for the bank defendants did not immediately respond
to requests for comment.
The lawsuits are among the larger cases accusing banks that
packaged mortgages into securities of deceiving investors in
prospectuses about the quality of the underwriting, causing
investors to lose money when market conditions deteriorated.
Baer rejected arguments that the investor claims were too
dissimilar to justify grouping them, which can result in higher
recoveries at lower cost and that some class members had been
sophisticated enough to know the risks of what they bought.
But he also said many of the same arguments have been
pressed by various parties over the course of more than five
years of litigation. Both lawsuits were filed in 2008.
"At the outset, as I reread defendants' papers and this
opinion, I was reminded of a thought ascribed to Albert
Einstein, it goes like this, insanity is doing the same thing
over and over and expecting different results," Baer wrote.
Joel Laitman, a partner at Cohen, Milstein, Sellers & Toll
representing the lead plaintiffs in both cases, and who
previously estimated the sums at issue, called Baer's decision
"very, very positive for the litigation."
The cases in the U.S. District Court, Southern District of
New York are New Jersey Carpenters Vacation Fund et al v. Royal
Bank of Scotland Group Plc et al, No. 08-05093; and New Jersey
Carpenters Health Fund et al v. Residential Capital LLC et al,