In re Indymac Mortgage–backed Sec. Litigationthis Document Relates To All Actions.

• Decision Date: 21 June 2011
• Docket Number: No. 09 Civ. 4583(LAK).,09 Civ. 4583(LAK).
• Citation: 793 F.Supp.2d 637
• Parties: In re INDYMAC MORTGAGE–BACKED SECURITIES LITIGATIONThis document relates to All Actions.
• Court: U.S. District Court — Southern District of New York

793 F.Supp.2d 637

In re INDYMAC MORTGAGE–BACKED SECURITIES LITIGATIONThis document relates to All Actions.

No. 09 Civ. 4583(LAK).

United States District Court, S.D. New York.

June 21, 2011.

Denis F. Sheils, Joseph C. Kohn, William E. Hoese, Kohn, Swift & Graf., P.C., Lawrence P. Kolker, Rachel S. Poplock, Wolf Haldenstein Adler Freeman & Herz LLP, for Movant Police and Fire Retirement System of the City of Detroit.Kenneth I. Trujillo, Trujillo Rodriguez & Richards, LLC, Stewart L. Cohen, Cohen, Placitella & Roth, P.C., for Movant City of Philadelphia Board of Pensions and Retirement.Robin F. Zwerling, Jeffrey C. Zwerling, Justin M. Tarshis, Zwerling, Schacher & Zwerling, LLP, for Movant General Retirement System of the City of Detroit.Robert F. Serio, Jonathan C. Dickey, Aric H. Wu, Eric M. Creizman, Dean J. Kitchens, Gibson, Dunn & Crutcher LLP, for Underwriter Defendants and Proposed Defendants Countrywide and Merrill Lynch.William R. Stein, Scott H. Christensen, Kenneth M. Katz, Hughes Hubbard & Reed LLP, Kathryn Norcross, Kaye E. Allison, Federal Deposit Insurance Corporation, for Defendant IndyMac MBS, Inc.Nicole Lavallee, Joseph J. Tabacco, Jr., Patrick T. Egan, Kristen D. Tremble, Jason M. Leviton, Berman Devalerio, for Lead Plaintiffs Wyoming State Treasurer and Wyoming Retirement System, and Movant Los Angeles County Employees Retirement Association.Joy A. Kruse, Richard M. Heimann, Lieff Cabraser Heimann & Bernstein, LLP, John L. Gadow, Pond, Gadow & Tyler, P.A., for Movant Public Employees' Retirement System of Mississippi.Christopher Lometti, Joel P. Laitman, Daniel B. Rehns, Kenneth M. Rehns, Cohen Milstein Sellers & Toll PLLC, for Movant Iowa Public Employees' Retirement System.Eric R. Levine, Eric Aschkenasy, Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., Robert L. Corbin, Joel M. Athey, Corbin, Fitzgerald & Athey LLP, John W. Spiegel, Kathleen M. McDowell, James C. Rutten, Munger, Tolles & Olson LLP, Robert H. Fairbank, Richard D. Gluck, Michael B. Norman, Fairbank & Vincent, for Individual Defendants.

MEMORANDUM OPINION

LEWIS A. KAPLAN, District Judge.

This putative class action arises from the collapse of the United States market for mortgage-backed securities. The securities at issue here, known as mortgage pass through certificates (the “Certificates”), were issued pursuant to three registration statements and related prospectuses and prospectus supplements (the “Offering Documents”) filed by IndyMac MBS, Inc. (“IndyMac MBS”). The Court assumes familiarity with its prior opinion.¹ The matter is before the Court on three motions to intervene and a motion for leave to amend the amended consolidated complaint (“ACC”).

Facts

I. The Securities

A Certificate is a type of mortgage-backed security that entitles its owner to a portion of the revenue stream generated by an underlying pool of residential mortgage loans. Here, IndyMac Bank originated or acquired the individual mortgage loans that underlie the Certificates. The loans then were transferred to IndyMac MBS, which bundled them into groups, or pools. The pools were transferred to issuing trusts, which created the Certificates. The issuing trusts then transferred the Certificates to IndyMac MBS which, in turn, sold them to the specific underwriters for each offering. After the Certificates were rated by rating agencies, the underwriters offered them to investors.

II. The Action and Motions

On May 14, 2009, Police and Fire Retirement System of the City of Detroit (“Detroit”), which allegedly had purchased certain Certificates, brought a putative class action asserting that the Offering Documents contained misrepresentations and omissions in violation of federal securities laws. ² On June 29, 2009, the Wyoming State Treasurer and Wyoming Retirement System (collectively, “Wyoming”) filed a similar action.³ As contemplated by the Private Securities Litigation Reform Act (“PSLRA”), the Court then considered various motions—including by Detroit and Wyoming—for the appointment of a lead plaintiff.⁴ Wyoming moved also to consolidate the two actions.⁵ The Court named Wyoming the lead plaintiff and, without opposition by Detroit, granted the motion to consolidate.⁶ The order of consolidation gave Wyoming substantial control over the pretrial proceedings and ordered it to file a consolidated class complaint.⁷ On October 9, 2009, Wyoming filed such a complaint ⁸ and, on October 29, 2009, the ACC.⁹ Wyoming is the only plaintiff named on the ACC. Neither Detroit nor anyone else objected to lead counsel's naming of Wyoming as the sole plaintiff.

Defendants then filed a number of motions to dismiss the ACC.¹⁰ The Court ruled on them in IndyMac I. Two aspects of that decision are relevant here. First, the Court held that Wyoming has standing to sue only with respect to offerings in which it had purchased Certificates. The Court therefore dismissed for lack of standing Wyoming's claims relating to all offerings except those in which it allegedly had purchased Certificates.¹¹

Second, the Court dismissed Wyoming's claims against Bank of America (“BoA”), which Wyoming had sued in its alleged capacity as “successor in interest” to Countrywide Securities Corporation (“Countrywide”) and Merrill, Lynch, Pierce, Fenner & Smith (“Merrill Lynch”), underwriters of several of the offerings at issue. The Court did so on the ground that the ACC failed to allege any facts supporting a departure from the general rule that a parent corporation is not liable for its subsidiaries' acts solely by virtue of its ownership interest.¹²

The motions at issue here stem from those two holdings. The motions to intervene aim to cure Wyoming's standing deficiency with respect to numerous offerings. Each movant alleges that it purchased securities pursuant to one or more offerings in respect of which Wyoming lacks standing to sue. On that basis, each seeks to intervene to assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of a class, the members of which purchased Certificates in the pertinent offering.¹³

In addition, Wyoming seeks leave to amend the ACC to add Countrywide and Merrill Lynch as defendants with respect to the claims concerning offerings that they allegedly underwrote.¹⁴ Several of the proposed intervenors join the motion for leave to amend, assuming of course that they are permitted to intervene. Defendants oppose both motions, principally on timeliness grounds.¹⁵

Discussion

I. Motions to InterveneA. Statute of Repose

As noted in IndyMac I, “no Section 11 claim may be brought ‘more than three years after the security was bona fide offered to the public,’ ” and “no Section 12(a)(2) claim may be brought ‘more than three years after the sale.’ ” ¹⁶ Section 15 imposes vicarious liability for persons controlling violators of Sections 11 and 12. Claims under that section therefore are subject to the statute of repose governing the primary violation. ¹⁷ Defendants correctly point out that the statutes of repose have expired on the majority of the claims that movants seek to assert. Movants respond that the statutes were tolled while the claims were included as part of this action, viz. between the filing of Detroit's original complaint and the Court's decision in IndyMac I.

Although some cases have reached a different result, this Court is persuaded by Judge Castel's recent ruling that neither American Pipe nor any other form of tolling may be invoked to avoid the three year statute of repose set forth in Section 13 of the Securities Act of 1933.¹⁸ The putative intervenors here cannot avoid the statute of repose on a “relation back” theory under Fed.R.Civ.P. 15(c) because the statute of repose by its terms allows no exceptions.¹⁹ Indeed, Rule 15 may not be construed to permit relation back because such a construction would conflict with the Rules Enabling Act, which provides in pertinent part that the rules prescribed by the Supreme Court (including Rule 15) “shall not abridge, enlarge or modify any substantive right.” ²⁰

With that conclusion in mind, the Court considers which, if any, of the claims that movants seek to assert are barred by the applicable statutes of repose.

1. Detroit

The Court turns first to the position of movant Detroit.

When Detroit filed its complaint on May 14, 2009, it asserted, inter alia, claims in connection with the INDX 2007–AR5 offering—the only offering in which it apparently had purchased Certificates.²¹ At that point, those claims were timely. After the Detroit and Wyoming actions were consolidated, Wyoming asserted claims relating to the INDX 2007–AR5 offering in the ACC. That offering, however, was one in which Wyoming, the only plaintiff named in the ACC, had not purchased Certificates. The Court therefore dismissed all claims relating to that offering in IndyMac I. Detroit now seeks to intervene as a class representative with standing to assert those claims.

Defendants argue, inter alia, that at least some of the claims that Detroit seeks to assert now are barred by the statute of repose. The INDX 2007–AR5 offering occurred on April 2, 2007.²² Detroit, however, did not move to intervene until May 17, 2010—more than three years after the offering. It therefore appears that at least the Section 11 and corresponding Section 15 claims that Detroit seeks to assert are time-barred. Detroit counters, however, that its claims are timely because it asserted them in its original May 14, 2009 complaint. The validity of this argument thus turns on the effect of the consolidation of the Detroit and Wyoming actions and the post-consolidation events.

Defendants argue that the filing of the ACC superseded the Detroit complaint and that the claims that Detroit now seeks to assert are, in effect, brand new claims that are time-barred. Detroit contends that the claims that it asserted in its original complaint, filed before consolidation, remain pending. On that theory, there obviously would be no need...