Am. Int'l Grp., Inc. v. Countrywide Fin. Corp. (In re Countrywide Fin. Corp. Mortg.–Backed Sec. Litig.), Case Nos. 2:11–ML–02265–MRP (MANx), 2:11–CV–10549 MRP (MANx).

• Citation: 834 F.Supp.2d 949
• Decision Date: 23 May 2012
• Docket Number: Case Nos. 2:11–ML–02265–MRP (MANx), 2:11–CV–10549 MRP (MANx).
• Court: U.S. District Court — Central District of California
• Parties: In re COUNTRYWIDE FINANCIAL CORP. MORTGAGE–BACKED SECURITIES LITIGATION. American International Group, Inc. et al., Plaintiff, v. Countrywide Financial Corporation, et al., Defendants.

834 F.Supp.2d 949

In re COUNTRYWIDE FINANCIAL CORP. MORTGAGE–BACKED SECURITIES LITIGATION.

American International Group, Inc. et al., Plaintiff,

v.Countrywide Financial Corporation, et al., Defendants.

Case Nos. 2:11–ML–02265–MRP (MANx), 2:11–CV–10549 MRP (MANx).

United States District Court,

C.D. California.

May 23, 2012.

James R. Asperger, Katherine P. Soby, Quinn Emanuel Urquhart & Sullivan LLP, Los Angeles, CA, Kathleen M. Sullivan, Michael Barry Carlinsky, Quinn Emanuel Urquhart & Sullivan LLP, Maria Ginzburg, Kirkland & Ellis LLP, New York, NY, for Plaintiffs.

Richard Christopher St. John, Marc T.G. Dworsky, Stephen M. Kristovich, Steven M. Perry, Munger Tolles and Olson LLP, David Martin Halbreich, Francisca M. Mok, James L. Sanders, Michelle L. Cheng, Reed Smith LLP, Los Angeles, CA, David H. Fry, Munger Tolles and Olson LLP, San Francisco, CA, Jordan W. Siev, Amy J. Greer, Brian Scott Goldberg, Jennifer Lynn Achilles, Reed Smith LLP, New York, NY, William Miller Krogh, Reed Smith LLP, Philadelphia, PA, for Defendants.

ORDER RE MOTION TO DISMISS THE COMPLAINT

MARIANA R. PFAELZER, District Judge.

I. INTRODUCTION & BACKGROUND

This case has been transferred to the Court for pre-trial proceedings as part of Multidistrict Litigation No. 2265, captioned In re Countrywide Financial Corp. Mortgage–Backed Securities Litigation (“the MDL”). Plaintiffs, American International Group, Inc. and 21 related entities (collectively “AIG” or “Plaintiffs”) bring suit against Countrywide Financial Corporation (“CFC”), Countrywide Capital Markets LLC (“CCM”), Countrywide Home Loans, Inc. (“CHL”), Countrywide Securities Corporation (“CSC”), CWABS, Inc., CWALT, Inc., CWHEQ, Inc., CWMBS, Inc. (collectively “Countrywide” or the “Countrywide Defendants”), Bank of America Corporation, Bank of America, N.A., and NB Holdings Corporation (collectively “Bank of America”) in connection with AIG's purchase of residential mortgage-backed securities (“RMBS”) originated and/or issued by Countrywide.¹ Between 2005 and 2007, AIG allegedly purchased RMBS Certificates ² with a total price of $28 billion. Complaint ¶ 2. AIG alleges that the Countrywide Defendants are liable because the Certificates' Offering Documents contain various misrepresentations. AIG alleges that Bank of America is liable under both successor liability and vicarious liability theories.³

At the Court's direction, Defendants filed a motion to dismiss based on timeliness, with all additional grounds reserved for later briefing. The timeliness issues have been fully briefed and the Court heard oral argument on those issues on May 14, 2012.

After due consideration, the Court decides as follows. AIG's federal claims are time-barred and are DISMISSED WITH PREJUDICE. The negligent misrepresentation claims brought by SunAmerica Annuity and Life Assurance Company, SunAmerica Life Insurance Company, American General Life Insurance Company of Delaware, American General Assurance Company, American General Life Insurance Company, The Variable Annuity Life Insurance Company, and Western National Life Insurance Company are also time-barred and are DISMISSED WITH PREJUDICE. The fraud claims brought by SunAmerica Annuity and Life Assurance Company, SunAmerica Life Insurance Company, and American General Life and Accident Insurance Company that were not covered by a tolling agreement are time-barred and are DISMISSED WITH PREJUDICE. The Court otherwise DENIES Defendants' motion.

II. LEGAL STANDARD

A Rule 12(b)(6) motion to dismiss should be granted when, assuming the truth of the plaintiff's allegations, the complaint fails to state a claim for which relief can be granted. See Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996). In deciding whether the plaintiff has stated a claim, the Court must assume the plaintiff's allegations to be true and draw all reasonable inferences in the plaintiff's favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987). However, the Court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir.2008). A court reads the complaint as a whole, together with matters appropriate for judicial notice, rather than isolating allegations and taking them out of context. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).

To the extent that federal law is relevant, the Court will follow Ninth Circuit precedent. Newton v. Thomason, 22 F.3d 1455, 1460 (9th Cir.1994). Because the case was originally filed in New York, the Court applies the substantive law of New York, including New York choice-of-law rules. In re Nucorp Energy Sec. Litig., 772 F.2d 1486, 1492 (9th Cir.1985).

III. DISCUSSION

A. Claims Transferred

The JPML transferred this case to the Court by a Transfer Order and Simultaneous Separation and Remand of Certain Claims. ECF No. 77. That Transfer Order sent a portion of the case to this Court and left a portion pending before Judge Jones in the Southern District of New York. The parties now dispute which claims were transferred and which remain in New York. The disputed claims fall into two broad categories: (i) the successor liability claims against Bank of America stemming from Countrywide's alleged primary violations; and (ii) the claims stemming from Third Party Offerings.

The Transfer Order provided:

In our initial transfer order, the Panel limited this MDL to claims brought by Countrywide MBS investors. AIG, however, involves additional unique claims relating to plaintiffs' purchase of Bank of America and Merrill Lynch & Co. MBS offerings. Accordingly, these non-Countrywide MBS claims are appropriate for separation and simultaneous remand, under 28 U.S.C. § 1407(a), to the Southern District of New York.

ECF No. 77. The Panel's use of “Countrywide MBS” and “Bank of America and Merrill Lynch & Co. MBS offerings” appears to draw a distinction based on whether Countrywide or Bank of America/Merrill issued a particular Certificate. The Court understands the Transfer Order to have therefore transferred all claims relating to Certificates that Countrywide issued (including the successor liability claims against Bank of America with respect to such Certificates), and remanded all claims relating to the Bank of America/Merrill Offerings.⁴

The Transfer Order does not explicitly address claims relating to Certificates issued by third parties. However, three factors lead the Court to conclude that the Panel intended to transfer the claims relating to those Third Party Offerings that contain Countrywide-originated loans. First, the purpose of the MDL is to centralize “actions sharing factual questions arising from allegations that Countrywide and affiliated defendants misrepresented to investors in Countrywide mortgage-backed securities (MBS) origination practices for, and the credit quality of, the mortgage loans Countrywide originated from 2004 to 2007.” Transfer Order, ECF No. 77. Third Party Offerings that contain Countrywide-originated loans present many of the same factual and legal questions regarding Countrywide's underwriting practices that are in other MDL cases. Second, the text of the Transfer Order made clear that it was transferring the entire case except for “ these non-Countrywide MBS claims.” Id. (emphasis added). The restrictive “these” refers to the Bank of America/Merrill Offerings; it follows that claims regarding other Offerings would be transferred to this Court. Third, in another case, the Panel transferred claims relating to third-party-issued Certificates to this Court because Countrywide had originated the underlying loans. See In re Countrywide Fin. Corp. Mortgage–Backed Securities Litig., Transfer Order (J.P.M.L. Feb. 7, 2012). These three factors lead the Court to conclude that claims relating to Third Party Offerings that contain Countrywide-originated loans have been transferred to the MDL. The successor liability claims against Bank of America relating to these Third Party Offerings have also been transferred to the Court for the reasons set out above. The remaining Third Party Offerings (including those that were underwritten by CSC) have nothing to do with the “origination practices for, and the credit quality of, the mortgage loans Countrywide originated from 2004 to 2007.” The Court does not believe that the Panel intended to transfer such claims.

B. The Securities Act Claims

Causes of Action Three, Four, and Five assert violations of the Securities Act of 1933. Such claims are subject to a three-year statute of repose that begins to run when the security is “bona fide offered to the public” (Section 11 claims) or on the date of sale (Section 12(a)(2)). 15 U.S.C. § 77m. The Complaint was filed on August 8, 2011, more than three years after each of the Certificates in this case was bona fide offered to the public and purchased by AIG. Compl. Ex. A. Tolling is not available for the reasons set out in Allstate Ins. Co. v. Countrywide Fin. Corp., 824 F.Supp.2d 1164, 1178–79 (C.D.Cal.2011). AIG's federal claims are therefore barred by the Securities Act's three-year statute of repose. Causes of Action Three, Four, and Five are DISMISSED WITH PREJUDICE.

C. The State Law Causes of Action

The case was originally filed in New York state court. The Court therefore applies New York law, including New York's choice-of-law rules and New York's borrowing statute. In re Nucorp Energy Sec. Litig., 772 F.2d at 1492. New York's borrowing statute, C.P.L.R. § 202, provides that when a nonresident sues on a cause of action that accrued outside the state, the action must be timely under both New York law and the law of the place where the cause of action accrued. Id. The parties dispute which plaintiffs are New York residents, where the plaintiffs' causes of action accrued, and whether AIG's claims are timely under the laws of...