On Behalf Of All Others Similarly Situated v. Countrywide Financial Corp.. .

• Decision Date: 04 November 2010
• Docket Number: Case No. 2:10-cv-00302-MRP-MANx.
• Citation: 722 F.Supp.2d 1157
• Court: U.S. District Court — Central District of California
• Parties: MAINE STATE RETIREMENT SYSTEM, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. COUNTRYWIDE FINANCIAL CORPORATION, et al., Defendants.

722 F.Supp.2d 1157

MAINE STATE RETIREMENT SYSTEM, Individually and On Behalf of All Others Similarly Situated, Plaintiff,

v.COUNTRYWIDE FINANCIAL CORPORATION, et al., Defendants.

Case No. 2:10-cv-00302-MRP-MANx.

United States District Court,C.D. California.

Nov. 4, 2010.

Andrew L. Zivitz, Jennifer L. Joost, Lauren Wagner Pederson, Sharan Nirmul, Lead Attorneys, Pro Hac Vice, Sean M. Handler, Pro Hac Vice, Barroway Topaz Kessler & Check LLP, Radnor, PA, Christina A. Royce, Daniel S. Drosman, Lauren G. Kerkhoff, Scott H. Saham, Spencer Alan Burkholz, Thomas E. Egler, Lead Attorneys, Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Maine State Retirement System, Individually and On Behalf of All Others Similarly Situated, Plaintiff.

Arthur L. Shingler, III, Scott and Scott LLP, Los Angeles, CA, for Putnam Bank, Movant.

Avi N. Wagner, The Wagner Firm, Los Angeles, CA, Ira M. Press, Pro Hac Vice, Randall K. Berger, Pro Hac Vice, Kirby McInemey LLP, New York, NY, for United Methodist Churches Benefit Board, Inc., Movant.

Christopher Lometti, Daniel B. Rehns, Joel P. Laitman, Lead Attorneys, Pro Hac Vice, Richard A. Speirs, Lead Attorney, Cohen Milstein Seller & Toll PLC, New York, NY; Julie G. Reiser, Lead Attorney, Matthew B. Kaplan, S. Douglas Bunch, Steven J. Toll, Lead Attorneys, Pro Hac Vice, Joshua S. Devore, Pro Hac Vice, Cohen Milstein Hausfeld & Toll PLLC, Washington, DC, Michael M. Goldberg, Glancy Binkow & Goldberg LLP, Los Angeles, CA, for Iowa Public Employees' Retirement System, Movant.

Spencer Alan Burkholz, Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Maine Public Employees Retirement System, Operating Engineers Annuity Plan, Pension Trust Fund for Operating Engineers, Vermont Pension Investment Committee, Washington State Plumbing & Pipefitting Pension Trust, Movants.

Azra Z. Mehdi, Milberg LLP, Los Angeles, CA, Spencer Alan Burkholz, Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Mashreqbank, P.S.C., Movant.

Lloyd Winawer, Lead Attorney, Goodwin Procter LLP, Los Angeles, CA, Brian Charles Devine, Brian E. Pastuszenski, Inez H. Friedman-Boyce, Jennifer B. Luz, Pro Hac Vice, Goodwin Procter LLP, Boston, MA, for Countrywide Financial Corporation, a Delaware corporation, Countrywide Home Loans, Inc., CWALT, Inc., CWMBS, Inc., CWHEQ, Inc., Countrywide Capital Markets, Countrywide Securities Corporation, N. Joshua Adler, CWABS, Inc., Defendants.

Alexander K. Mircheff, Dean J. Kitchens, Gibson Dunn and Crutcher LLP, Los Angeles, CA, for J.P. Morgan Securities Inc., Deutsche Bank Securities Inc., Bear, Stearns & Co. Inc., Banc of America Securities LLC, UBS Securities, LLC, Edward D. Jones & Co., L.P., Citigroup Global Markets Inc., Goldman, Sachs & Co., Credit Suisse Securities (USA) LLC, Greenwich Capital Markets, Inc., Barclays Capital Inc., HSBC Securities (USA) Inc., Morgan Stanley & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Defendants.

Alexander K. Mircheff, Dean J. Kitchens, Gibson Dunn and Crutcher LLP, Los Angeles, CA, Inez H. Friedman-Boyce, Pro Hac Vice, Goodwin Procter LLP, Boston, MA, for BNP Paribas Securities Corp., Defendant.

Christopher G. Caldwell, David C. Codell, Jeffrey M. Hammer, Caldwell Leslie & Proctor PC, Los Angeles, CA, for Stanford L. Kurland, Defendant.

Jennifer M. Sepic, Lead Attorney, Bingham McCutchen LLP, Los Angeles, CA, Leiv H. Blad, Jr., Lead Attorney, Pro Hac Vice, Boyd Cloern, Pro Hac Vice, Bingham McCutchen LLP, Washington, DC, for David A. Spector, Defendant.

David A. Priebe, Jeffrey B. Coopersmith, DLA Piper US LLP, East Palo Alto, CA, Matthew D. Caplan, Nicolas Morgan, DLA Piper US LLP, Los Angeles, CA, Shirli Fabbri Weiss, DLA Piper Rudnick Gray Cary US, San Diego, CA, for Eric P. Sieracki, Defendant.

Joshua G. Hamilton, Peter Young Hoon Cho, William F. Sullivan, Lead Attorneys, Paul Hastings Janofsky and Walker LLP, Los Angeles, CA, for Ranjit Kripalani, Jennifer S. Sandefur, Defendants.

Michael D. Torpey, Lead Attorney, Penelope A. Graboys Blair, Lead Attorney, Orrick Herrington and Sutcliffe, San Francisco, CA, Michael C. Tu, Lead Attorney, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, for David A. Sambol, Defendant.

Jonathan Rosenberg, Pro Hac Vice, O'Melveny & Myers LLP, New York, NY, Matthew W. Close, Seth A. Aronson, O'Melveny and Myers LLP, Los Angeles, CA, for Bank of America Corp., NB Holdings Corporation, Defendants.

Alexander K. Mircheff, Gibson Dunn and Crutcher LLP, Los Angeles, CA, for JPMorgan Chase, Erroneously Sued As JPMorgan Chase & Co., RBS Securities Inc., Defendants.

ORDER RE: MOTIONS TO DISMISS AMENDED CLASS ACTION CONSOLIDATED COMPLAINT

MARIANA R. PFAELZER, District Judge.

I. INTRODUCTION AND BACKGROUND

From 2005 to 2007, Countrywide was the nation's largest residential mortgage lender. AC ¶ 4. During that period, Countrywide originated and purchased residential mortgages and home equity lines of credit (“HELOC”) through its subsidiary Countrywide Home Loans (“CHL”). Id. at ¶ 28. Between 2005 and 2007, CHL originated or purchased a total of approximately $1.4 trillion in mortgage loans. See Countrywide Fin. Corp.2007 SEC Form 10-K (filed Feb. 29, 2008) at 29. ¹ Countrywide's core business was to originate and purchase residential mortgage loans, which it then sold into the secondary market, principally to make up pools of mortgage-backed securities (“MBS”).

Plaintiffs filed this putative class action individually and “on behalf of a class of all persons or entities who purchased or otherwise acquired beneficial interests in” certain MBS in the form of certificates issued in 427 separate offerings (the “Offerings”) between January 25, 2005 and November 29, 2007 “pursuant and/or traceable to the Offering Documents” and were damaged thereby. AC ¶¶ 1, 186. The claims are brought against the Countrywide Defendants ² pursuant to Sections 11, 12 and 15 of the Securities Act of 1933. Plaintiffs contend the Countrywide Defendants made materially untrue or misleading statements or omissions regarding Countrywide's loan origination practices in public offering documents associated with 427 separate offerings. Also named as defendants are Bank of America, Countrywide special-purpose issuing trusts, several current or former Countrywide officers and directors, and a number of banks that served as underwriters on one or more of the offerings at issue.

On May 14, 2010, the Court appointed Iowa Public Employees' Retirement System (“IPERS”) as Lead Plaintiff in this action because it had the greatest financial interest. Docket No. 120. On July 13, 2010, IPERS and three other institutions ³ , which joined as named plaintiffs (collectively, “Plaintiffs”), filed an Amended Consolidated Class Action Complaint (“AC”). Docket No. 122. All defendants filed motions to dismiss the AC. After the motions were fully briefed, the Court heard extensive oral argument on October 18, 2010. The Court DISMISSES the action without prejudice on the basis of standing and the statute of limitations. Plaintiffs will have thirty (30) days to amend their pleading. Although there are many other flaws in the AC, the Court reserves judgment on the remaining issues until after Plaintiffs have cured the chief pleading deficiencies which are potentially dispositive of this action.

II. THE STATE LITIGATION

This action was commenced on January 14, 2010, nearly five years after the earliest challenged Offering and more than two years after the last challenged Offering. Docket No. 1. The plaintiffs and law firms that filed this action in federal court had previously litigated a separate case, involving the same group of Offerings, in California Superior Court. That case, Luther v. Countrywide Home Loans Servicing LP, No. BC 380698 (Cal.Super.Ct.) was dismissed with prejudice on January 6, 2010, when the Superior Court sustained a demurrer to the complaint. The Superior Court held that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) gave the federal courts exclusive subject matter jurisdiction over class action claims under the Securities Act of 1933. A week later, the plaintiffs filed this action in federal court and now argue that the existence of the first state court putative class action lawsuit tolled the statute of limitations for this action under the American Pipe ⁴ tolling doctrine.

At the time that Luther was dismissed, the state court case was a consolidation of the original Luther action, which was filed on November 14, 2007, Countrywide Defendants' Request for Judicial Notice (“CW RJN”) Exh. 25, and a separate suit, Washington State Plumbing and Pipefitting Pension Trust v. Countrywide Financial Corp. et al., No. BC 392571 (Cal.Super.Ct.) filed on June 12, 2008, CW RJN Exh. 27. The Luther complaint had been amended on September 9, 2008. CW RJN Exh. 26. Luther and Washington State were consolidated on October 16, 2008 when a consolidated complaint was filed which encompassed the same 427 Offerings at issue in this case. CW RJN Exh. 28. During the process of amendment and consolidation of these two cases, parties and claims were dropped and added. Plaintiffs have offered no explanation of precisely how the state litigation has preserved their claims before this Court, nor has it offered any explanation of how the parties named in this case are individually affected by the amendments in the state case.

III. DISCUSSION

As stated, there are numerous problems caused by the generality of the allegations in the AC, many of which Defendants have pointed out in their comprehensive motions to dismiss. Defendants have raised many meritorious issues, and the Court will not resolve them all in this Order. However, there are two threshold issues that the Court will address: standing and the statute of limitations. Today, the Court GRANTS the motion to dismiss with leave to amend on the grounds of the statute of limitations and standing. The Court will rule on the remaining issues after Plaintiffs have amended...