Securities Standing Issue Taken Up by High Court
WASHINGTON (CN) - Pension plans denied standing to sue IndyMac for allegedly deceiving them as to mortgage pass-through certificates can take their case to the Supreme Court, the justices said Monday.
U.S. District Judge Lewis Kaplan, the original jurist to dismiss the claims for lack of standing, had defined such certificates "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."
"IndyMac Bank originated or acquired the individual mortgage loans that underlie the certificates," he wrote. "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."
In separate lawsuits, the Police and Fire Retirement System of the City of Detroit and the Wyoming State Treasurer and the Wyoming Retirement System had hoped to represent a class of those who bought certificates in some of the 106 offerings.
After consolidating the actions and naming the Wyoming entities lead plaintiff, Kaplan refused to consider claims arising from the purchase of securities that the Wyoming entities had not bought.
The Detroit PFRS and other asserted members of the class, none of which were named as plaintiffs, moved to intervene so that they could assert claims on behalf of the certificates they purchased, but they had already missed the three-year statute of repose in Section 13 of the Securities Act of 1933.
In a bid to toll the statute, the intervenors cited the 1974 Supreme Court opinion in American Pipe & Construction Co. v. Utah.
In 2011, Kaplan dismissed that argument as well as the alternative theory that Federal Rule of Civil Procedure Rule 15(c) would let the intervenors "relate back" the proposed amended complaint.
This led to an unsuccessful appeal in the 2nd Circuit by Detroit Retirement, the Los Angeles County Employees Retirement System aka LACERA and the Public Employees' Retirement System of Mississippi aka PERS.
Per its custom the Supreme Court issued no comment in granting PERS a writ of certiorari Monday.