A ruling issued yesterday by the U.S. District Court for the Southern District of New York denied class certification in an MBS law suit.

The defendants in the case are affiliates of the Royal Bank of Scotland, which were represented by Simpson Thacher. The case is called New Jersey Carpenters Vacation Fund, et al. v. The Royal Bank of Scotland Group, Plc, et al.

The lawsuit asserted claims under sections 11, 12 and 15 of the Securities Act of 1933, for alleged misstatements and omissions about residential mortgage loan origination practices in the offering documents for the MBS backing these loans.

Plaintiffs sought certification of a class of investors who bought $3.4 billion worth of securities in two deals. The court denied class certification on two grounds. 

It held that individual questions predominate about each buyer’s knowledge of the underwriting guidelines and practices that were supposedly misstated in the offering documents. The Court also noted that different investors’ knowledge relied on factors such as their respective levels of sophistication as well as the time when they bought the securities.

Second, the court held that class action treatment would not be a good method to resolve investors’ claims where the proposed class consisted of big, institutional and sophisticated buyers that could pursue their own claims, and where those class members are probably going to have competing interests in prosecuting the action. 

This, according to Simpson Thacher, might be the first ruling on class certification among the numerous MBS actions pending in the different U.S. courts.

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