Pension funds progress in credit crisis-related mortgage suits against banks

Class action suits brought by US pension fund investors against financial industry titans such as Credit Suisse and Merrill Lynch in the wake of the financial crisis have been making headway in the courts. During August, Manhattan federal judge Jed Rakoff outlined his decision to allow a case where the lead plaintiff is the $17.2bn (€12.1bn) Public Employees Retirement System of Mississippi (MIssPERS) against Merrill Lynch to reach class certification.
A suit led by the New Jersey Carpenters Health Fund against Credit Suisse’s DLJ Mortgage Capital has also taken a step forward with certification by Manhattan federal judge Paul Crotty. The MissPERS case relates to purchases of ‘mortgage pass-through certificates’ sold by Merrill between February 2006 and September 2007. The plaintiffs claim the prospectuses contained “untrue statements of material fact”. At least 1,600 investors are affected.In the ruling, Rakof said: “The common questions presented by this case –- essentially, whether the Offering Documents were false or misleading in one or more respects –- are clearly susceptible to common answers.” He added: “Although the class certainly includes sophisticated institutional investors, individual investors also purchased the mortgage-backed securities at issue.” The defendants in the case had called into question MissPERS’s relationship with lead legal counsel, Bernstein Litowitz Berger & Grossmann LLP. The judge said these “belatedly-raised insinuations are not only hopelessly vague but also entirely unpersuasive”. The case dates back to an initial action filed by the Connecticut Carpenters Pension Fund in 2008, of which MissPERS was named lead plaintiff in April 2009. Other plaintiffs in the action include the Los Angeles County Employees Retirement Association, the Wyoming State Treasurer.