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On March 29, 2012, Judge Deborah A. Batts of the United States District Court for the Southern District of New York granted Defendants' motions to dismiss a second amended complaint with prejudice.  The complaint asserted claims under the Securities Act of 1933 and alleged that the offering documents issued in connection with a mortgage-backed securities offering contained material misstatements and/or omissions.  The offering at issue was underwritten by our clients: RBS Securities Inc., Deutsche Bank Securities Inc., and Wells Fargo Securities Inc.  Judge Batts dismissed the complaint for two reasons.  First, Judge Batts held that the complaint failed to tie plaintiff’s allegation that loan originators failed to follow their loan underwriting guidelines to either the loans backing the relevant offering or to the loans specifically backing plaintiff’s mortgage-backed securities certificates.  Second, Judge Batts found that the complaint failed to sufficiently plead that the alleged misstatements and omissions were material in light of the offering documents’ risk disclosures and publicly available information regarding the derogation of subprime lending practices.  This is one of the first instances where a mortgage-backed securities case has been dismissed with prejudice on such grounds.

The case is New Jersey Carpenters Health Fund, et al. v. NovaStar Mortgage, Inc., et al. The Simpson Thacher team consists of Tom Rice, Alan Turner, Alyssa Watzman, John Robinson and Abigail Williams.