Class Certified in Mortgage-Backed Securities Litigation

A tempest is brewing in the U.S. Court of Appeals for the Second Circuit in the multibillion-dollar residential mortgage-backed securities (RMBS) litigation. Southern District Judge Jed S. Rakoff last week granted class certification in an RMBS case against Merrill Lynch, green-lighting claims by investors holding $16.5 billion in face value of Merrill-issued securities. His ruling in Public Employees Retirement System of Mississippi v. Merrill Lynch & Co., 08 civ. 10841, apparently the first of its kind, stands in stark contrast to a January decision by his colleague, Judge Harold Baer Jr., who denied class certification in two cases brought by purchasers of RMBS underwritten by Goldman Sachs, Citigroup, and others. New Jersey Carpenters Health Fund v. Residential Capital LLC, 272 FRD 160 (S.D.N.Y. 2011).

The class certification issue is already teed up before the circuit. In April, the court agreed to hear an interlocutory appeal of Judge Baer’s rulings rejecting class status for RMBS plaintiffs. That appeal is being briefed, and a date for oral arguments has not been set.