The financial collapse of 2008, which Federal Reserve Chairman Alan Greenspan referred to as a “once-in-a century credit tsunami,”1 not only roiled the financial markets, but also left behind the flotsam and jetsam of litigation concerning mortgages and asset-backed securities. These cases run the gamut from mortgage foreclosures to consumer class actions against mortgage lenders to securities class actions against major financial institutions and their affiliates that issued mortgage-backed securities. Plaintiffs have filed more than 200 federal cases relating to the credit crisis since 2008.2

Certainly one of the plaintiffs’ bar’s favorite claims in these cases has been under §11 of the Securities Act of 1933. And little wonder. §11 renders securities issuers, underwriters, and others who sign registration statements liable if “any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.”3 There is typically no requirement that plaintiffs plead scienter, reliance, or causation.4 This subjects issuers to “virtually absolute” liability.5 While other defendants have an affirmative “due diligence” defense,6 they are nonetheless potentially liable for “mere negligence.”7 And in many cases, because §11 claims do not involve fraud, the complaints are not subject to Rule 9(b)’s or the Private Securities Litigation Reform Act’s stringent pleading standards, which require complainants to particularize their allegations.8

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