On September 6, 2012, the U.S. Court of Appeals for the Second Circuit held that a plaintiff had standing to assert claims not only against originators of offering certificates in which the plaintiff specifically invested, but could also proceed with claims on behalf of purchasers of certificates backed by mortgages originated by the same lenders. According to the court, such claims implicate “the same set of concerns” as the plaintiff’s individual claims. In doing so, the Second Circuit rejected the defendants’ argument that the plaintiff lacked standing to bring claims on behalf of investors in different certificates.
The District Court previously found that the plaintiff, who had purchased securities in two of the 17 MBS offerings by Goldman Sachs, could only assert claims on behalf of those investors in the offerings in which the plaintiff participated, but not on behalf of the investors in the other 15 offerings. The Second Circuit reversed, reasoning that since the plaintiff sought to represent investors in a securities case where the alleged misrepresentation involved the origination practices of the same mortgage lenders, the plaintiff’s claims and the other investors’ claims represented the “same set of concerns.” While the Second Circuit concluded that the plaintiff could represent investors in seven of the offerings since they involved mortgages originated by common lenders, it also held that the plaintiff could not represent investors investing in securities backed by mortgages originated by other originators, since those were “different in character and origin.” (“Second Circuit Hands Subprime Mortgage-Backed Securities Plaintiffs Substantial Standing Victory,” D&O Diary, September 7, 2012).