In what is the largest settlement so far of an mortgage-backed securities class action lawsuit filed as part of the subprime and credit-crisis securities litigation wave, the parties to the consolidated Countrywide mortgage-backed securities suit pending in the Central District of California have agreed to settle the litigation for $500 million. The settlement is subject to court approval. The plaintiffs’ lawyers’ April 17, 2013 press release describing the settlement can be found here.


The consolidated litigation that has been settled involves several different lawsuits and several different sets of claimants. Background regarding the litigation can be found here.  All of the claimants allege that they purchased mortgage-backed securities that had been issued by Countrywide prior to its acquisition by Bank of America, and that the offering documents accompanying the offering contained misrepresentations and omissions about the mortgages underlying the securities. Among other things, the claimants alleged that the defendants had misrepresented the underlying process that had been used in the origination of the mortgages and the creditworthiness of the mortgage borrowers.


This litigation has a long and complicated procedural history. Among other cases that are consolidated in this litigation is the Luther v. Countrywide case, which I have written about several times in the past, as pertains to questions of concurrent state court jurisdiction under Section 22 of the ’33 Act. (Refer here for the background of the Luther case and a discussion of the jurisdictional issues involved.)


Further complicating the attempts to settle the case is that during the pendency of the case, Central District of California Judge Marianne Pfaelzer entered several orders dismissing certain groups of claimants on standing and tolling issues. These dismissed claimants preserved rights to appeal these rulings. However, all of the claimants claims are settled through this settlement, including even those whose claims had been dismissed and who might have appealed the dismissal rulings.


According to Steve Toll of the Cohen Milstein Sellers & Toll law firm, who is lead counsel for the class plaintiffs, a plan of allocation will have to be agreed to in order to apportion the settlement amount among the various groups of plaintiffs. The plaintiffs’ lawyers will have to negotiate a proposed allocation amongst themselves and submit a plan of allocation when the settlement papers are submitted to the court.


The $500 million settlement is by far the largest settlement of a mortgage-backed securities class action lawsuit (MBS) as part of the current subprime and credit crisis litigation wave. The next largest MBS securities suit settlement is the December 2011 $315 million Merrill Lynch mortgage backed securities settlement, followed by the $125 million Wells Fargo mortgage backed securities suit settlement. There have of course been larger subprime and credit crisis-related securities class action settlements, led by the massive $2.43 billion BofA/Merrill Lynch merger settlement, among others. However, these other larger settlements did not relate to mortgage backed securities, which, as the procedural history of these cases show, posed a different set of hurdles for the prospective claimants. Overall, this settlement ranks as the sixth largest settlement among all subprime and credit crisis-related securities suit settlements, as shown by the settlement table that can be found here.


I have in any event added the Countrywide Mortgage Backed securities settlement to my running tally of settlements and other case resolutions of the subprime and credit crisis-related lawsuits, which can be accessed here.