U.S. Supreme Court to decide if IndyMac MBS plaintiff filed too late

Mon Mar 10, 2014 10:56am EDT
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By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday agreed to consider whether class action claims against underwriters of securities issued by a unit of the now-defunct IndyMac Bancorp Inc should be able to proceed.

The court will rule on whether the three-year window for filing certain securities claims is suspended if investors can show they would have been parties in a previously filed class action lawsuit had it not been dismissed. Lower courts are split on the question.

Various institutional investors, including the Wyoming state retirement fund, sued over what they said were untrue statements and omissions concerning mortgage-backed securities issued by IndyMac subsidiary IndyMac MBS Inc. The bank failed in July 2008.

The defendants in the case are banks that were underwriters for the offerings. They are units of Credit Suisse Group AG CSGN.VX, Deutsche Bank AG DBKGn.DE, Goldman Sachs Group Inc (GS.N: Quote) and Morgan Stanley (MS.N: Quote).

A federal district judge in New York and the 2nd U.S. Circuit Court of Appeals, in a June 2013 ruling, both ruled for the defendants.

The public employee retirement system of Mississippi, the plaintiff seeking high court review, was not part of the lawsuit at the time it was dismissed, but said it could revive the case because it would have been a member of the class if the litigation had been allowed to continue.

The fund cites a 1974 Supreme Court case, American Pipe & Construction Co v. Utah, which said that the filing of a class action lawsuit before the deadline keeps the claims of all potential class members alive.

The banks counter that the 1933 Securities Act states that the specific claims at issue in the case cannot be brought more than three years after the securities were offered to the public.   Continued...

The U.S. Supreme Court building seen in Washington May 20, 2009. REUTERS/Molly Riley