Massachusetts Mutual Life Insurance v. Residential Funding Co.

55 F. Supp. 3d 235
CourtDistrict Court, D. Massachusetts
DecidedOctober 29, 2014
DocketCivil Action Nos. 11-30035-MGM, 11-30039-MGM, 11-30044-MGM, 11-30047-MGM, 11-30048-MGM, 11-30094-MGM, 11-30126-MGM, 11-30127-MGM, 11-30141-MGM, 11-30215-MGM, 11-30285-MGM
StatusPublished

This text of 55 F. Supp. 3d 235 (Massachusetts Mutual Life Insurance v. Residential Funding Co.) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Massachusetts Mutual Life Insurance v. Residential Funding Co., 55 F. Supp. 3d 235 (D. Mass. 2014).

Opinion

MEMORANDUM AND ORDER REGARDING PLAINTIFF’S MOTIONS FOR PARTIAL SUMMARY JUDGMENT

MARK G. MASTROIANNI, District Judge.

I. Introduction

Massachusetts Mutual Life Insurance Company (“Plaintiff’) filed eleven related actions against various defendants (“Defendants”),1 asserting violations of the Massachusetts Uniform Securities Act (“MUSA”), Mass. Gen. Laws ch. 110A, § 410, for misstatements and omissions contained in the offering documents of residential mortgage-backed securities (“RMBS”). Presently before the court are Plaintiffs motions for partial summary judgment, filed in all eleven cases, in which it seeks to preclude Defendants from asserting a “loss causation” affirmative defense. For the following reasons, the court agrees with Plaintiff that a loss causation affirmative defense is not available and that it is appropriate for the court to resolve the issue at this stage. Accordingly, the court will allow Plaintiffs motions for partial summary judgment.

II. BACKGROUND

Plaintiff explained in its Local Rule 56.1 Statement of Uncontested Material Facts that “there are no material facts that relate to its Motion for Partial Summary Judgment of Defendants’ Loss Causation Defense” because “[t]he Motion raises a pure question of law.”2 (11-30035-MGM, Dkt. No. 252, Pl.’s Statement of Uncontested Material Facts Pursuant to Local Rule 56.1.) In any event, the following background, largely taken from Judge Ponsor’s ruling on Defendants’ motions to dismiss, provides context for the present dispute.

These actions arise out of the sale of RMBS certificates between 2005 and 2007. All of the certificates at issue were created in a largely identical multi-step securitization process. Loan originators originated mortgage loans to borrowers who were buying or refinancing homes. A sponsor bought loans from the originators and aggregated them into a loan pool, which usually contained thousands of loans. The sponsor then sold the pool to a depositor, who transferred the loans to a trust. The trust issued certificates to the depositor, who sold the certificates to the underwriting financial institutions for resale to investors, such as Plaintiff. Defendants in these actions include institutions that served as sponsors, depositors, and underwriters of the loans.
When sold, certificates were accompanied by offering documents that included a prospectus and prospectus supplement. The offering documents provided [238]*238descriptions of the certificates, summary-loan information on the underlying loans, and summary descriptions of the third-party originators’ loan underwriting guidelines. Plaintiff alleges that the offering documents at issue in these cases misstated or omitted certain material facts....

Massachusetts Mut. Life Ins. Co. v. Residential Funding Co., LLC, 843 F.Supp.2d 191, 198 (D.Mass.2012). Specifically, Plaintiff alleged, as to one category of misstatements, that “Defendants represented that the loans were underwritten using prudent underwriting standards, but, in fact, loan originators systematically disregarded their stated loan underwriting guidelines.” Id.

Plaintiff brought these eleven actions in 2011, seeking to rescind the RMBS purchases under Section 410 of the MUSA. On February 14, 2012, Judge Ponsor granted in part and denied in part Defendants’ motions to dismiss.3 As relevant for present purposes, Judge Ponsor explained in his ruling that

[t]o state a claim under MUSA section 410(a), Plaintiff must show that (1) Defendants offered or sold securities in Massachusetts; (2) by making an untrue statement of, or omitting, any material fact; (3) Plaintiff did not know of the untruth or omission; and (4) Defendants knew or should have known of the untruth or omission. Marram [v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 809 N.E.2d 1017, 1026 (2004) ]. Plaintiff does not need to prove negligence, scienter, reliance, or loss causation. Id. at 1026-27. Furthermore, the buyer’s sophistication is irrelevant to a MUSA claim, and the buyer has no duty to investigate or verify a statement’s accuracy. Id. at 1027.

Massachusetts Mut., 843 F.Supp.2d at 200. As to Plaintiffs allegations regarding the underwriting guidelines, Judge Ponsor held that the complaints adequately alleged “wholesale abandonment of underwriting standards” sufficient to overcome certain disclosures contained in the offering documents which might otherwise defeat Plaintiffs claims of material misstatements: “Plaintiff has alleged in each of the complaints a widespread abandonment of underwriting guidelines by these specific Defendants and poor performance of the loans.” Id. at 202 (citing Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762, 773-74 (1st Cir.2011)). In response to Defendants’ argument that “the poor performance of the loans is due solely to the economic downturn,” Judge Ponsor explained that “this is a question of fact that cannot be resolved on a motion to dismiss.” Id.

Following Judge Ponsor’s ruling on the motions to dismiss, Plaintiff filed motions to strike various affirmative defenses asserted in Defendants’ answers to the complaints. On October 17, 2012, Judge Nei-man granted Plaintiffs motions to strike in part and denied them in part. In re Massachusetts Mut. Life Ins. Company’s Motions to Strike, 2012 WL 5077642 (D.Mass. Oct. 17, 2012). One of the affirmative defenses Plaintiff sought to strike was loss causation. Judge Neiman, however, de-[239]*239dined to strike the defense, explaining that “[i]t is simply too early to decide that this affirmative defense is barred.” Id. at *4.4

III. STANDARD OF REVIEW '

When ruling on a motion for summary judgment, the court must construe the facts in a light most favorable to the non-moving party. Benoit v. Tech. Mfg. Corp., 331 F.3d 166, 173 (1st Cir.2003). Summary judgment is appropriate when “there is no genuine issue as to any material fact” and “the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). An issue is “genuine” when the evidence is such that a reasonable fact-finder could resolve the point in favor of the non-moving party, and a fact is “material” when it might affect the outcome of the suit under the applicable law. Morris v. Gov’t Dev. Bank, 27 F.3d 746, 748 (1st Cir.1994). The non-moving party bears the burden of placing at least one material fact into dispute after the moving party shows the absence of any disputed material fact. Mendes v. Medtronic, Inc., 18 F.3d 13, 15 (1st Cir.1994) (discussing Celotex Corp. v. Catrett,

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Cohesive Technologies v. Waters Corp.
130 F. Supp. 2d 157 (D. Massachusetts, 2001)
Marram v. Kobrick Offshore Fund, Ltd.
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Reisman v. KPMG Peat Marwick LLP
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843 F. Supp. 2d 191 (D. Massachusetts, 2012)
Wilson v. Saintine Exploration & Drilling Corp.
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Cite This Page — Counsel Stack

Bluebook (online)
55 F. Supp. 3d 235, Counsel Stack Legal Research, https://law.counselstack.com/opinion/massachusetts-mutual-life-insurance-v-residential-funding-co-mad-2014.