New Jersey Carpenters Vacation Fund, et al. v. The Royal Bank of Scotland Group, plc, et al.

In a widely covered decision in the US District Court for the Southern District of New York, class certification was denied in a securities class action against Analysis Group client the Royal Bank of Scotland (RBS) and affiliates. Counsel from Simpson Thacher retained Analysis Group in this matter involving allegations of misstatements and omissions in connection with residential mortgage-backed securities (RMBS). Plaintiffs alleged that the defendants omitted material facts and made untrue statements in the offering documents regarding the underwriting standards and practices followed by the mortgage originators.

The Analysis Group team, led by Managing Principals Nicholas Crew, Adam Decter, Mark Howrey, and Richard Starfield, and including Vice President Lauren Hunt, supported academic affiliate Walter Torous, who filed an expert report as part of defendants' opposition to plaintiffs' motion for class certification.

Judge Harold Baer Jr. declined to certify the putative class, which included large institutional investors, stating that individual questions concerning the plaintiffs' knowledge predominated and that a class action would therefore not be the best way to move forward with the case. As reported in AmLaw Litigation Daily, with regard to the Rule 23(b)(3) requirements that govern class certification, Judge Baer "concluded that because the defendants could offer evidence of widely different levels of sophistication and knowledge among investors in the putative classes, individual issues predominated over class issues … " The judge stated in his opinion: "Were I to certify the proposed classes the Court would have to hear significant individualized evidence on, among other things, each purchaser's knowledge and damages. The necessity of hearing all this individualized evidence defeats the requisite superiority of class treatment."

It has been reported that the decision marks the first ruling on class certification among the numerous mortgage-backed securities actions pending in courts across the country.