It’s Official: $500 Million Countrywide Settlement Gets Final Approval

On December 6, 2013, Senior U.S. District Court Judge Mariana R. Pfaelzer approved a settlement in which Countrywide Financial Corporation (“Countrywide”) agreed to pay $500 million to settle investors’ claims that they were misled as part of Countrywide’s sale of mortgage-backed securities (“MBS”) from 2005 to 2007. The half-billion dollar settlement is the largest MBS class action recovery in history.

Robbins Geller initially filed what was to be the first post-financial crisis MBS class action and alleged that Countrywide (now owned by Bank of America Corp.), along with various Wall Street banks, misrepresented the quality of billions of dollars’ worth of MBS and sold them to plaintiffs and other class members. Although the securities that pooled the loans were rated investment grade (A to AAA), in reality they were “junk” and held massive amounts of defective loans. Defendants issued MBS certificates through 430 offerings tied to registration statements and prospectus supplements that allegedly misrepresented the underwriting standards and loan origination practices used in originating the underlying mortgages. For more than six years, the California Superior Court case wound its way from state court to federal district court, including Robbins Geller’s victories at both the California Court of Appeal and the U.S. Court of Appeals for the Ninth Circuit, eventually reaching resolution in the Central District of California before Judge Pfaelzer.

The settlement in this enormously complex case was achieved with the assistance of experienced mediators and included participation at mediation sessions by lead plaintiffs Vermont Pension Investment Committee and Pension Trust Fund for Operating Engineers.

In approving the settlement, Judge Pfaelzer repeatedly complimented plaintiffs’ attorneys, writing that it was “beyond serious dispute that Class Counsel has vigorously prosecuted the Settlement Actions on both the state and federal level over the last six years.” She also wrote that “[w]ithout a settlement, these cases would continue indefinitely, resulting in significant risks to recovery and continued litigation costs. It is difficult to understate the risks to recovery if litigation had continued.” The court indicated in its order that “[p]laintiffs’ [c]ounsel have over the last six years persisted through numerous adverse rulings at both the state and federal levels and litigated issues of first impression in the Ninth Circuit and in California state court to maintain the viability of their claims.” Judge Pfaelzer also wrote that “[h]ere, the proposed $500 million settlement represents one of the 25 largest securities class action settlements and largest MBS class action settlements to date. Indeed, this settlement easily surpasses the next largest . . . MBS settlement.”

 “This was an incredible recovery for our clients, and was the result of the hard work by our team of lawyers. The defendants paid a substantial sum to settle the cases because of our ability to prepare the case and send it to trial, if necessary,” said Robbins Geller partner Spencer A. Burkholz. “After six years of hard-fought litigation, this record-breaking recovery is a tremendous result for MBS investors.”

Robbins Geller is co-lead counsel for the plaintiffs. Robbins Geller attorneys Spencer A. Burkholz, Scott Saham and Thomas E. Egler were responsible for obtaining this historic settlement on behalf of the settlement class. The settlement resolves Luther v. Countrywide Fin. Corp., No. 12-cv-05125-MRP-MAN (C.D. Cal.); Western Conference of Teamsters Pension Trust Fund v. Countrywide Fin. Corp., No. 12-cv-05122-MRP-MAN (C.D. Cal.); and Maine State Ret. Sys. v. Countrywide Fin. Corp., No. 10-cv-00302-MRP-MAN (C.D. Cal.).

Other related articles: The Chicago Tribune