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Court urged to go ahead with securities case

A plan to settle a significant case over losses from investing in mortgage-backed securities should not keep the Supreme Court from going ahead to decide a related but separate dispute, lawyers involved told the Court on Thursday.

The Court on Tuesday had called for new briefs on whether it should proceed with Mississippi Public Employees’ Retirement System v. IndyMac MBS — set for argument on October 6, the opening day of the new Term.  The new briefs, filed in the form of letters to the Court, are here, here, and here.

The new  filings told the Court that the proposed settlement explicitly excludes one of the major securities firms involved  — Goldman Sachs & Co. — so the pending petition deals with claims that Mississippi PERS would still press if it were allowed to intervene in lower courts, a key issue before the Justices.

The Court had granted review in March of the Mississippi pension system’s challenge to its exclusion from a class-action case that was focused on mortgage-backed securities sold to investors by the now-defunct firm, IndyMac MBS, Inc.   Lower courts kept the Mississippi system out of the case by finding that it had waited too long, under federal securities law, to attempt to enter the case.  The Court’s review centers on the scope of that three-year time limitation.

Other investor groups had sued IndyMac MBS and a group of investment firms that had acted as underwriters.  That is the lawsuit that Mississippi PERS sought to enter, and that is the one that would be ended with the proposed $340 million settlement agreement now awaiting a judge’s reaction in federal district court in New York City.

If the Mississippi system wins its case in the Supreme Court, it would then be able to go forward with its claims at least against Goldman Sachs.   The pending settlement deal involves six underwriting firms, and three of those are among those involved in the pension system’s appeal, the underwriting firms’ lawyers said in their letter.

“The claims that petitioner seeks to assert against respondent Goldman Sachs are not encompassed in the proposed settlement agreement,” the filing said, so “the agreement — if and when it is approved by the district court — should have no effect on the proceedings in this Court.”

In fact, the letter said, what Mississippi PERS is pursuing in the Supreme Court involves only two IndyMac offerings that were underwritten by Goldman Sachs, so the outcome of the system’s appeal would have no impact on the investors’ claims against the other underwriters that are the subject of the proposed settlement.

Mississippi PERS’ new letter said it agreed with the underwriters’ lawyers that the plan to settle would not affect its case before the Justices.  In addition, that letter said “there is no certainty” that the judge will give final approval to the deal, or that any appeals in the future over the terms of the deal if the judge did approve it would be resolved before the Justices had ruled on the pending case.

Lawyers for IndyMac MBS told the Court that it agreed with the views expressed in the letter by the underwriting firms, and noted that it is not a party to the proposed settlement.  Those who worked out the settlement between the original investor groups who sued and six underwriting firms had told the district court that, since IndyMac has essentially gone out of business, they were not seeking to collect anything from that firm and thus would dismiss any claims against that firm if the judge approved the deal.

IndyMac, although it is nominally involved in the case now before the Supreme Court, has not filed any formal briefs in the case, and told the Court that it would not do so.

The Court holds its first private Conference of the new Term next Monday, and presumably it will examine the new letters at that session and decide whether to actually go forward with the case.


Recommended Citation: Lyle Denniston, Court urged to go ahead with securities case, SCOTUSblog (Sep. 25, 2014, 1:19 PM),