Judge Oetken Certifies Liability-Only Class in MBS Case Against JP Morgan

In an opinion yesterday, Judge Oetken certified a class, for purposes of liability only, in a case alleging that certain JP Morgan mortgage-backed securites offering documents falsely represented (among other things) that the underlying loans complied with certain underwriting standards when, in fact, those standards were abandoned. Judge Oetken rejected JP Morgan’s argument (among many others) that there were too many underwriting standards -- 8,196 according to JP Morgan -- to address on a class wide basis:

[W]hen Plaintiffs’ expert reviewed some of the documents that Defendants tally as separate “underwriting guidelines,” he found that many among this number may be either materially identical or irrelevant. Further, as long as the relevant underwriting guidelines contained substantially similar terms regarding the borrowers’ ability to repay the loans, along with reference to properly calculated appraisals and LTV ratios—as Plaintiffs assert they do, and Defendants have not shown otherwise —relatively minor variations between those guidelines will not require individualized attention.

Judge Oetken certified the class for liability only, however, because he found that the “Plaintiffs have failed to meet their burden of showing that damages can be calculated on a classwide basis.”:

Their expert, Dr. Joseph Mason, states in his principal report that “[t]here are several ways in which the securities that make up these Offerings can be valued at different points in time,” and mentions three methods. He concludes by stating that it is his opinion “that class-wide damages can be calculated in a formulaic manner.” . . . . Without more specificity as to the methodology that will be used, however, the Court cannot be certain that this is so. . . . As a result, Plaintiffs’ submissions at this stage do not demonstrate that there is a damages calculation method that will be usable for all class members’ claims. Of course, no actual calculation needs to be performed at this stage. But without assurance beyond Mason’s say-so, the Court cannot conclude that there is a damages model that will permit the calculation of damages on a classwide basis.