Firm Defeats Motion to Dismiss Fraud Claims in an RMBS Case Against Affiliates of the Royal Bank of Scotland Group PLC

In July 2013, the Firm filed an Amended Complaint on behalf of Assured Guaranty Municipal Corp. (“Assured Guaranty”), against three affiliates of The Royal Bank of Scotland Group plc (“RBS”) – the Sponsor, the Depositor and the Underwriter (the “RBS Defendants”) – that had created a residential mortgage-backed securities (“RMBS”) structure known as Soundview Home Loan Trust 2007-WMC1. As of June 2013, the $1.15 billion Soundview securitization already had realized losses of $454 million (i.e., 39% of the original face value of the mortgage loans) with 61% of the remaining loans at least 60 days delinquent.

In August 2013, the RBS Defendants moved to dismiss the Amended Complaint. On March 17, 2014, the United States District Court for the Southern District of New York (Koeltl, J.) held oral argument on the motion to dismiss. Following oral argument, the Court sustained Assured Guaranty’s claims against each of the RBS Defendants for common law fraud and for aiding and abetting common law fraud, stating as follows: “These allegations taken together raise a strong inference that RBS had a specific motive and intent to deceive the plaintiff in order to obtain the [insurance] policy for a specific transaction. Thus, the plaintiff has made sufficient allegations to support scienter.” March 17, 2014 Transcript at p.54. On March 18, 2014, the Court entered an Order denying the motion to dismiss the common law fraud claims and the aiding and abetting common law fraud claims against all defendants. See Assured Guaranty Municipal Corp. v. RBS Securities Inc., et al., 13 Civ. 2019 (SDNY) (JGK), Docket No. 30.

A copy of the Amended Complaint is available here.