NEW YORK (Reuters) - A federal judge on Friday said investors seeking to hold banks liable for helping underwrite more than $7.7 billion of mortgage-backed securities from the now-bankrupt subprime lender NovaStar Mortgage Inc may pursue their claims as a group.

In a 33-page decision, U.S. District Judge Deborah Batts in Manhattan granted class certification to investors led by the New Jersey Carpenters Health Fund against units of Royal Bank of Scotland Group Plc, Deutsche Bank AG and Wells Fargo & Co.

Several former NovaStar executives are also defendants.

NovaStar specialized in lower-quality residential mortgages, including many packaged into securities issued in 2006 and 2007.

Investors accused the banks of misleading them through their offering materials into believing that the underlying loans were underwritten as advertised, and that the securities they bought were safer than they proved to be.

The lawsuit was filed in June 2008. Hundreds of similar lawsuits have been filed nationwide against banks over mortgage securities sold prior to the 2008 financial crisis.

NovaStar filed for bankruptcy protection in July.

The case is New Jersey Carpenters Health Fund v Royal Bank of Scotland Group Plc et al, U.S. District Court, Southern District of New York, No. 08-05310. </s> In a 33-page decision, U.S. District Judge Deborah Batts in Manhattan granted class certification to investors led by the New Jersey Carpenters Health Fund against units of Royal Bank of Scotland Group Plc ( ), Deutsche Bank AG ( ) and Wells Fargo & Co ( ).

Several former NovaStar executives are also defendants.

NovaStar specialized in lower-quality residential mortgages, including many packaged into securities issued in 2006 and 2007.

Investors accused the banks of misleading them through their offering materials into believing that the underlying loans were underwritten as advertised, and that the securities they bought were safer than they proved to be.

The lawsuit was filed in June 2008. Hundreds of similar lawsuits have been filed nationwide against banks over mortgage securities sold prior to the 2008 financial crisis.

The case is New Jersey Carpenters Health Fund v Royal Bank of Scotland Group Plc et al, U.S. District Court, Southern District of New York, No. 08-05310. </s> WASHINGTON: The U.S. Supreme Court on Tuesday ruled that foreign corporations cannot be sued in American courts for human rights abuses overseas, refusing to revive a lawsuit claiming Jordan-based Arab Bank Plc helped finance militant attacks in Israel and the Palestinian territories.

The 5-4 decision left in place a lower court ruling that had thrown out a lawsuit brought by some 6,000 plaintiffs, including survivors and relatives of non-U.S. citizens killed in attacks, filed under a 1789 U.S. law called the Alien Tort Statute that accused Arab Bank of being the "paymaster" to militant groups.

The court ruled along ideological lines, with its five conservatives in the majority and its four liberal justices dissenting.

Only in recent years have plaintiffs sought to bring human rights claims under that obscure law.

The plaintiffs accused Arab Bank of deliberately financing terrorism, including suicide bombings and other attacks. They said Arab Bank used its New York branch to transfer money that helped Hamas and other Islamist militant groups fund attacks and reward families of the perpetrators between 1995 and 2005.

Conservative Justice Anthony Kennedy, who wrote Tuesday's opinion, said the "relatively minor connection between the terrorist attacks at issue in this case and the alleged conduct in the United States" illustrates the problems of extending liability to foreign corporations.

Noting that the case has caused significant diplomatic tension with Jordan, a U.S. ally, Kennedy said that the "political branches are in a better position" to extend that liability if they so choose.

In a dissenting opinion, liberal Justice Sonia Sotomayor wrote that barring suits against foreign companies ensures that they "remain immune from liability for human rights abuses, however egregious they may be."

The lead plaintiff in the Arab Bank case was Joseph Jesner, whose British citizen son was killed at age 19 in a 2002 suicide bombing of a bus in Tel Aviv. The bank said in court papers that the U.S. government has called it a constructive partner in the fight against terrorism financing.

In a 2013 ruling, the Supreme Court did not resolve the corporate liability question when it ruled in favour of Royal Dutch Shell Plc over a lawsuit claiming the company was complicit in a crackdown on protesters in Nigeria.

That 2013 ruling narrowed the Alien Tort Statute's reach, saying claims must sufficiently "touch and concern" the United States to overcome the presumption that the law does not cover foreign conduct.

In a separate case involving U.S. citizens and brought under a different law, a New York jury in 2014 found Arab Bank liable for facilitating two dozen militant attacks in Israel.

The Supreme Court, in another case involving U.S. litigation concerning an attack overseas, ruled on Feb. 21 that Americans injured in a 1997 suicide bombing in Jerusalem cannot seize ancient Persian artifacts from a Chicago museum to satisfy a US$71.5 million court judgement against Iran. The plaintiffs had accused Iran of complicity in that attack.

The justices on April 2 refused to consider reinstating a US$655.5 million jury award won against the Palestinian Authority and Palestine Liberation Organization by 11 American families over militant attacks in Israel.

In another case, the justices on March 5 declined to take up Iranian government-owned Bank Melli's appeal of a lower court ruling that allowed victims of militant attacks allegedly backed by Iran to seek millions of dollars in compensation from the bank. </s> The settlement with RBS brings the U.S. regulator's recoveries against various banks to $4.3 billion in lawsuits over their sale of mortgage-backed securities before the 2008 financial crisis.

NCUA Board Chairman Rick Metsger said the regulator was pleased with the settlement and plans to continue "to pursue recoveries against financial firms that we maintain contributed to the corporate crisis."

The settlement resolves lawsuits filed in federal courts in California and Kansas in the NCUA's role as the liquidating agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union.

Under the settlement, RBS does not admit fault, the NCUA said in a statement. The settlement comes on top of a prior deal in 2015 in which RBS agreed to pay $129.6 million to resolve a similar federal lawsuit the NCUA filed in New York.

RBS in January said it had set aside 3.8 billion pounds ($4.95 billion) to resolve civil lawsuits over mortgage-backed securities, investment products packaged and sold before the U.S. housing meltdown and financial crisis in 2008.

RBS had said that provision did not cover ongoing investigations by the U.S. Justice Department or various state attorneys general.

The bank also continues to face a multi-billion dollar lawsuit by the U.S. Federal Housing Finance Agency, which has acted as the conservator for mortgage giants Fannie Mae and Freddie Mac since their government takeover in 2008.

Replying to a request for comment, an RBS spokesman on Tuesday pointed to comments that RBS CEO Ross McEwan made at a conference in London earlier in the day, in which he said the bank was working toward resolving various mortgage bond claims over the remainder of this year and next.

The NCUA said it continues to litigate against other banks, including Credit Suisse and UBS, over what it says was their sale of faulty mortgage-backed securities to corporate credit unions. </s> The U.S. Supreme Court on Tuesday ruled that foreign corporations cannot be sued in American courts for human rights abuses overseas, refusing to revive a lawsuit claiming Jordan-based Arab Bank Plc helped finance militant attacks in Israel and the Palestinian territories.

The 5-4 decision brought to an end a lawsuit brought by some 6,000 non-U.S. citizen plaintiffs, including survivors and relatives of people killed in attacks, filed under a 1789 U.S. law called the Alien Tort Statute that accused Arab Bank of being the "paymaster" to militant groups.

The court ruled along ideological lines, with its five conservatives in the majority and its four liberal justices dissenting.

Conservative Justice Anthony Kennedy, writing for the court, said the "relatively minor connection between the terrorist attacks at issue in this case and the alleged conduct in the United States" illustrates the problems of extending liability to foreign corporations.

In ruling for the bank, the court for the second time in five years curbed the ability of plaintiffs to sue corporations in U.S. courts under the Alien Tort Statute for human rights violations occurring abroad. Other foreign-based companies to have faced such suits include Royal Dutch Shell PLC, Nestle SA and Daimler AG.

"Arab Bank is pleased with the court's decision, which ends this litigation and affirms the bank's belief that there is no basis to hold corporations liable under international law," the bank said in a statement.

Lawyers for the plaintiffs could not immediately be reached for comment.

The ruling delivered a blow to human rights lawyers but left open the possibility of U.S. corporations being sued under the Alien Tort Statute in limited circumstances.

Paul Hoffman, who represents plaintiffs in such disputes, said a current case in which Indonesian villagers sued U.S.-based Exxon Mobil Corp for alleged human rights abuses carried out by security forces working for the company should be unaffected by Tuesday's ruling.

Hoffman said Kennedy "went out of his way to avoid a categorical ruling" shielding U.S. corporations.

The plaintiffs accused Arab Bank of deliberately financing terrorism, including suicide bombings and other attacks. They said Arab Bank used its New York branch to transfer money that helped Hamas and other Islamist militant groups fund attacks and reward families of perpetrators between 1995 and 2005.

Noting that the case has caused significant diplomatic tension with Jordan, a U.S. ally, Kennedy said the "political branches are in a better position" to extend that liability if they so choose.

Liberal Justice Sonia Sotomayor wrote in a dissent that barring suits against foreign companies ensures they "remain immune from liability for human rights abuses, however egregious they may be."

The lead plaintiff in the Arab Bank case was Joseph Jesner, whose British citizen son was killed at age 19 in a 2002 suicide bombing of a bus in Tel Aviv. The bank said in court papers the U.S. government has called it a constructive partner in the fight against terrorism financing.

In its previous 2013 ruling, the Supreme Court did not resolve the corporate liability question when it ruled in favor of Shell over a lawsuit claiming the company was complicit in a crackdown on protesters in Nigeria.

That 2013 ruling narrowed the Alien Tort Statute's reach, saying claims must sufficiently "touch and concern" the United States to overcome the presumption that the law does not cover foreign conduct.

In a separate case involving U.S. citizens that was brought under a different law, a New York jury in 2014 found Arab Bank liable for facilitating two dozen militant attacks in Israel.

That ruling was overturned on appeal in January. </s> The US Supreme Court on Tuesday ended one of two major Arab Bank cases, closing off any path for suits in US courts by foreign victims of overseas terrorism against banks with a US footprint.



The ruling said that foreign corporations such as Jordan’s financial juggernaut, Arab Bank, cannot be sued in American courts for allegations that they helped to finance terrorist attacks in Israel and the Palestinian territories.





In April 2017, the landmark anti-terrorism financing suit, which was presumed dead, was surprisingly resuscitated by the US Supreme Court agreeing to hear the appeal.That preliminary decision by the court led to speculation that if the plaintiffs won, the case could lead to a flood of anti-terrorism financing lawsuits by foreigners (including Israelis) against foreign financial entities (including those banking for Palestinian terrorist groups) that do business in the US.This would have changed the face of international banking and affected US diplomacy in a variety of unpredictable ways.But with Tuesday’s 5-4 vote, the decision left in place a lower court ruling that had previously thrown out the lawsuit brought by some 6,000 plaintiffs, including survivors and relatives of non-US citizens killed in attacks, filed under the 1789 US law called the Alien Tort Statute that accused Arab Bank of being terrorist groups’ “paymaster.”Only in recent years have plaintiffs sought to bring such cases under the obscure law.The plaintiffs accused Arab Bank of deliberately financing terrorism, including suicide bombings and other attacks. They said Arab Bank used its New York branch to transfer money that helped Hamas and other Islamist terrorist groups fund attacks and reward families of the perpetrators between 1995 and 2005.The lead plaintiff in the Arab Bank case was Joseph Jesner, whose British citizen son was killed at age 19 in a 2002 suicide bombing of a bus in Tel Aviv.The bank said in court papers that the US government has called it a constructive partner in the fight against terrorism financing.In a 2013 ruling, the Supreme Court did not resolve the corporate liability question when it ruled in favor of Royal Dutch Shell Plc over a lawsuit claiming the company was complicit in a crackdown on protesters in Nigeria.That 2013 ruling narrowed the Alien Tort Statute’s reach, saying claims must sufficiently “touch and concern” the United States to overcome the presumption that the law does not cover foreign conduct.But the justices had left the door open to future cases where the financial entity is on US soil and the case represents a US national interest – say, eliminating financial havens for terrorist financing.Then in September 2014, the plaintiffs won in the other major case against Arab Bank. Unlike Tuesday’s case of foreigners, the plaintiffs who sued the Arab Bank in the other case were US citizens. Their win came in the first public trial of a major bank on charges relating to terrorist attacks – specifically those in Israel during the Second Intifada.There were a series of mixed rulings and appeals following the US plaintiffs’ win in the trial court, and eventually Arab Bank signed a reportedly $1 billion confidential settlement.That gave hope to the foreigners suing Arab Bank in the second case connected to Tuesday’s ruling.However, the court indicated that the plaintiffs did not sufficiently demonstrate that the foreign entity they were suing had a large enough US footprint and had a sufficient role, even if passive, in facilitating terrorism.This closes off the path for Israelis or anyone else harmed by terrorism to go after large financial institutions in the Middle East or elsewhere in the world, which look the other way when their clients are funding terrorism.Reuters contributed to this story. </s> [WASHINGTON] The US Supreme Court on Tuesday ruled that foreign corporations cannot be sued in American courts for human rights abuses overseas, refusing to revive a lawsuit claiming Jordan-based Arab Bank Plc helped finance militant attacks in Israel and the Palestinian territories.

The 5-4 decision left in place a lower court ruling that had thrown out a lawsuit brought by some 6,000 plaintiffs, including survivors and relatives of non-US citizens killed in attacks, filed under a 1789 US law called the Alien Tort Statute that accused Arab Bank of being the "paymaster" to militant groups.

Only in recent years have plaintiffs sought to bring human rights claims under that obscure law.

The plaintiffs accused Arab Bank of deliberately financing terrorism, including suicide bombings and other attacks. They said Arab Bank used its New York branch to transfer money that helped Hamas and other Islamist militant groups fund attacks and reward families of the perpetrators between 1995 and 2005.

The lead plaintiff in the Arab Bank case was Joseph Jesner, whose British citizen son was killed at age 19 in a 2002 suicide bombing of a bus in Tel Aviv. The bank said in court papers that the US government has called it a constructive partner in the fight against terrorism financing.

In a 2013 ruling, the Supreme Court did not resolve the corporate liability question when it ruled in favor of Royal Dutch Shell Plc over a lawsuit claiming the company was complicit in a crackdown on protesters in Nigeria.

That 2013 ruling narrowed the Alien Tort Statute's reach, saying claims must sufficiently "touch and concern" the United States to overcome the presumption that the law does not cover foreign conduct.

In a separate case involving US citizens and brought under a different law, a New York jury in 2014 found Arab Bank liable for facilitating two dozen militant attacks in Israel. </s> NEW YORK (Reuters) - A U.S. judge on Wednesday rejected Saudi Arabia’s bid to dismiss lawsuits claiming that it helped plan the Sept. 11, 2001, attacks and should pay billions of dollars in damages to victims.

U.S. District Judge George Daniels in Manhattan said the plaintiffs’ allegations “narrowly articulate a reasonable basis” for him to assert jurisdiction under a federal law, the Justice Against Sponsors of Terrorism Act.

Saudi Arabia had long had broad immunity from Sept. 11 lawsuits in the United States, before the U.S. Congress in September 2016 overrode a veto by President Barack Obama to allow such cases to proceed.

Lawyers for Saudi Arabia did not immediately respond to requests for comment.

The Saudi government has long denied involvement in the attacks, in which hijacked airplanes crashed into New York’s World Trade Center, the Pentagon outside Washington, D.C., and a Pennsylvania field. Nearly 3,000 people died.

Daniels has overseen litigation against Saudi Arabia by the families of those killed, roughly 25,000 people who suffered injuries, and a variety of businesses and insurers.

“We’re delighted that Judge Daniels denied Saudi Arabia’s motion to dismiss,” James Kreindler, a lawyer for many of the plaintiffs, said in a phone interview.

“We have been pressing to proceed with the case and conduct discovery from the Kingdom of Saudi Arabia, so that the full story can come to light, and expose the Saudi role in the 9/11 attacks,” he added.

In two decisions, Daniels also dismissed claims by various plaintiffs against several other defendants, saying he lacked jurisdiction.

Among these defendants were two Saudi banks, National Commercial Bank and Al Rajhi Bank, and Saudi Binladin Group, a construction company controlled by the bin Laden family.

They were accused of knowingly providing material support to Osama bin Laden or al Qaeda, in the form of funds and financial services, to carry out the attacks.

The case is In re: Terrorist Attacks on September 11, 2001, U.S. District Court, Southern District of New York, No. 03-md-01570. </s> Editor's note: Morning Scan will not publish on Wednesday, July 4, in observance of Independence Day. We’ll be back on Thursday, July 5.



Missed signals: A federal judge ordered PricewaterhouseCoopers to pay $625.3 million in damages for failing to detect a fraud that led to the 2009 failure of Alabama’s Colonial Bank, one of the largest bank failures during the financial crisis. U.S. District Judge Barbara Jacobs Rothstein ruled last December the accounting firm was negligent in failing to discover the fraud at Colonial, and on Monday she sided with the Federal Deposit Insurance Corp., the failed bank’s receiver, on the proper level of damages.

The judgment against PwC “is one of the largest judgments or settlements ever for malpractice by an accounting firm, and accentuates longstanding concerns over the quality of audits performed by the Big Four accounting firms,” the Wall Street Journal says. Wall Street Journal, Financial Times



Let’s make a deal: The Federal Reserve showed mercy when it gave Goldman Sachs and Morgan Stanley the option of accepting failure on the second round of stress tests or agreeing to hold steady the amount of dividends and stock buybacks they will return to shareholders. The banks settled on the latter, rather than having to retake the tests if they wanted to return more to investors.

“The arrangement is the first of its kind in the eight years of the Fed’s annual tests, and one of the clearest signs to date of a significant shift in the regulatory environment for banks, which have been expecting a gentler approach from Washington ever since the election of President Donald Trump,” the paper comments.

On the hunt: Social Finance wants to build a $500 million war chest through an unsecured line of credit from banks “that could go toward potential buyouts of other financial-technology firms.” SoFi, which is now led by Anthony Noto, a former Goldman Sachs banker, “is looking to ramp up acquisitions as a way to make the online lender a more full-service financial institution.”

“We don’t have any near-term plans, but we’re building a strategy and a process to evaluate the different opportunities as they come our way,” Noto said.

Where are they now: Fabrice Tourre, the former Goldman Sachs subprime mortgage bond trader who was convicted in 2013 of federal charges of defrauding investors, is now conducting postdoctoral research in economics at Northwestern University.

Joseph Cassano, the former chief executive of AIG’s financial products unit in London, now devotes his time to philanthropy. “Few individuals played a more pivotal role in the financial crisis than” he, the paper says.



Moving toward legitimacy: Switzerland is expected to grant cryptocurrency companies full access to conventional banking services by the end of the year, “removing one of the restrictions to future growth.” The move would allow “crypto companies to operate with banks in the same way as other companies.”



Growing shadow: The so-called shadow banking industry in the U.K. is now larger than the country’s GDP, according to the Office for National Statistics. The agency estimated the nonbank lending industry totals £2.2 trillion, although it could be much larger. By contrast, traditional British banks have combined balance sheets of £12 trillion.



“We are pleased that the court recognized there are consequences when an auditor breaches its duty to the investing public.” — FDIC attorney Stephen Sorensen on a federal judge’s ruling against PricewaterhouseCoopers in the failure of Colonial Bank.
A U.S. district court judge grants class certification to plaintiffs in a lawsuit against banks that helped underwrite securities from NovaStar, once a high-flying subprime lender, now defunct.