Goodwin litigators recently secured a significant victory when the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal of class action securities claims brought against firm clients, Municipal Mortgage & Equity, LLC (“MuniMae”) and several of its former and current officers and directors, as well as the lead underwriters in MuniMae’s 2005 secondary public offering (“SPO”).
The 2008 complaint alleged that the defendants violated certain sections of the Securities Exchange Act and Securities Act by misrepresenting that MuniMae had been in compliance with accounting rule FIN 46R since 2005. The District of Maryland dismissed all of the Exchange Act claims as well as all of the Securities Act claims stemming from the SPO.
In a published opinion, the Fourth Circuit unanimously agreed with the lower court’s opinion. In addition, on the Securities Act claims, the Fourth Circuit settled two key principles on which the Fourth Circuit had no precedential authority. First, the Fourth Circuit held that the statute of repose for Section 11 claims began running, and will almost always begin running, when the SEC declares a registration statement effective. Second, the Fourth Circuit held that Section 12(a)(2) plaintiffs must plead specific supporting facts, not just a conclusory allegation, to show that they actually bought shares in the offering about which they complained.