U.S. District Judge Mariana Pfaelzer of federal
court in Los Angeles is poised to deliver a ruling in AIG's mortgage-backed
securities case against Countrywide that could have an impact on just about
every company headquartered in New York. The issue: How long do N.Y. businesses
have to bring fraud claims? Are they entitled to the benefit of the state's
generous six-year statute of limitations? Or, as Countrywide argues in a
supplemental motion to dismiss filed on March 23, are companies headquartered
in New York instead restricted to the generally stingier time limits in their
states of incorporation?
To understand how this
question arose in AIG's MBS case, we have to back up a few steps. It's no
secret that in MBS litigation, there's no more potent defense than arguments
that investors waited too long to file suit. It's a quick, clean way to excise
big chunks of a plaintiff's case, particularly because federal securities
claims, with exceptions for American Pipetolling (if you don't
know, don't ask), are generally time-barred after three years under the statute
of limitations or the more-obscure-until-MBS-litigation
statute of repose. That's why we've seen so many MBS plaintiffs -- including AIG
and the satellite insurance companies that are also plaintiffs in its
Countrywide suit -- assert state-law fraud
claims in addition to federal securities claims.
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