A financial services company has defeated class certification in a Manhattan federal court lawsuit against it involving subprime securities. The defendant, First American subsidiary eAppraiseIT, conducted home appraisals in connection with Washington Mutual mortgage loans. First American shareholders, led by the Berks County, Pa. Employees’ Retirement Fund, alleged that eAppraiseIT routinely overvalued homes so WaMu could close mortgage deals. The arrangement, according to the plaintiffs, allowed First American to report inflated financial results.
When details of the arrangement began to emerge, via a New York attorney general’s suit against eAppraiseIT, among other disclosures, the share price of First American dropped, according to Berks County’s complaint. But in a 15-page opinion last week, Southern District of New York Judge Lewis A. Kaplan ruled that the statements and omissions the plaintiffs challenged were not material, and therefore class counsel from Grant & Eisenhofer could not show that all potential class members relied on them.
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