Read In Re: Wells Fargo Mortgage Backed Certificates Litigation 09-CV-01376-Lead Plaintiffs' Opposition To The Wells Fargo Defendants' And Individual Defendants' Motion For Judgment On The Pleadings And Partial Summary Judgment text version

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1 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP 2 DAVID R. STICKNEY (Bar No. 188574) TIMOTHY A. DeLANGE (Bar No. 190768) 3 MATTHEW P. JUBENVILLE (Bar No. 228464) TAKEO A. KELLAR (Bar No. 234470) 4 JONATHAN D. USLANER (Bar No. 256898) PAUL M. JONNA (Bar No. 265389) 5 12481 High Bluff Drive, Suite 300 San Diego, CA 92130 6 Tel: (858) 793-0070 Fax: (858) 793-0323 7 [email protected] [email protected] 8 [email protected] [email protected] 9 [email protected] [email protected] 10 Attorneys for Lead Plaintiffs Alameda County 11 Employees' Retirement Association, Government of Guam Retirement Fund, New Orleans Employees' Retirement System and 12 Louisiana Sheriffs' Pension and Relief Fund 13 UNITED STATES DISTRICT COURT 14 NORTHERN DISTRICT OF CALIFORNIA - SAN JOSE DIVISION 15 IN RE WELLS FARGO MORTGAGE- 16 BACKED CERTIFICATES LITIGATION 17 18 19 20 21 22 23 24 25 26 27 28

LEAD PLAINTIFFS' OPP. TO DEFENDANTS' MOTION Case No. CV-09-01376-LHK

Civil Action No. 09-cv-01376-LHK CONSOLIDATED CLASS ACTION - ECF LEAD PLAINTIFFS' OPPOSITION TO THE WELLS FARGO DEFENDANTS' AND INDIVIDUAL DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS AND PARTIAL SUMMARY JUDGMENT Hon. Lucy H. Koh Judge: July 21, 2011 Date: Time: 1:30 p.m. Courtroom: 4, 5 th Floor

REDACTED PUBLIC VERSION

Pursuant to Court Order Regarding Requests to Seal dated June 10, 2011 [ECF No. 435]

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1 2 3 TABLE OF AUTHORITIES 4 I. 5 II. INTRODUCTION STATEMENT OF FACTS

TABLE OF CONTENTS Pate ii 1 3 5 5 6 6 9 12 14 14 18 23 25

6 III. ARGUMENT 7 8 9 10 2. 11 12 13 4. 14 15 16 D. 17 18 E. Lead Plaintiffs Have Standing To Assert Claims Related To All Securities In Each Offering Lead Plaintiffs Need Not Allege Nor Prove Reliance C. Lead Plaintiffs' Claims On 2006-AR 12 And 2006AR14 Are Clearly Timely 3. The Boilermakers' Complaint Tolled The Statute Of Repose As To All 13 Challenged Offerings

American Pipe Applies To All Asserted Members

A. B.

Standard Of Review Lead Plaintiffs' Claims Are Timely 1. The PSLRA-Mandated Notice Stopped Time Running On The Statute Of Repose

Of The Class

Wells Fargo's Motion For Partial Summary Judgment Lacks Evidence And Should Be Denied

19 IV. CONCLUSION 20 21 22 23 24 25 26 27 28

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1 2 3 4 5 6

C ASES

TABLE OF AUTHORITIES

Page(s)

In re Activision Sec. Litig.,

1986 WL 15339 (N.D. Cal. Oct. 20, 1986)

Albano v. Shea Homes Ltd. P'ship,

10 11 12, 23 passim 17 16 20 11 10 23 22,23 20

634 F.3d 524 (9th Cir. 2011)

7 In re Am. Int'l Grp., Inc. 2008 Sec. Litig., 741 F. Supp. 2d 511 (S.D.N.Y. Sept. 27, 2010) 8 9 10 11

Am. Pipe & Constr. Co. v. Utah,

414 U.S. 538 (1974)

Anderson v. Liberty Lobby, Inc.,

477 U.S. 242 (1986)

12 Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337 (9th Cir. 1995) 13 14

Ann Arbor Emps. ' Ret. Sys. v. Citigroup Mortg. Loan Trust, Inc.,

2010 WL 6617866 (E.D.N.Y. Dec. 23, 2010)

15 Arivella v. Lucent Techs., Inc., 623 F. Supp. 2d 164 (D. Mass. 2009) 16 17 Ballard v. Tyco Int'l, Ltd., 2005 WL 1683598 (D.N.H. July 11, 2005) 18 19

Basic Inc. v. Levinson,

485 U.S. 224 (1988)

20 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) 21 22 In re Blech Sec. Litig., 2003 WL 1610775 (S.D.N.Y. Mar. 26, 2003) 23 24 25

Boilermaker-Blacksmith Nat'l Pension Trust v. WaMu Mortg. Pass Through Certificates, Series,

748 F. Supp. 2d 1246 (W.D. Wash. 2010)

20 7 8

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26 Boilermakers Nat'l Annuity Trust Fund v. WaMu Mortg. Pass Through Certificates, 2009 WL 5170186 (W.D. Wash. Dec. 18, 2009) 27

Breier v. N. Cal. Bowling Proprietors' Ass'n,

28

316 F.2d 787 (9th Cir. 1963)

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1 Bridges v. Dep't of Md. State Police, 441 F.3d 197 (4th Cir. 2006) 2

Bright v. U.S.,

12,13 11 14 17 14 14 6 16 23 12 1, 8 19 23 18, 19 12, 25 9, 12 19, 22

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3

603 F.3d 1273 (Fed. Cir. 2010)

4 Bromley v. Mich. Educ. Ass'n-NEA, 178 F.R.D. 148 (E.D. Mich. 1998) 5 6 Burlington N. Santa Fe RR v. Assiniboine & Sioux Tribes, 323 F.3d 767 (9th Cir. 2003) 7 8

Cal. Pub. Emps. ' Ret. Sys. v. Chubb Corp.,

2002 WL 33934282 (D.N.J. June 26, 2002)

9 Catholic Soc. Servs. v. INS, 232 F.3d 1139 (9th Cir. 2000) 10 11 In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002) 12 13

Celotex Corp. v. Catrett,

477 U.S. 317 (1986)

14 In re Charles Schwab Corp. Sec. Litig., 264 F.R.D. 531 (N.D. Cal. 2009) 15 16 In re CitiGroup Inc. Bond Litig., 723 F. Supp. 2d 568 (S.D.N.Y. 2010) 17

Cole v. Builders Square,

1 8

2000 WL 1456908 (D. Or. Sept. 20, 2000)

19 In re Connetics Corp. Sec. Litig., 257 F.R.D. 572 (N.D. Cal. 2009) 20 21 In re Cooper Cos. Inc. Sec. Litig., 254 F.R.D. 628 (C.D. Cal. 2009) 22 23 502 F.3d 91 (2d Cir. 2007)

Cordes & Co. Fin. Servs. v. A.G. Edwards & Sons, Inc.,

24 In re Countrywide Fin. Corp. Sec. Litig., 2009 WL 7322254 (C.D. Cal. Dec. 9, 2009) 25 26 Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345 (1983) 27

In re DDi Corp. Sec. Litig.,

28

2005 WL 3090882 (C.D. Cal. July 21, 2005)

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1 In re Dreyfus Aggressive Growth Mut. Fund Litig., 2000 WL 1357509 (S.D.N.Y. Sept. 20, 2000) 2

In re Dynex Capital, Inc. Sec. Litig.,

19 20, 22 8 8 10 20 9 10, 14 10 5 18, 19 10,14 11 19 8 18 14

-iv-

3

2011 WL 781215 (S.D.N.Y. Mar. 7, 2011)

4 Edwards v. Occidental Chem. Corp., 892 F.2d 1442 (9th Cir. 1990) 5 6 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) 7 8

Employers-Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Anchor Capital Advisors,

498 F.3d 920 (9th Cir. 2007)

9 Emps' Ret. Sys. of Gov't of Virgin Islands v. J.P. Morgan Chase & Co., 2011 WL 1201520 (S.D.N.Y. Mar. 30, 2011) 10 11 In re Enron Corp. Sec., Derivative & "ERISA " Litig., 310 F. Supp. 2d 819 (S.D. Tex. 2004) 12 13

In re Enron Corp. Sec. Derivative & "ERISA " Litig.,

529 F. Supp. 2d 644 (S.D. Tex 2006)

14 In re Enron Corp. Sec., Derivative & "ERISA " Litig., 2007 WL 209923 (S.D. Tex. Jan. 24, 2007) 15 16 Enron Oil Trading & Transp. Co. v. Walbrook Ins. Co., 132 F.3d 526 (9th Cir. 1997) 17

Fallick v. Nationwide Mut. Ins. Co.,

1 8

162 F.3d 410 (6th Cir. 1998)

19 In re Flag Telecom Holdings, Ltd. Sec. Litig., 352 F. Supp. 2d 429 (S.D.N.Y. 2005) 20 21 Footbridge Ltd. Trust v. Countrywide Fin. Corp., 2011 WL 907121 (S.D.N.Y. Mar. 16, 2011) 22

Gratz v. Bollinger,

23

539 U.S. 244, 265 (2003)

24 Grisham v. Philip Morris, Inc., 670 F. Supp. 2d 1014 (C.D. Cal. 2009) 25 26 Guenther v. Cooper Life Scis., Inc., 759 F. Supp. 1437 (N.D. Cal. 1990) 27 Haas v. Pittsburgh Nat ' l Bank, 526 F.2d 1083 (3d Cir. 1975) 28

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1 Hal Roach Studios, Inc., v. Richard Feiner and Co., Inc., 896 F.2d 1542 (9th Cir. 1990) 2

In re Hanford Nuclear Reservation Litig.,

5 12 19 17 10 23 7 20 22 14, 18 7 19,22 11 11, 20 11 8 18

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3

534 F.3d 986 (9th Cir. 2008)

4 Hanlon v. Chrysler Corp. 150 F.3d 1011 (9th Cir. 1998) 5 6 Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214 (4th Cir. 2002) 7 8

Hellerstein v. Mather,

360 F. Supp. 473 (D. Colo. 1973)

9 Hevesi v. Citigroup, 366 F.3d 70 (2d Cir. 2004) 10 11 Hodges v. Immersion Corp., 2009 WL 5125917 (N.D. Cal. Dec. 21, 2009) 12 13

In re IndyMac Mortg. Backed Sec. Litig.,

718 F. Supp. 2d 495 (S.D.N.Y. 2010)

14 In re Initial Pub. Offering Sec. Litig., 241 F. Supp. 2d 281 (S.D.N.Y. 2003) 15 16 In re Initial Pub. Offering Sec. Litig., 2004 WL 3015304 (S.D.N.Y. Dec. 27, 2004) 17

In re JDS Uniphase Corp. Sec. Litig.,

1 8

238 F. Supp. 2d 1127 (N.D. Cal. 2002)

19 In re Juniper Networks Sec. Litig., 264 F.R.D. 584 (N.D. Cal. 2009) 20 21 Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991) 22

In re Lehman Bros. Sec. & ERISA. Litig.,

23

684 F. Supp. 2d 485 (S.D.N.Y. 2010)

24 In re Lehman Bros. Sec. & ERISA Litig., 2011 WL 1453790 (S.D.N.Y. Apr. 13, 2011) 25 26 Lopez v. Smith, 203 F.3d 1122 (9th Cir. 2000) 27

Lujan v. Defenders of Wildlife,

28

504 U.S. 555 (1992)

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1 Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832 (9th Cir. 2001) 2

Morse v. Peat, Marwick, Mitchell & Co.,

17 15 19 20 20 13, 14 3, 24, 25 20 15 20 8 10 16 16 23 6 16

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3

445 F. Supp. 619 (S.D.N.Y. 1977)

4 Mutchka v. Harris, 5 373 F. Supp. 2d 1021 (C.D. Cal. 2005) 6 N.J. Carpenters Health Fund v. DLJ Mortg. Capital, Inc., 2010 WL 1473288 (S.D.N.Y. Mar. 29, 2010) 7 8

N.J. Carpenters Health Fund v. Residential Capital, LLC,

2010 WL 1257528 (S.D.N.Y. Mar. 31, 2010)

9 N.J. Carpenters Health Fund v. Residential Capital, LLC, 2010 WL 5222127 (S.D.N.Y. Dec. 22, 2010) 10 11 N.J. Carpenters Health Fund v. Residential Capital, LLC, 2011 WL 1630349 (S.D.N.Y. Apr. 28, 2011) 12 13

N.J. Carpenters Vacation Fund v. Royal Bank of Scot. Grp., PLC

720 F. Supp. 2d 254 (S.D.N.Y. 2010)

14 Nationwide Life Ins. Co. v. Bankers Leasing Ass'n, Inc., 182 F.3d 157 (2d Cir. 1999) 15 16 NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 2010 WL 4739779 (S.D.N.Y. Nov. 17, 2010) 17

Noll v. Carlson,

18

809 F.2d 1446 (9th Cir. 1987)

19 Official Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, 277 B.R. 20 (S.D.N.Y. 2002) 20 21 In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir. 2010) 22

Orr v. Bank of Am., NT & SA,

23

285 F.3d 764 (9th Cir. 2002)

24 In re Parmalat Sec. Litig., 2008 WL 3895539 (S.D.N.Y. Aug. 21, 2008) 25 26 Perlmutter v. Intuitive Surgical, Inc., 2011 WL 566814 (N.D. Cal. Feb. 15, 2011) 27

Pfingston v. Ronan Eng'g Co.,

28

284 F.3d 999 (9th Cir. 2002)

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1 Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762 (1st Cir. 2011) 2

Popov v. Countrywide Fin. Corp.,

12, 21 8, 23 9, 14 20 20 2, 19, 22 10 19, 21 7 23 10 8 8 12, 13 11 16 6

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3

2009 WL 5206679 (E.D. Cal. Dec. 18, 2009)

4 In re Priceline.Com Inc. Sec. Litig., 5 342 F. Supp. 2d 33 (D. Conn. 2004) 6 Pub. Emps. ' Ret. Sys. of Miss. v. Merrill Lynch & Co., Inc., 714 F. Supp. 2d 475 (S.D.N.Y. 2010) 7 8

Pub. Emps. ' Ret. Sys. of Miss. v. Goldman Sachs Group, Inc.,

2011 WL 135821 (S.D.N.Y. Jan. 12, 2011)

9 Rafton v. Rydex Series Funds, 2011 WL 31114 (N.D. Cal. Jan. 5, 2011) 10 11 Robbin v. Fluor Corp., 835 F.2d 213 (9th Cir. 1987) 12 13

Rodriguez v. Hayes,

591 F.3d 1105 (9th Cir. 2010)

14 Rothman v. Gregor, 220 F.3d 81 (2d Cir. 2000) 15 16 In re Salomon Analyst Level 3 Litig., 350 F. Supp. 2d 477 (S.D.N.Y. 2004) 17

Sawyer v. Atlas Heating & Sheet Metal Works, Inc.,

18

731 F. Supp. 2d 850 (E.D. Wis. 2010)

19 Schiavone v. Fortune, 477 U.S. 21 (1986) 20 21 Scott v. Eversole Mortuary, 522 F.2d 1110 (9th Cir. 1975) 22 23

State Farm Mut. Auto. Ins. Co. v. Boellstorff,

540 F.3d 1223 (10th Cir. 2008)

24 Stone Container Corp. v. U.S., 229 F.3d 1345 (Fed. Cir. 2000) 25 26 T. W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626 (9th Cir. 1987) 27

Takeda v. Turbodyne Techs., Inc.,

28

67 F. Supp. 2d 1129 (C.D. Cal. 1999)

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1 Tosti v. City of Los Angeles, 754 F. 2d 1485 (9th Cir. 1985) 2

Tsereteli v. Residential Asset Securitization Trust 2006-A8,

10,12 20 13 7, 8, 9 24, 25 12, 13, 24, 25

3

692 F. Supp. 2d 387 (S.D.N.Y. 2010)

4 In re Wachovia Equity Sec. Litig., 5 753 F. Supp. 2d 326 (S.D.N.Y. 2011) 6 In re Wash. Mut., Inc. Sec. Derivative & ERISA Litig., 2011 WL 321736 (W.D. Wash. Jan. 28, 2011) 7 8

In re WorldCom, Inc. Sec. Litig.,

219 F.R.D. 267 (S.D.N.Y. 2003)

9 In re WorldCom, Inc. Sec. Litig., 496 F.3d 245 (2d Cir. 2007) 10 11

STATUTES

12 15 U.S.C. § 77k § 77m 13 § 77z § 78o(d) 14 15 17 C.F.R. § 230.158 § 240.12b-20 § 249.323(b) 16 17 7AA Fed. Prac. & Proc. Civ. § 1785.1 (3d ed. 2010) 18 70 Fed. Reg. 1506, 2005 WL 24262 (Jan. 7, 2005) 19 Federal Rules Of Civil Procedure 20 Rule 12 Rule 23 21 Rule 56 22 Sec. Offering Reform, 70 Fed. Reg. 44722, 44793 (Aug. 3, 2005) 23 24 25 26 27 28

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18, 23 6, 15 6 24 24 24 24 19 24

5 passim 16, 17, 18 15

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1 2

I.

INTRODUCTION After nearly two years of litigation and two motions to dismiss, the Wells Fargo Defendants'

3 ("Wells Fargo") again attempt to resolve claims on the pleadings relating to 13 of the 17 Offerings at 4 issue. Wells Fargo's motion is based on a misleading description of the history of this litigation and 5 should be denied. Specifically, Wells Fargo contends that the three-year Securities Act statute of 6 repose expired as to claims related to 13 of the 17 Offerings prior to the filing of the Consolidated 7 Complaint. 1 Wells Fargo filed two motions to dismiss, yet made no reference to the purported 8 expiration of the statute of repose. As detailed herein, Wells Fargo's belated attempt to further limit the 9 scope of the litigation (and obviously, their exposure) should be rejected. 10 In its motion, Wells Fargo fails to address or even note key facts that are critical to its motion.

11 For instance, Wells Fargo fails to mention that on January 29, 2009 (less than three years from the 12 issuance of the 13 challenged Offerings), the Boilermaker-Blacksmith National Pension Trust 13 ("Boilermakers") filed the first class action complaint asserting virtually identical claims against the 14 same Defendants relating to the 13 Offerings. Likewise, Wells Fargo fails to acknowledge that on 15 February 3, 2009, the Boilermakers issued notice pursuant to the Private Securities Litigation Reform 16 Act of 1995 ("PSLRA") to all investors advising them of the pendency of the lawsuit and the 17 opportunity to move for appointment as lead plaintiff. As is customary in all securities class actions, 18 the issuance of the PSLRA notice begins the process which ultimately culminates in the appointment of 19 a lead plaintiff(s) and the filing of a consolidated complaint. Accordingly, pursuant to Ninth Circuit 20 precedent regarding motions to amend and Congress's mandate regarding securities class actions, this 21 notice stopped time running on the statute of repose. See Cole v. Builders Square, 2000 WL 1456908, 22 at *2 (D. Or. Sept. 20, 2000) (plaintiff need not tender formal motion in order to seek leave to amend). 23 Furthermore, after the filing of virtually identical complaints in this Court, Wells Fargo stipulated that 24 Defendants would not have to respond to the initial complaints and to a schedule for the filing of a 25 consolidated complaint. See New Orleans Action, No. 09-cv-1620, Stipulation and Order, ECF No. 36. 26 27 28

1 Wells Fargo does not challenge the following Offerings: 2006-AR10, 2006-AR1 1, 2006-AR17 and 2007-11.

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1 The Court appointed the Lead Plaintiffs and directed them to file a consolidated complaint, which they 2 ultimately did on August 31, 2009. 3 Even assuming the PSLRA notice did not stop the running of time, the Boilermakers'

4 Complaint tolled the statute of repose for all 13 Offerings pursuant to American Pipe & Construction 5 Co. v. Utah, 414 U.S. 538, 554 (1974). Ignoring the Boilermakers' Complaint, Wells Fargo attempts to 6 focus the Court's attention on later-filed complaints, and erroneously contends that American Pipe 7 tolling depends on whether the prior plaintiff had standing to bring the claim. As detailed below, it 8 does not. 9 Additionally, Wells Fargo moves for partial summary judgment with respect to the 2006-6,

10 2006-AR8 and 2006-AR14 Offerings, erroneously contending that the statute of repose began to run 11 months earlier than the date of the prospectus supplement. The statute of repose cannot begin to run 12 prior to the accrual of the statutory cause of action ­ here, the issuance of the prospectus supplements 13 with the untrue statements and omissions. See J. William Hicks, 17 Civil Liabilities: Enforcement & 14 Litig. Under the 1933 Act, § 4.77 (2010) ("it seems highly unlikely that Congress intended the 15 limitations period to commence prior to the accrual of the statutory cause of action. Section 11 imposes 16 liability only for untruths in an effective registration statement"). Wells Fargo's purported "evidence" 17 consists of three unauthenticated spreadsheets generated specifically for this litigation that are clearly 18 inadmissible. Accordingly, Wells Fargo's motion for partial summary judgment should be denied. 19 Separately, Wells Fargo belatedly challenges Lead Plaintiffs' standing to assert claims related to

20 all securities ( i.e., tranches) in the Offerings they purchased. In its prior motions to dismiss, Wells 21 Fargo conceded that the Lead Plaintiffs had standing to assert claims related to offerings in which they 22 purchased. Defendants' Motion to Dismiss, ECF No. 162 at 23-24 (contending that, in order to have 23 Section 11 standing, " the security's being traceable to the offering is sufficient."). Wells Fargo's 24 revised theory of standing should be rejected. Ninth Circuit law holds that a named plaintiff may 25 represent absent class members that purchased in other securities where the alleged harm stems from 26 the same improper conduct or same issuance. See, e.g., Rafton v. Rydex Series Funds, 2011 WL 31114 27 (N.D. Cal. Jan. 5, 2011) (Koh, J.). Here, all securities in each Offering were issued pursuant to a single 28 prospectus supplement, with the same false and misleading representations regarding the quality of the

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1 underlying collateral. The harm to all securities stems from the same improper conduct ­ namely that 2 Wells Fargo systematically disregarded its underwriting guidelines. Lead Plaintiffs clearly have 3 standing to assert claims related to all securities in the 17 Offerings. 4 Finally, contrary to Wells Fargo's insinuations, reliance is not an element of Lead Plaintiffs'

5 Section 11 claims. Wells Fargo's efforts to show it issued "earning statements" here that spanned "at 6 least twelve months beginning after the effective date of the registration statement," are without merit. 7 No court has ever accepted this argument, and one court recently rejected it as "unpersuasive" because 8 distribution reports are not "earning statements" within the meaning of the statute and regulations. 9 N.J. Carpenters Health Fund v. Residential Capital, LLC, 2011 WL 1630349, at *6 (S.D.N.Y. Apr. 28, 10 2011) ("ResCap I"). 11 In short, the parties and the Court have devoted enormous resources to this litigation, including

12 multiple hearings and status conferences, extensive motion practice, 15 depositions and the production 13 and review of millions of pages of documents. Wells Fargo's belated motion should be denied in its 14 entirety. 15 II. 16

STATEMENT OF FACTS

On January 29, 2009, the first complaint asserting claims under the Securities Act of 1933

17 ("Securities Act") relating to Wells Fargo mortgage-backed securities was filed in the Southern District 18 of New York. Boilermaker-Blacksmith Nat'l Pension Trust v. Wells Fargo Mortg.-Backed Sec. 200619 AR1 Trust, et al., No. 09-cv-0833 ("Boilermakers' Complaint"). The complaint asserted Section 11, 12 20 and 15 claims related to Wells Fargo's untrue statements and omissions regarding the purported 21 underwriting guidelines for the mortgage loans underlying 35 offerings, including all 13 Offerings 22 Wells Fargo now challenges as untimely. 2 On February 3, 2009, the Boilermakers issued a notice to 23 investors pursuant to the provisions of the PSLRA. See Declaration of Timothy A. DeLange In Support 24 Of Lead Plaintiffs' Opposition To The Wells Fargo Defendants' And Individual Defendants' Motion 25 For Judgment On The Pleadings And Partial Summary Judgment ("DeLange Decl."), Exhibit ("Ex.") 1. 26 The notice specifically identified the 35 offerings and notified all investors of their right to seek 27 28 2 The Boilermakers purchased Certificates in four Offerings: 2006-AR1, 2006-AR10, 2006-AR12 and 2006-AR17.

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1 appointment as lead plaintiff. On April 6, 2009, the Boilermakers' Complaint was voluntarily 2 dismissed. 3 On March 27, 2009, the General Retirement System of the City of Detroit ("Detroit") filed a

4 complaint in this District asserting virtually identical claims relating to 22 additional Wells Fargo 5 Offerings. 3 On March 31, 2009, Detroit issued a PSLRA notice to investors. See DeLange Decl., Ex. 6 4. Thereafter, on April 13, 2009, New Orleans Employees' Retirement System ("New Orleans") filed a 7 complaint in this District asserting claims relating to all 54 offerings originally asserted in both the 8 Boilermaker and Detroit actions. 4 On April 14, 2009, New Orleans issued a PSLRA notice to 9 investors. Ex. 1 to Corrected Stickney Decl., ECF No. 56-1. On June 1, 2009, New Orleans, along 10 with the Alameda County Employees' Retirement Association ("Alameda"), Government of Guam 11 Retirement Fund ("Guam"), and Louisiana Sheriffs' Pension & Relief Fund ("Louisiana") filed a 12 motion for appointment as lead plaintiffs and consolidation of related actions, identifying the securities 13 each purchased and the Offering(s) in which they purchased. Lead Plaintiff Motion, ECF No. 52. On 14 July 16, 2009, the Court consolidated all related actions and appointed the Lead Plaintiffs. Order Re: 15 Motions to Transfer, etc., ECF No. 124. 16 On August 31, 2009, Lead Plaintiffs filed the consolidated complaint ("Consolidated

17 Complaint"), asserting Securities Act claims on behalf of all investors in 54 offerings. On April 22, 18 2010, the Honorable Susan Illston sustained Lead Plaintiffs' Section 11 and 15 claims as to 17 19 Offerings in which the Lead Plaintiffs purchased Certificates and granted leave to amend to identify 20 additional plaintiffs in the remaining 37 offerings. In re Wells Fargo Mortg.-Backed Certificates Litig,, 21 712 F. Supp. 2d 958 (N.D. Cal. 2010) ("April 22 Order). 22 On May 28, 2010, Lead Plaintiffs filed their Amended Complaint ("Amended Complaint").

23 The Amended Complaint re-asserted the sustained claims in connection with the 17 Offerings, and 24 added five named plaintiffs that asserted claims related to 10 of the 37 dismissed offerings. On October 25 19, 2010, this Court again sustained Lead Plaintiffs' Section 11 and 15 claims on all securities in the 17 26

3 Detroit purchased Certificates in the WFMBS 2007-11 Offering, the lone Offering remaining in the 27 current action that was not included in the Boilermaker Complaint. 28 4 New Orleans purchased Certificates in seven Offerings: 2006-3, 2006-6, 2006-AR2, 2006-AR8, 2006-AR10, 2006-AR1 1 and 2006-AR17.

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1 Offerings, but dismissed the added claims related to the 10 offerings. In re Wells Fargo Mortg.-Backed 2 Certificates Litig., 2010 WL 4117477 (N.D. Cal. Oct. 19, 2010) ("October 19 Order"). The dismissed 3 claims are currently on appeal to the Ninth Circuit. 4 Wells Fargo structured each of the 17 Offerings such that the rights to the cash flows from the

5 pool (i.e., borrower payments of principal and interest) were divided into various securities, or 6 "tranches," pursuant to a predetermined formula known as a "cash flow waterfall," which was set forth 7 in the Offering Documents for each Offering. Regardless of a tranche's position in the cash flow 8 waterfall, however, its level of risk (credit risk, prepayment risk, etc.) was a direct function of the 9 corresponding risk of the income stream from the underlying mortgage pool. See Expert Report of 10 Joseph R. Mason, ECF No. 349-1 ("Mason Report"), at ¶¶5-6, 55, 63-68; DeLange Decl., Ex. 3 11 (Deposition Transcript of Bradford Cornell, Ph.D. ("Cornell Tr.")), at 143:9-144:19; 156:6-157:20. For 12 each Offering, all securities (or tranches) were issued pursuant to the same registration statement, 13 prospectus and prospectus supplement ("Offering Documents"). The alleged untrue statements and 14 omissions in the Offering Documents for each Offering affected all securities within each Offering 15 similarly. See Mason Report, at ¶¶5-6, 55, 63-68. 16 III. ARGUMENT 17 18 A.

Standard Of Review

A motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) is treated the same as a

19 motion to dismiss under Fed. R. Civ. P. 12(b)(6). Hal Roach Studios, Inc., v. Richard Feiner and Co., 20 Inc., 896 F.2d 1542, 1550 (9th Cir. 1990). "For purposes of the motion, the allegations of the non21 moving party must be accepted as true, while the allegations of the moving party which have been 22 denied are assumed to be false." Id. Judgment on the pleadings is appropriate only "when the moving 23 party clearly establishes on the face of the pleadings that no material issue of fact remains to be 24 resolved and that it is entitled to judgment as a matter of law." Enron Oil Trading & Transp. Co. v. 25 Walbrook Ins. Co., 132 F.3d 526, 529 (9th Cir. 1997). "[H]owever, judgment on the pleadings is 26 improper when the district court goes beyond the pleadings to resolve an issue." Hal Roach Studios, 27 896 F.2d at 1550. 28

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1 2

B.

Lead Plaintiffs' Claims Are Timely

Claims under Section 11 must be asserted within one year of the discovery of the untrue

3 statements in the offering documents or within three years of the date the security was offered. 15 4 U.S.C. § 77m. Wells Fargo does not challenge the timeliness of 4 of the 17 Offerings in the Amended 5 Complaint ­ 2006-AR10, 2006-AR11, 2006-AR17 and 2007-11. With respect to the remaining 13 6 Offerings, Wells Fargo's motion ignores key facts, Ninth Circuit precedent, and the procedural process 7 dictated by Congress in the PSLRA. 8 9 10 As noted above (but nowhere mentioned in Wells Fargo's motion), the first complaint asserting 1. The PSLRA-Mandated Notice Stopped Time Running On The Statute Of Repose

11 claims against Wells Fargo involving the 13 challenged Offerings was filed on January 29, 2009, well 12 within the three-year statute of repose for all Offerings. See DeLange Decl., Ex. 1. Thereafter, 13 plaintiffs effectively sought leave to amend the complaint on February 3, 2009, through the issuance of 14 a PSLRA notice to all investors in the Offerings. See DeLange Decl., Ex. 2. As is mandated by statute 15 in all securities class actions, the issuance of the PSLRA notice begins the process which ultimately 16 culminates in the appointment of a lead plaintiff(s) and the filing of a consolidated complaint. 5 As the 17 earliest of the 13 challenged Offerings was issued February 22, 2006 (2006-AR1), there was ample 18 time remaining on the statute of repose for all 13 challenged Offerings as of February 3, 2009. 19 Similar PSLRA notices were issued in connection with the Detroit and New Orleans Actions

20 filed in this District. On June 1, 2009, pursuant to the process established by Congress, Lead Plaintiffs 21 22 5 Congress enacted the PSLRA with mandatory steps related to notifying investors and appointing lead plaintiffs. Specifically, the first investor to file a complaint must send notice to investors advising them 23 of the pendency of the action, the substance of the action and that class members may move for appointment as lead plaintiff not more than 60 days later. 15 U.S.C. § 77z-1(a)(3)(A)(i)(I-II); 24 Perlmutter v. Intuitive Surgical, Inc., 2011 WL 566814, at *2 (N.D. Cal. Feb. 15, 2011) (Koh, J.). The PSLRA directs that cases should be consolidated where there is "more than one action on behalf of a 25 class asserting substantially the same claim or claims.'" Takeda v. Turbodyne Techs., Inc., 67 F. Supp. 2d 1129, 1133 (C.D. Cal. 1999). Not later than 90 days after the notice is published, and as soon as 26 practicable after the court renders a decision on any motion to consolidate, the court shall "appoint the most adequate plaintiff as lead plaintiff for the consolidated actions." 15 U.S.C. § 77z-1(a)(3)(B)(ii); 27 Takeda, 67 F. Supp. 2d at 1133. While these procedures create certain delays, Congress enacted them to effectuate its ultimate goal of appointing the class member most capable of adequately representing 28 the interests of the class. 15 U.S.C. § 77z-1(a)(3)(B)(ii); In re Cavanaugh, 306 F.3d 726, 729-30 (9th Cir. 2002).

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1 filed their motion for appointment as lead plaintiff and specifically identified the securities they 2 purchased, and the Offerings in which they purchased. See Lead Plaintiff Motion, ECF No. 52. Wells 3 Fargo never opposed this process, nor the filing of a consolidated complaint. In fact, Defendants 4 entered into a stipulation with the then-proposed Lead Plaintiffs agreeing to the filing of a consolidated 5 complaint and stating that they would have "no obligation to move, answer, or otherwise respond" until 6 the consolidated complaint was filed. See New Orleans Action, No. 09-cv-1620, Stipulation and Order, 7 ECF No. 36. Such stipulations are common in securities class actions. See, e.g., Hodges v. Immersion 8 Corp., 2009 WL 5125917, at *5 (N.D. Cal. Dec. 21, 2009); In re JDS Uniphase Corp. Sec. Litig., 238 9 F. Supp. 2d 1127, 1132 (N.D. Cal. 2002); Boilermakers Nat'l Annuity Trust Fund v. WaMu Mortg. 10 Pass Through Certificates, 2009 WL 5170186, at *1 (W.D. Wash. Dec. 18, 2009). On July 16, 2009, 11 the Court consolidated all related actions, appointed Lead Plaintiffs and Lead Counsel and directed 12 Lead Plaintiffs to file a consolidated complaint. On August 31, 2009, Lead Plaintiffs filed the 13 Consolidated Complaint. 14 It is well-established in the Ninth Circuit that for purposes of calculating the timeliness of

15 claims, the date of an amended pleading is the date when a motion to amend is filed. See In re Wash. 16 Mut., Inc. Sec. Derivative & ERISA Litig., 2011 WL 321736 (W.D. Wash. Jan. 28, 2011) (citing 17 Rothman v. Gregor, 220 F.3d 81, 96 (2d Cir. 2000)). Here, as detailed above, the motion to amend was 18 effectively filed on February 3, 2009, when notice was issued advising all potential members of the 19 class (and Wells Fargo) of the pendency of this action and their ability to move to be appointed lead 20 plaintiff. Wells Fargo was on notice of the claims against it related to the 13 challenged Offerings as of 21 February 3, 2009, and suffered no prejudice as a result of the Consolidated Complaint not being 22 actually filed until August 31, 2009. 23 To the extent the Wells Fargo Defendants contend that the PSLRA-mandated notice or the lead

24 plaintiff motions should not be treated as motions to amend because they were not presented to the 25 Court in a separate document entitled "Motion for Leave to Amend," this contention is misplaced. The 26 Ninth Circuit has specifically held that a formal motion is unnecessary: 27 28

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1 2 3

[Under Rule 15(a) o]nce a responsive pleading has been served, many courts require a party seeking to amend its pleading to file a specific motion requesting leave to amend. In the Ninth Circuit, however, a plaintiff need not necessarily tender a formal motion in order to seek leave to amend.

4 Cole, 2000 WL 1456908, at *2 (emphasis added); see also Scott v. Eversole Mortuary, 522 F.2d 1110, 5 1116 n.8 (9th Cir. 1975) (reversing district court's refusal to grant leave to amend notwithstanding the 6 fact that "appellants' written request for leave to amend was not contained in a properly captioned 7 motion paper'). 6 Courts within the Ninth Circuit have broadly construed requests to amend to promote 8 the interests of justice. See, e.g., Grisham v. Philip Morris, Inc., 670 F. Supp. 2d 1014, 1022-23 (C.D. 9 Cal. 2009) (holding that "courts may construe other filings, including oppositions to motions, as 10 motions to amend where amendment would be proper,' and treating plaintiff's opposition to 11 defendants' summary judgment motion as a motion for leave to amend the complaint); Popov v. 12 Countrywide Fin. Corp., 2009 WL 5206679, at *2-3 (E.D. Cal. Dec. 18, 2009) (amendment permitted 13 although plaintiffs did not file a "formal noticed motion' for leave to amend). 14 Courts in securities class actions have reached conclusions consistent with this liberal rule. For

15 example, in Washington Mutual, defendants moved to dismiss plaintiffs' complaint, arguing that 16 plaintiffs lacked standing to assert claims as to specific securities. 2011 WL 321736, at *1. Plaintiffs 17 opposed the motion, but requested leave to amend to add additional plaintiffs in the event the court 18 agreed with defendants on the standing issue. Id. After the court dismissed the claims on standing 19 grounds, plaintiffs filed an amended complaint which included additional plaintiffs. Id. Defendants 20 moved for judgment on the pleadings, arguing that the additional claims were untimely. Id. The court 21 22 23 6 The Ninth Circuit has "repeatedly stressed that the court must remain guided by `the underlying 24 purpose of Rule 15 ... to facilitate decision on the merits, rather than on the pleadings or technicalities.'' Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Noll v. Carlson, 809 25 F.2d 1446, 1448 (9th Cir. 1987)). "This policy `is to be applied with extreme liberality.'' Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003); see also Breier v. N. Cal. Bowling 26 Proprietors' Ass'n, 316 F.2d 787, 789-90 (9th Cir. 1963) (leave to amend should be granted if underlying facts provide proper grounds for relief or if complaint can be saved by amendment). "[T]he 27 `principal function of procedural rules should be to serve as useful guides to help, not hinder, persons who have a legal right to bring their problems before the courts,' and `decisions on the merits are not to 28 be avoided on the basis of mere technicalities.'' Edwards v. Occidental Chem. Corp., 892 F.2d 1442, 1445 (9th Cir. 1990) (quoting Schiavone v. Fortune, 477 U.S. 21, 27 (1986)).

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1 denied defendants' motion, concluding that although plaintiffs had not filed a formal motion, the 2 request in their motion to dismiss opposition stopped time running. Id. at *3-4. 3 Likewise, in In re Priceline.Com Inc. Securities Litigation, the court ruled that plaintiffs'

4 motion to be appointed lead plaintiffs should be construed "as a motion to amend the complaint." 342 5 F. Supp. 2d 33, 43-45 (D. Conn. 2004). The court explained that "the fact that the court did not decide 6 [the lead plaintiff] motion until September 12, 2001 and allowed plaintiffs an additional forty-five days 7 to file the consolidated amended complaint should not prejudice plaintiffs for waiting to incorporate all 8 amendments to the complaints rather than filing amended complaints in several actions. Because 9 plaintiffs sought to amend their complaints within the one-year limitations period, both their 10 amendments adding [new defendants] and their amendments adding arguably new allegations are 11 timely." Id. at 44-45. See also In re Enron Corp. Sec., Derivative & "ERISA " Litig., 310 F. Supp. 2d 12 819, 858-59 (S.D. Tex. 2004) (holding that the date plaintiffs submitted a letter to the court inquiring 13 about amendment was determinative for timeliness purposes). Here, the first PSLRA notice was issued 14 February 3, 2009, and the lead plaintiff motions were filed June 1, 2009. Lead Plaintiffs should not be 15 prejudiced for following the PSLRA process and then filing the Consolidated Complaint after their 16 appointment as Lead Plaintiffs. See Priceline.com , 342 F. Supp. 2d at 43-45. 17 18 19 For the reasons stated above, the claims on all 13 Offerings were filed within the three-year 2. The Boilermakers' Complaint Tolled The Statute

Of Repose As To All 13 Challenged Offerings

20 statute of repose and tolling is unnecessary. Nevertheless, American Pipe and its progeny also serve to 21 toll the statute of repose on the 13 Offerings. In American Pipe, the Supreme Court held that the filing 22 of a class action suspends the applicable statute of limitations "`as to all asserted members of the 23 class.'" Id. at 554; see also Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345, 354 (1983). The 24 Supreme Court noted that, were the rule otherwise, potential class members "would be induced to file 25 protective motions to intervene or join in the event that the class was later found unsuitable," denying 26 Rule 23 class actions of the "efficiency and economy of litigation which is a principal purpose of the 27 procedure." American Pipe, 414 U.S. at 553. American Pipe tolling applies, as long as the claims in 28 the subsequent complaint "concern the same evidence, memories, and witnesses as the subject matter of

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1 the original class suit," so that "the defendant will not be prejudiced." Id. at 562 (Powell, J. 2 concurring); Tosti v. City of Los Angeles, 754 F. 2d 1485, 1489 (9th Cir. 1985). 3 Courts in this circuit and others have repeatedly recognized that American Pipe applies equally

4 to the Securities Act's statute of repose. See, e.g., In re Activision Sec. Litig., 1986 WL 15339, at *5 5 (N.D. Cal. Oct. 20, 1986); In re Flag Telecom Holdings, Ltd. Sec. Litig., 352 F. Supp. 2d 429, 455 n.19 6 (S.D.N.Y. 2005) ("`[t]he American Pipe rule has been extended to statutes of repose'" (quoting Official 7 Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, 277 B.R. 20, 31 (S.D.N.Y. 2002))); 8 Ballard v. Tyco Int'l, Ltd., 2005 WL 1683598 (D.N.H. July 11, 2005); In re Enron Corp. Sec. 9 Derivative & "ERISA " Litig., 529 F. Supp. 2d 644, 708 (S.D. Tex 2006); Hellerstein v. Mather, 360 F. 10 Supp. 473, 475 (D. Colo. 1973). Additionally, this Court and others have recognized that American 11 Pipe tolling applies to complaints that are voluntarily dismissed. See October 19 Order, 2010 WL 12 4117477, at *4 n.6 (citing Employers-Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Anchor 13 Capital Advisors, 498 F.3d 920 (9th Cir. 2007) for the proposition that American Pipe tolling applies 14 when a class action complaint is voluntarily dismissed); Sawyer v. Atlas Heating & Sheet Metal Works, 15 Inc., 731 F. Supp. 2d 850 (E.D. Wis. 2010) ("Park Bank voluntarily dismissed its case after deciding 16 that it no longer wanted to represent the class ... Under these circumstances, there is no reason to 17 relegate Sawyer and the rest of the putative class to multiple individual actions and deprive them of the 18 efficiencies of the class mechanism"); see also Robbin v. Fluor Corp., 835 F.2d 213 (9th Cir. 1987) 19 (applying American Pipe when case was voluntarily dismissed); In re Enron Corp. Sec., Derivative & 20 "ERISA " Litig., 2007 WL 209923, at *4 (S.D. Tex. Jan. 24, 2007). 21 Here, the Boilermakers' Complaint was filed on January 29, 2009, and asserted Section 11 and

22 15 claims on behalf of investors in all 13 Offerings Wells Fargo now challenges. The Boilermakers' 23 Complaint related to the same subject matter, the same untrue statements and omissions, and the same 24 theory of liability as the Complaint ­ namely that Wells Fargo disregarded its underwriting standards as 25 to the underlying loans. American Pipe, 414 U.S at 562; Tosti, 754 F. 2d at 1489. Accordingly, as 26 there is no risk of prejudice to Wells Fargo, the Boilermakers' Complaint tolled the statute of repose as 27 to the 13 challenged Offerings. While the statute of repose arguably began to run again when the 28 Boilermakers' Complaint was voluntarily dismissed on April 6, 2009, the New Orleans Complaint ­

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1 which again asserted claims on all 13 Offerings ­ was filed one week later on April 13, 2009. 2 Accordingly, Lead Plaintiffs' claims related to all 13 challenged Offerings are timely. 3 Wells Fargo's two out-of-circuit district court decisions are contrary to established law. In

4 Footbridge Ltd. Trust v. Countrywide Fin. Corp., a non-class case that has been appealed to the Second 5 Circuit, the court held that American Pipe did not apply to the Securities Act's statute of repose. 2011 6 WL 907121, at *7 (S.D.N.Y. Mar. 16, 2011). The court, however, relied heavily on Lampf, Pleva, 7 Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363 (1991), a non-class case involving the 8 equitable tolling doctrine of fraudulent concealment. Lampf is distinguishable, however, because 9 American Pipe tolling is legal, not equitable. Indeed, the "weight of federal authority" holds that 10 American Pipe is a species of legal tolling. See, e.g., Albano v. Shea Homes Ltd. P'ship, 634 F.3d 524, 11 535 (9th Cir. 2011) (collecting cases and noting that "[t]he majority of the lower federal courts that 12 have addressed the issue have held that American Pipe tolling is not equitable, but legal"); Arivella v. 13 Lucent Techs., Inc., 623 F. Supp. 2d 164, 177-78 (D. Mass. 2009) (collecting cases); Stone Container 14 Corp. v. U.S., 229 F.3d 1345, 1354 (Fed. Cir. 2000) ( American Pipe is not based on "equitable tolling, 15 but rather on the Court's interpretation of Rule 23"); Bright v. U.S., 603 F.3d 1273, 1287­88 (Fed. Cir. 16 2010) (class action tolling is "statutory" and "is not triggered by equitable considerations"). 17

In re Lehman Brothers Securities & ERISA Litigation, which cites to Footbridge and reaches a

18 similar conclusion, is likewise contrary to the overwhelming weight of authority. 2011 WL 1453790, 19 at *3 (S.D.N.Y. Apr. 13, 2011). In fact, both Lehman and Footbridge acknowledge that their holdings 20 are contrary to the majority view that American Pipe is a species of legal tolling. Footbridge stated 21 that "many of the policy considerations present in American Pipe would support tolling of a statute of 22 repose," 2011 WL 907121, at *7, and Lehman noted that its conclusion is "in tension with the policies 23 animating the American Pipe decision." 2011 WL 1453790, at *3. 24 In sum, the well-established line of authority holds that American Pipe tolls the Securities Act's

25 statute of repose. Here, the Boilermakers' Complaint and the New Orleans Complaint tolled the statute 26 of repose for all 13 challenged Offerings. 27 28

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1 2 3

3.

American Pipe Applies To All

Asserted Members Of The Class

American Pipe created a "bright line rule" for class action tolling. Bridges v. Dep't of Md. State

4 Police, 441 F.3d 197, 211 (4th Cir. 2006). In In re Hanford Nuclear Reservation Litig., 534 F.3d 986 5 (9th Cir. 2008), the Ninth Circuit broadly restated the American Pipe rule as "the commencement of a 6 class action suspends the applicable statute of limitations as to all asserted members of the class who 7 would have been parties had the suit been permitted to continue as a class action. The tolling period 8 ends, and the statute runs anew, once class certification is granted or denied." Id. at 1008. This 9 language makes clear that American Pipe's application does not depend on whether class members 10 reasonably relied on the institution of the class action. See American Pipe, 414 U.S. at 551 ("no 11 different a standard should apply to those members of the class who did not rely upon the 12 commencement of the class action (or who were even unaware that such a suit existed)"); Tosti, 754 13 F.2d at 1489 (American Pipe applies "irrespective of whether a member demonstrably relied on 14 institution of the class action."); State Farm Mut. Auto. Ins. Co. v. Boellstorff, 540 F.3d 1223, 1233 15 (10th Cir. 2008) (American Pipe applies "regardless of the reliance or awareness of putative class 16 members"); In re WorldCom, Inc. Sec. Litig., 496 F.3d 245, 253 (2d Cir. 2007) ("Even class members 17 who were unaware of the class action ­ indeed, even those who `demonstrably did not rely' on it ­ 18 should benefit from the tolling"). The certainty this broad rule creates prevents the problems American 19 Pipe sought to avoid ­ the filing of "repetitious papers and motions" by potential class members 20 seeking to protect their claims. 414 U.S. at 550; see also Crown, 462 U.S. at 350. 21 In this case, "standing" was a complex, hotly-contested issue that was undecided until the April

22 22 Order. No one ­ from counsel in this action to investors who were unaware of the issue ­ could 23 have known conclusively that the Court would rule that Lead Plaintiffs did not have standing to pursue 24 claims related to offerings that were traceable to common registration statements. 7 Accordingly, absent 25 26 At the time of the Boilermakers' Complaint, at least one court had concluded named plaintiffs could represent absent class members who purchased securities issued pursuant to a common shelf 27 registration statement. In re Countrywide Fin. Corp. Sec. Litig., 2009 WL 7322254, at *32 (C.D. Cal. 28 Dec. 9, 2009). Recently, at least two others have agreed. See In re Am. Int'l Grp., Inc. 2008 Sec. Litig., 741 F. Supp. 2d 511 (S.D.N.Y. Sept. 27, 2010); In re CitiGroup Inc. Bond Litig., 723 F. Supp. 2d 568, 584-85 (S.D.N.Y. 2010). Additionally, in Plumbers' Union Local No. 12 Pension Fund v. Nomura

7

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1 class members would have been forced to flood the courts with suits in order to protect against the 2 uncertainty that the standing issue would be decided in Defendants' favor ­ the precise situation that 3 American Pipe's bright line rule seeks to avoid. 4

8

Several courts in recent securities cases have concluded that American Pipe tolling applies

5 where the original plaintiffs initially lacked standing to pursue claims related to particular securities, 6 but later cured the deficiency. For example, in In re Wachovia Equity Securities Litigation, 753 F. 7 Supp. 2d 326 (S.D.N.Y. 2011), plaintiffs that were not originally included in the complaint sought to 8 bring claims related to securities for which no original plaintiff had standing. Id. As they do here, 9 defendants in Wachovia contended that American Pipe did not apply "if the original plaintiffs lacked 10 standing to bring their claims in the first place." Id. at 372. The court, however, disagreed, finding that 11 failure to apply American Pipe would "undermine the policies of `efficiency and economy of litigation' 12 that underlie Rule 23." Id. The court noted that "Plaintiffs should not be punished for their failure to 13 anticipate or timely remedy the standing deficiencies" of the original complaint. Id. 14 Likewise, in New Jersey Carpenters Health Fund v. Residential Capital, LLC, 2010 WL

15 5222127, at *3 (S.D.N.Y. Dec. 22, 2010) ("ResCap II"), investors sought to intervene in a mortgage16 backed securities case after the court determined that the lead plaintiff did not have standing to bring 17 claims related to the offerings in which the intervenors purchased. The court rejected defendants' 18 contention that American Pipe did not apply in the absence of standing: "Defendants have been on 19 notice of the claims that would be added since the beginning of the action, and could no more have 20 anticipated that they would have been dismissed on standing grounds than the plaintiffs ... Litigation 21 22 23 24 Asset Acceptance Corp., 632 F.3d 762 (1st Cir. 2011) ("Nomura II"), the First Circuit suggested that 25 with the proper "alignment of incentives" and "identity of issues," named plaintiffs could assert claims related to offerings in which they did not purchase. 26 8 See also Bridges, 441 F.3d at 212 ("[T]he Supreme Court [in American Pipe] remained highly sensitive to the need for certainty of a bright-line rule."); Boellstorff, 540 F.3d at 1229 ("If not for a 27 tolling doctrine, individuals would feel compelled to file placeholder lawsuits prior to the expiration of the statute of limitations, thereby clogging the channels of the court with suits already encompassed by 28 the class action."); WorldCom, 496 F.3d at 256 ("The American Pipe tolling doctrine was created to protect class members from being forced to file individual suits in order to preserve their claims.").

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1 in the Federal Court is not a game of `gotcha' but rather its goal is to try cases on their merits." Id. at 2 *3. Numerous other cases from this Circuit and others are in accord. 9 3 4 5 As detailed above, Wells Fargo ignores the filing of the Boilermakers' Complaint, and the fact 4. Lead Plaintiffs' Claims On 2006-AR12 And 2006-AR14 Are Clearly Timely

6 that the Boilermakers purchased Certificates in 2006-AR12. Even under Wells Fargo's argument, 7 Boilermakers had standing in 2006-AR12. Thus, claims related to the 2006-AR12 Offering were 8 unquestionably tolled as of January 29, 2009 (with 205 days remaining on the statute of repose). If the 9 statute of repose began to run again when the Boilermakers' Complaint was voluntarily dismissed on 10 April 6, 2009, the Consolidated Complaint, with Louisiana as a Lead Plaintiff who purchased 11 Certificates in 2006-AR12 (and therefore had standing), was filed on August 31, 2009, just 149 days 12 after the dismissal of the Boilermakers' Complaint. 13 Likewise, the claims for the 2006-AR14 Offering are unquestionably timely. Louisiana

14 purchased Certificates in 2006-AR14 and identified these purchases in its certification filed in 15 connection with its lead plaintiff motion on June 1, 2009, less than three years from the September 27, 16 2006 prospectus supplement for 2006-AR14. As detailed above, the filing of a lead plaintiff motion is 17 a motion to amend for purposes of calculating the timeliness of the claims. Priceline.Com , 342 F. 18 Supp. 2d at 43-45. 19 20 21 Wells Fargo seeks partial summary judgment on three Offerings (2006-6, 2006-AR8 and 2006C. Wells Fargo's Motion For Partial Summary Judgment Lacks Evidence And Should Be Denied

22 AR14), contending that the statute of repose expired less than three years from the date of the 23 24 9 See, e.g., Catholic Soc. Servs. v. INS, 232 F.3d 1139, 1149 (9th Cir. 2000) (en banc) (tolling 25 preserves the claims of additional plaintiffs where intervening change in statute stripped current plaintiffs of standing); Flag Telecom, 352 F. Supp. 2d at 456 (if tolling is denied because the initial 26 plaintiff lacked standing, it "would undermine the policies of `efficiency and economy of litigation' which underlie Rule 23" (quoting American Pipe, 414 U.S. at 553)); Haas v. Pittsburgh Nat ' l Bank, 27 526 F.2d 1083, 1097-98 (3d Cir. 1975); Cal. Pub. Emps. ' Ret. Sys. v. Chubb Corp., 2002 WL 33934282, at *30 (D.N.J. June 26, 2002); Bromley v. Mich. Educ. Ass'n-NEA, 178 F.R.D. 148, 159-60 28 (E.D. Mich. 1998); Enron, 529 F. Supp. 2d at 709; In re Initial Pub. Offering Sec. Litig., 2004 WL 3015304, at *4-6 (S.D.N.Y. Dec. 27, 2004).

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1 prospectus supplements due to certain undisclosed "contracts of sale." Wells Fargo is wrong. Notably, 2 Wells Fargo seeks partial summary judgment on less than a full record. Discovery is ongoing, with the 3 date for substantial completion of document productions still a month away and the discovery cut-off 4 three and a half months away. 5 By way of background, a plaintiff must bring its Securities Act claims within three years after

6 the security was "bona fide offered to the public." 15 U.S.C. § 77m. Courts have traditionally treated 7 the bona fide offering date as "the date upon which the security actually becomes available to the public 8 for purchase and sale." See, e.g., Morse v. Peat, Marwick, Mitchell & Co., 445 F. Supp. 619, 622, 9 (S.D.N.Y. 1977). Here, 2006-6, 2006-AR8 and 2006-AR14 were first offered to the public pursuant to 10 prospectus supplements dated April 26, 2006, April 21, 2006, and September 27, 2006, respectively. It 11 is beyond doubt that Lead Plaintiffs purchased Certificates in each of these Offerings and brought suit 12 within three years of the prospectus supplements. 13 Nevertheless, in an attempt to shorten the Securities Act's three-year statute of repose, Wells

14 Fargo contends that the bona fide offering date began to run earlier based upon the "first contract of 15 sale." Tellingly, Wells Fargo cites no case law, and Lead Plaintiffs are aware of none, holding that the 16 "first contract of sale," not the date of the prospectus supplement, triggers the statute of repose. When 17 the SEC adopted Rule 430B ­ upon which Wells Fargo relies ­ it specifically stated that the new rules 18 were meant to "maintain investor protection against misleading or inaccurate disclosures" and 19 "encourage the disclosure of accurate information about transactions." Sec. Offering Reform, 70 Fed. 20 Reg. 44722, 44793 (Aug. 3, 2005). If Wells Fargo's interpretation is accepted, the statute of repose for 21 these three Offerings would begin to run prior to the accrual of the statutory cause of action ­ namely 22 the issuance of the untrue statements and omissions in the prospectus supplements. Such a result is 23 unjust and contrary to public policy. See J. William Hicks, 17 Civil Liabilities: Enforcement & Litig. 24 Under the 1933 Act, § 4.77 (2010) ("it seems highly unlikely that Congress intended the limitations 25 period to commence prior to the accrual of the statutory cause of action. Section 11 imposes liability 26 only for untruths in an effective registration statement"). 27 More significantly, Wells Fargo has not met the high burden necessary to prevail on a motion

28 for summary judgment. See Nationwide Life Ins. Co. v. Bankers Leasing Ass'n, Inc., 182 F.3d 157, 160

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1 (2d Cir. 1999) ("[S]ummary judgment is a `drastic device, since its prophylactic function when 2 exercised, cuts off a party's right to present his case to the jury.'"). As the moving party, Wells Fargo 3 has the burden to prove "the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 4 U.S. 317, 323 (1986). Stated differently, Wells Fargo must "show there is an absence of evidence to 5 support the plaintiff's case." Id. at 324. When "a rational trier of fact might resolve the issue in favor 6 of the nonmoving party, summary judgment must be denied." T.W. Elec. Serv., Inc. v. Pac. Elec. 7 Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987). A "district court's ruling on a motion for 8 summary judgment may only be based on admissible evidence." In re Oracle Corp. Sec. Litig., 627 9 F.3d 376, 385 (9th Cir. 2010). Defendants bear the burden of showing the admissibility of the evidence 10 it is seeking to admit. Pfingston v. Ronan Eng'g Co., 284 F.3d 999, 1004 (9th Cir. 2002). 11 In support of its motion, Wells Fargo submits only "trading records produced by the

12 underwriters" and summarily concludes that these "trading records" are "contracts of sale." Def. Mem. 13 at 7. These spreadsheets have not been authenticated and are, therefore, inadmissible hearsay. 10 Even 14 if admissible, the spreadsheets contain neither the elements of a traditional contract nor the terms of 15 sale. Indeed, two of the three spreadsheets ­ Exhibits 2 and 3 ­ bear stamps reading: "Run At: Dec 20 162010 4:40PM" and "Run At: Jan 6, 2011 4:45PM," clearly indicating such documents were created in 17 connection with this litigation. In sum, Wells Fargo has provided no admissible evidence establishing 18 the existence of a valid and enforceable contract of sale on the dates its motion suggests. Accordingly, 19 Wells Fargo's motion must be denied. 20 Substantively, the spreadsheets resolve nothing. For example, Wells Fargo contends that the

21 "contract of sale" date for 2006-6 is April 11, 2006, but the settlement date for that trade (the date on 22 which the buyer must pay for, and the seller must deliver, the purchased securities) was April 27, 2006, 23 24 10 Pursuant to the Federal Rules of Evidence, these internal spreadsheets purportedly produced by Credit Suisse Securities (USA) LLC and UBS Securities, LLC (submitted as Defendants' Exhibits 1-3), 25 are inadmissible hearsay that further lack authentication and foundation. Among other things, the exhibits contain no identifying information (such as a date of creation or recipient), and Wells Fargo 26 has not established that these exhibits were even business records. Such objectionable and inadmissible evidence creates an issue of fact not appropriate for summary judgment. See Fed. R. Civ. P. 56(c)(2); 27 Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002) ("We have repeatedly held that unauthenticated documents cannot be considered in a motion for summary judgment."); Anheuser28 Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 345 n.4 (9th Cir. 1995) ("inadmissible hearsay evidence may not be considered on a motion for summary judgment").

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1 less than three years from the date of the New Orleans Complaint. See Declaration of David H. Fry, 2 ECF No. 403 ("Fry Decl."), Ex. 2 at 9. Likewise, Wells Fargo contends that the "contract of sale" date 3 for 2006-AR14 is August 22, 2006, but the spreadsheet shows a settlement date of September 29, 2006, 4 less than three years from the date of the Consolidated Complaint. 5

11

Lastly, Wells Fargo's motion for partial summary judgment is premature. Summary judgment

6 is not appropriate where additional discovery is required to present facts essential for an opposition. 7 See Fed. R. Civ. P. 56(d); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n.5 (1986). Indeed, the 8 Ninth Circuit has interpreted Rule 56(d) as "requiring, rather than merely permitting, discovery `where 9 the nonmoving party has not had the opportunity to discover information that is essential to its 10 opposition.'" Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832, 846 (9th Cir. 2001). See also Burlington 11 N. Santa Fe RR v. Assiniboine & Sioux Tribes, 323 F.3d 767, 774 (9th Cir. 2003) (reversing summary 12 judgment granted prematurely because of the early stage of discovery); Harrods Ltd. v. Sixty Internet 13 Domain Names, 302 F.3d 214, 244 (4th Cir. 2002) (same). 14 Here, the deadline for the substantial completion of the production of documents is not until

15 June 15, 2011, and the discovery cut-off is not until September 15, 2011. Between now and the 16 completion of fact-discovery, Lead Plaintiffs expect to receive a substantial amount of additional 17 documents. In addition, Lead Plaintiffs plan to take numerous depositions, including those of 18 personnel who worked at Wells Fargo, the Underwriter Defendants, and relevant third parties including 19 the rating agencies and due diligence firms. As explained in the accompanying Declaration of Timothy 20 A. DeLange, Lead Plaintiffs have not had the opportunity to take discovery related to the spreadsheets 21 submitted in support of Wells Fargo's motion. Lead Plaintiffs expect many of the documents and 22 depositions will shed light on whether these "spreadsheets" are authentic and, more importantly, 23 whether they constitute "contracts of sale." See DeLange Decl., ¶¶5-6. Accordingly, if the Court is 24 inclined to grant Wells Fargo's motion for partial summary judgment, Lead Plaintiffs respectfully 25 26

11 See id., Ex. 3 at 2. As explained above, Lead Plaintiffs filed their motion for lead plaintiff, identifying their transactions in the 2006-AR14 Offering on June 1, 2009. Accordingly, these claims 28 are timely irrespective of whether the bona fide offering date is the "first contract of sale" or the prospectus supplement.

27

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1 request that they be allowed an opportunity to conduct further discovery pursuant to Rule 56(d) of the 2 Federal Rules of Civil Procedure. 3 4 5 It is beyond dispute that one of the Lead Plaintiffs purchased a security in each of the 17 Wells D.

12

Lead Plaintiffs Have Standing To Assert

Claims Related To All Securities In Each Offering

6 Fargo Offerings at issue. Nevertheless, Wells Fargo belatedly challenges Lead Plaintiffs' standing to 7 assert claims on behalf of all tranches in each Offering. Wells Fargo's newfound argument conflicts 8 with its prior positions. Indeed, in their first round of motions to dismiss, Defendants argued that Lead 9 Plaintiffs only had standing to assert claims related to offerings in which they purchased. See 10 Defendants' Motion to Dismiss, ECF No. 162 at 23-24 (citing Guenther v. Cooper Life Scis., Inc., 759 11 F. Supp. 1437, 1439 (N.D. Cal. 1990)). The court affirmatively held that Lead Plaintiffs have standing 12 to assert claims related to each offering, a fact the court repeatedly emphasized. See April 22 Order, 13 712 F. Supp. 2d at 974 ("The Court has already concluded that plaintiffs have pled a primary violation 14 of Section 11 with respect to the seventeen offerings they have standing to challenge." Id. at 974 15 (emphasis added); October 19 Order, 2010 WL 4117477. 16 Each Lead Plaintiff has unquestionably established individual standing under Article III and the

17 Securities Act. In order to have Article III standing, the plaintiff must have "suffered an injury in fact." 18 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The Securities Act provides that "any 19 person" acquiring a security sold pursuant or traceable to a registration statement that contains untrue 20 statements or omissions may sue. 15 U.S.C. § 77k. In this case, one of the Lead Plaintiffs purchased a 21 security pursuant or traceable to each of the 17 Offerings, and suffered damages as a result. 22 Once a plaintiff has established individual standing, inquiries regarding the plaintiff's ability to

23 represent absent class members are examined under Rule 23. Cordes & Co. Fin. Servs. v. A. G. 24 Edwards & Sons, Inc., 502 F.3d 91, 100 (2d Cir. 2007); Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 25 410 (6th Cir. 1998); 1 Newberg on Class Actions § 2:5 (4th ed. 2010); see id. § 2:7; 7AA Fed. Prac. & 26 27 12 Rule 56(d) provides that "[i]f a nonmoving shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering 28 the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order." Fed. R. Civ. P. 56(d).

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1 Proc. Civ. § 1785.1 (3d ed. 2010). In Cordes, the Second Circuit recognized that in the class action 2 context, the plaintiff's ability to represent absent class members is satisfied via compliance with Rule 3 23. In Gratz v. Bollinger, the Supreme Court agreed with this concept, finding that whether 4 characterized as Article III standing or Rule 23 typicality, the relevant question is whether the injury 5 suffered by the representative plaintiffs "implicate[s] a significantly different set of concerns" than the 6 injuries suffered by the rest of the class. 539 U.S. 244, 265 (2003). This is nearly the same inquiry as 7 under Rule 23(a). See, e.g., Rodriguez v. Hayes, 591 F.3d 1105, 1124 (9th Cir. 2010) (representative's 8 claims must be "`reasonably coextensive with those of absent class members'" (quoting Hanlon v. 9 Chrysler Corp. 150 F.3d 1011, 1020 (9th Cir. 1998))). 10 In securities class actions, courts routinely find that a named plaintiff may represent absent class

11 members that purchased other securities where the alleged harm stems from the same improper conduct 12 or same issuance. See Rafton, 2011 WL 31114; In re DDi Corp. Sec. Litig., 2005 WL 3090882, at *6 13 (C.D. Cal. July 21, 2005) (purchasers of common stock could represent purchasers of convertible notes 14 because both were traceable to same issuance); In re Juniper Networks Sec. Litig., 264 F.R.D. 584, 594 15 (N.D. Cal. 2009) ("plaintiffs with a valid securities claim may represent the interests of purchasers of 16 other types of securities in a class action where the alleged harm stems from the same allegedly 17 improper conduct"). 18 This Court's decision in Rafton is instructive. 2011 WL 31114, at *13. There, the named

19 plaintiffs purchased one of four classes of mutual fund shares for which they asserted claims. 20 Defendants moved to dismiss, claiming ­ as Wells Fargo does here ­ that plaintiffs lacked standing to 21 represent investors in the other three classes. This Court rejected defendants' argument, finding that 22 plaintiffs had standing to represent investors in all four classes because, as here, they were issued 23 pursuant to registration statements which contained the same disclosures. Id. at *13. Numerous 24 courts are in accord. 13 25 26

See Mutchka v. Harris, 373 F. Supp. 2d 1021, 1024 (C.D. Cal. 2005); In re Connetics Corp. Sec. Litig., 257 F.R.D. 572, 579-80 (N.D. Cal. 2009) (common stock and bondholders); In re Dreyfus 27 Aggressive Growth Mut. Fund Litig., 2000 WL 1357509, at *3 (S.D.N.Y. Sept. 20, 2000) ("[C]lass

13

28 representatives need not have invested in each security so long as the plaintiffs have alleged a single course of wrongful conduct with regard to each security. Courts have not addressed this concern vis a vis the doctrine of standing, but rather have examined such concerns pursuant to Rule 23(a)(3)'s

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1

The vast majority of courts presiding over mortgage-backed securities class actions agree. 14 In

2 In re Dynex Capital, Inc. Sec. Litig., 2011 WL 781215 (S.D.N.Y. Mar. 7, 2011), the lead plaintiff 3 purchased one tranche in an offering of MBS and sought class certification. Defendants contended, as 4 they do here, that the lead plaintiff could not represent absent class members because it did not 5 purchase in every tranche of the deal. Id. at *3. The court disagreed, finding: 6 7 8 Id. 9 Here, the untrue statements and omissions in the Offering Documents for each Offering were [w]hile a lead plaintiff must without question have standing to sue on `at least some claims' ... it would be premature to defeat class certification on the basis that some Plaintiff did not purchase every single security forming the basis of the claims.

10 identical and affected all securities in that Offering similarly. Mason Report, at ¶¶4, 6, 63-68 ("all the 11 securities in an offering are interrelated and untrue statements and material omissions in the Offering 12 Documents similarly affect the securities in each offering."). Likewise, each Offering is supported by a 13 defined set of collateral ­ the mortgage pools. Each security issued in an offering is supported by the 14 cash flow from that collateral and distributed pursuant to the same cash flow waterfall set forth in the 15 Offering Documents. See Mason Report, at ¶¶4-6, 55, 63-38. The credit risk and value of each 16 security in the particular Offering is negatively affected by the reduced income stream resulting from 17 increased defaults and delinquencies. Wells Fargo's expert Bradford Cornell agrees: 18 19 20 typicality requirement."); In re Blech Sec. Litig., 2003 WL 1610775, at *17 (S.D.N.Y. Mar. 26, 2003) 21 (seven representatives could represent all securities as "[t]here need not be a class representative for every Blech security, as long as all the securities are part of a common fraudulent or manipulative 22 scheme"). 14 Pub. Emps. ' Ret. Sys. of Miss. v. Merrill Lynch & Co., Inc., 714 F. Supp. 2d 475 (S.D.N.Y. 2010); In 23 re Lehman Bros. Sec. & ERISA. Litig., 684 F. Supp. 2d 485 (S.D.N.Y. 2010); N.J. Carpenters Vacation Fund v. Royal Bank of Scot. Grp., PLC, 720 F. Supp. 2d 254 (S.D.N.Y. 2010); N.J. Carpenters Health 24 Fund v. DLJ Mortg. Capital, Inc., 2010 WL 1473288 (S.D.N.Y. Mar. 29, 2010); N.J. Carpenters Health Fund v. Residential Capital, LLC, 2010 WL 1257528 (S.D.N.Y. Mar. 31, 2010); Tsereteli v. 25 Residential Asset Securitization Trust 2006 -A8, 692 F. Supp. 2d 387 (S.D.N.Y. 2010); In re IndyMac Mortg. Backed Sec. Litig., 718 F. Supp. 2d 495 (S.D.N.Y. 2010); Boilermaker-Blacksmith Nat'l 26 Pension Trust v. WaMu Mortg. Pass Through Certificates, 748 F. Supp. 2d 1246 (W.D. Wash. 2010); NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 2010 WL 4739779 (S.D.N.Y. Nov. 17, 27 2010); Ann Arbor Emps. ' Ret. Sys. v. Citigroup Mortg. Loan Trust, Inc., 2010 WL 6617866 (E.D.N.Y. Dec. 23, 2010); Pub. Emps. ' Ret. Sys. of Miss. v. Goldman Sachs Group, Inc., 2011 WL 135821 28 (S.D.N.Y. Jan. 12, 2011); Emps' Ret. Sys. of Gov't of Virgin Islands v. J.P. Morgan Chase & Co., 2011 WL 1201520 (S.D.N.Y. Mar. 30, 2011).

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1 2 3 4

Q. If the cumulative loss expectations exceeded the credit enhancement, would the credit risk for the securities in that trust increase? A. I don't think the risk increases. I think the likelihood of a loss increases, which is not exactly the same thing. Risk is deviation around what is expected. If I now know

there are going to be more defaults, I know the security is going to be worth less.

5 Cornell Tr. at 109:20-110:3 (emphasis added); see also Mason Report, at ¶¶5-6, 55, 66-67; Cornell Tr. 6 at 143:9-144:19; 156:6-157:20. Thus, the claims for each security in each Offering will be based on the 7 same common proof ­ namely that Wells Fargo systematically disregarded its underwriting standards. 8 Lead Plaintiffs' injuries are "reasonably coextensive with those of absent class members." Rodriguez, 9 591 F.3d at 1124. 10 Wells Fargo's reliance on the First Circuit's decision in Nomura II, 632 F.3d 762, is misplaced.

11 In Nomura II, the court held that plaintiffs that purchased mortgage-backed securities had standing to 12 represent absent class members in all tranches of two offerings. While affirming the dismissal of 13 claims for six offerings in which the plaintiffs did not purchase, the First Circuit noted that named 14 plaintiffs could represent purchasers of other securities if they had "essentially the same incentive to 15 litigate the counterpart claims of the class members because the establishment of the named plaintiffs' 16 claims necessarily establishes those of other class members. The matter is one of identity of issues not 17 in the abstract but at a ground floor level." Id. at 770 (emphasis added). There, the dismissed offerings 18 were "backed by loans from different banks." Id. at 771. 19 Unlike Nomura II, Wells Fargo originated or acquired the loans underlying each offering and

20 represented that each loan was originated pursuant to its underwriting standards. In addition, Wells 21 Fargo served in multiple roles in each of the 17 Offerings, including Sponsor, Depositor, Master 22 Servicer, Custodian and Paying Agent. Lead Plaintiffs have the "same incentive" to litigate and 23 establish the claims of the absent class members. Specifically, because all tranches in an Offering are 24 issued pursuant to the same set of Offering Documents and subject to the same cash flow waterfall (and 25 payments from the same underlying mortgages), the requisite incentives and identity of issues allow 26 Lead Plaintiffs to represent investors who purchased other tranches in the same Offering. 27 Lead Plaintiffs anticipate that in their reply memorandum Wells Fargo will rely on Judge

28 Pfaelzer's decision in Maine State Retirement System v. Countrywide Financial Corp., No. 10-cvLEAD PLAINTIFFS' OPP. TO DEFENDANTS' MOTION Case No. CV-09-01376-LHK -21-

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1 00302, slip op. (C.D. Cal. May 5, 2011) ( " Countrywide MBS"). On a pleading motion before the 2 development of a record, the court held that the named plaintiffs only had standing to pursue claims in 3 the tranches they purchased. The decision is legally and factually inapposite and should not be 4 followed. First, the court's holding that the text of the Securities Act "dictates that Plaintiffs must have 5 acquired or purchased the security" in order to have standing is contrary to this Court's ruling in Rafton 6 and the established line of securities cases in this District (and elsewhere) holding that a named plaintiff 7 may represent absent class members that purchased other securities where the alleged harm stems from 8 the same improper conduct or same issuance. See, e.g., Rafton, 2011 WL 31114, at *13; DDi Corp., 9 2005 WL 3090882, at *6; Juniper, 264 F.R.D. at 594. 10

Second, Countrywide MBS is factually distinct. There, unlike here, "the loan groups backing

11 the Certificates differed from tranche to tranche" and in "most of the offerings," the senior tranches 12 were backed by different groups of mortgage loans. Countrywide MBS at 14. Here, five of the 13 Offerings have a single loan pool supporting each tranche and ten other Offerings have cross14 collateralization features enabling cash flow shortfalls in any group to affect all tranches. The loan 15 pools in these Offerings are identical ­ not different ­ from tranche to tranche. As Dr. Mason explained 16 (and Wells Fargo's experts agreed), the securities at issue in this case are supported by the same income 17 stream, namely the principal and interests payments on the underlying loans in the pool. A decrease in 18 the income stream has a negative effect on all tranches in the Offering. See Mason Report, at ¶¶5-6, 55, 19 66-67; Cornell Tr. at 109:20-110:3 ("If I now know there are going to be more defaults, I know the 20 security is going to be worth less"); 143:9-144:19; 156:6-157:20. While the magnitude of such 21 negative effect may differ, the determination of damages is a question of fact not appropriate for 22 resolution at this stage. In re Initial Pub. Offering Sec. Litig., 241 F. Supp. 2d 281, 351 n.80 (S.D.N.Y. 23 2003) ("The determination of value [in a Section 11 case] is a fact-intensive inquiry."); Blackie v. 24 Barrack, 524 F.2d 891, 905 (9th Cir. 1975) ("[t]he amount of damages is invariably an individual 25 question and does not defeat class action treatment"); In re Dynex Capital, Inc. Sec. Litig., 2011 WL 26 781215, at *2 (S.D.N.Y. Mar. 7, 2011) (different repayment rights and potential damages do not 27 preclude class certification). 28

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1

Lastly, Wells Fargo's contention that this case "presents 438 separate questions of standing"

2 disregards the structure of MBS as well as Supreme Court and Ninth Circuit precedent holding that 3 claims under the federal securities laws are most appropriately and efficiently litigated using the class 4 action. See, e.g., Basic Inc. v. Levinson, 485 U.S. 224 (1988); Blackie, 524 F.2d 891. ("It makes no 5 sense for the parties to conduct that discovery and trial preparation more than once."); In re Cooper 6 Cos. Inc. Sec. Litig., 254 F.R.D. 628, 642 (C.D. Cal. 2009) ("[t]rying each plaintiff's case separately 7 would be incredibly inefficient, burdensome, and costly," creating "a substantial danger of inconsistent 8 findings and judgments"). Moreover, a rule requiring 438 named plaintiffs to file suit ­ all of whom, 9 presumably, would be class representatives with fiduciary duties ­ is contrary to the statutorily10 prescribed function of the lead plaintiff. See Hevesi v. Citigroup, 366 F.3d 70, 82 n.13 (2d Cir. 2004) 11 (purpose of the full PSLRA's lead plaintiff provision is to "empower one or several investors with a 12 major stake in the litigation to exercise control over the litigation as a whole"). Wells Fargo's belated 13 attempt to subdivide this litigation into 438 separate cases to avoid liability to investors for its untrue 14 statements and omissions should be rejected. 15 15 16 17 It is well-settled that "Section 11 ... claims do not require proof of reliance." In re Charles E. Lead Plaintiffs Need Not

Allege Nor Prove Reliance

18 Schwab Corp. Sec. Litig., 264 F.R.D. 531, 536 (N.D. Cal. 2009). See also Countrywide, 588 F. Supp. 19 2d at 1162 ("Reliance is not an element [of Section 11 claims]."). Only if an investor purchased 20 securities after the issuance of an "earning statement" covering "a period of at least twelve months 21 beginning after the effective date of the registration statement," must that investor prove reliance. 15 22 U.S.C. § 77k(a). 23 Lead Plaintiffs here made 23 separate purchases in the 17 Offerings at issue. As to four

24 purchases, Wells Fargo contends that Lead Plaintiffs must plead and prove reliance because, according 25 26

15 None of the out-of-circuit cases that Wells Fargo cites related to standing have facts remotely 27 comparable to this case. Def. Mem. at 10 (citing Am. Int'l Group, 265 F.R.D. 157; In re Parmalat Sec. Litig., 2008 WL 3895539 (S.D.N.Y. Aug. 21, 2008) and In re Salomon Analyst Level 3 Litig., 350 F. 28 Supp. 2d 477 (S.D.N.Y. 2004)). In all three cases, plaintiffs sought to assert claims related to both stocks and bonds and therefore, unlike here, asserted fundamentally different damage theories.

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1 to Wells Fargo, the purchases were after the issuance of twelve months of "distribution reports." 16 2 Wells Fargo contends that distribution reports are "earning statements" for purposes of Section 1 1 (a). 3 No court has accepted Wells Fargo's assertion that monthly distribution reports are "earning 4 statements." In fact, one court squarely rejected the contention as "unpersuasive": 5 6 7 8 9 10 ResCap I, 2011 WL 1630349, at *6. 11 Distribution reports and Forms 10-D are not included among the corporate reports that qualify Defendants argue that a number of `Distribution Summaries' they released are the equivalent of an `earning statement' and triggered a requirement to plead reliance. Their argument is unpersuasive because the regulations that define `earning statement" are specific and do not appear to contemplate the kind of Distribution Summaries at issue here. See 17 C.F.R. 230.158. Nor can [] Defendants point to any judicial decision finding that Distribution Summaries such as those here are adequate stand-ins. The Distribution Summaries do not constitute earning statements because they fail to include the `information required' for the traditional earning statements.

12 as "earning statements." 17 Additionally, whereas all corporate reports are filed with the SEC, only a 13 limited number of Forms 10-D are required to be filed. 14

18

Moreover, a distribution report cannot qualify as an "earning statement" if it does not comply

15 with SEC rules and regulations governing disclosure. 19 In WorldCom the court remarked "[i]t would 16 be illogical indeed if any filing ­ no matter how inaccurate or misleading, and despite its perpetuation 17 of the very misrepresentations at stake in the Section 11 claim ­ were sufficient to shift the burden to 18 the plaintiffs to establish reliance on the Registration Statement." Id. at 293-94 (emphasis added); see 19

16 Wells Fargo fails to mention that Louisiana and Guam also purchased Certificates in each of the 20 four tranches less than a year from the date the prospectus supplements were issued. Accordingly, 21 even is Wells Fargo is correct ­ and it is not ­ the Offerings cannot be dismissed. 17 17 C.F.R. § 230.158(a)(2)(i)-(ii). An "earning statement" must consist of one, "or any combination 22 of," the following corporate reports: Forms 10-K, 10-Q, 8-K, 20-F, 40-F, 6-K or in the annual report pursuant to Rule 14a-3 of the Exchange Act. The various Rules and Regulations Wells Fargo cites 23 related to Forms 10-D are inapposite. For example, 70 Fed. Reg. 1506 is devoid of language indicating that distribution reports constitute earning statements. See 2005 WL 24262 (Jan. 7, 2005). 24 18 Further distinguishing Forms 10-D from the "earning statements" identified in 17 C.F.R. § 230.158 25 is that the duty to file Forms 10-D with the SEC is automatically suspended if the security is held by less than 300 purchasers. See 15 U.S.C. § 78o(d); 17 C.F.R. § 249.323(b). 26 19 See, e.g., In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267, 293 (S.D.N.Y. 2003). The General Instructions for filing a Form 10-D expressly recognize that the filer must comply with SEC Rule 12b27 20, which states that periodic statements of reports must contain information "necessary to make the required statements, in the light of the circumstances under which they are made not misleading." 17 28 CFR § 240.12b-20; General Instructions to Form 10-D, at 1, Subsection C, "Preparation Of Report" available at http://www.sec.gov/about/forms/form10-d.pdf.

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1 also Countrywide, 2009 WL 7322254, at *32 (quoting WorldCom). None of Wells Fargo's Forms 102 D or distribution reports disclosed the systematic disregard of Wells Fargo's underwriting standards 3 and, therefore, only perpetuated "the very misrepresentations at stake" in Lead Plaintiffs' Section 11 4 claims. WorldCom, 219 F.R.D. at 294. 5 In sum, reliance is not an element of Lead Plaintiffs' Section 11 claims. As the court in ResCap

6 I held, distribution reports are not "earning statements" and Lead Plaintiffs need not show reliance for 7 the four purchases Wells Fargo challenges. 20 8 IV. CONCLUSION 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 20 Wells Fargo's focus on the fraud-on-the-market presumption is a red herring. Def. Mem. at 17-18. "Because § 11 of the `33 Act imposes nearly strict liability for misrepresentations or omissions in a 28 registration statement, Plaintiffs do not need to rely on a fraud-on-the-market theory to establish classwide reliance." Countrywide, 2009 WL 7322254, at *32.

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For the foregoing reasons, Wells Fargo's motion should be denied in its entirety. DATED: May 26, 2011 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP

/s/ Timothy A. DeLange

TIMOTHY A. DeLANGE DAVID R. STICKNEY (Bar No. 188574) TIMOTHY A. DeLANGE (Bar No. 190768) MATTHEW P. JUBENVILLE (Bar No. 228464) TAKEO A. KELLAR (Bar No. 234470) JONATHAN D. USLANER (Bar No. 256898) PAUL M. JONNA (Bar No. 265389) 12481 High Bluff Drive, Suite 300 San Diego, CA 92130 Tel: (858) 793-0070 Fax: (858) 793-0323

Counsel for Lead Plaintiffs Alameda County Employees' Retirement Association, Government of Guam Retirement Fund, New Orleans Employees' Retirement System and Louisiana Sheriffs' Pension and Relief Fund

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

LEAD PLAINTIFFS' OPP. TO DEFENDANTS' MOTION Case No. CV-09-01376-LHK

KLAUSNER & KAUFMAN, P.A. ROBERT D. KLAUSNER STUART A. KAUFMAN 10059 Northwest 1 st Court Plantation, FL 33324 Tel: (954) 916-1202 Fax: (954) 916-1232

Additional Counsel for Lead Plaintiff Louisiana Sheriffs' Pension and Relief Fund

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Case5:09-cv-01376-LHK Document436-3 Filed06/14/11 Page1 of 3

1 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP 2 DAVID R. STICKNEY (Bar No. 188574) 3 TIMOTHY A. DeLANGE (Bar No. 190768) MATTHEW J. JUBENVILLE (Bar No. 228464) 4 TAKEO A. KELLAR (Bar No. 234470) JONATHAN D. USLANER (Bar No. 256898) 5 PAUL M. JONNA (Bar No. 265389) 12481 High Bluff Drive, Suite 300 6 San Diego, CA 92130 7 Tel: (858) 793-0070

Fax: (858)793-0323

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g [email protected] [email protected] 9 [email protected] [email protected] 10 [email protected] 11 [email protected] 12 Attorneys for Lead Plaintiffs Alameda County Employees' Retirement Association, Government of Guam Retirement 13 Fund, New Orleans Employees' Retirement System and Louisiana Sheriffs' Pension and Relief Fund

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15 16

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Case No. 09-CV-1376-LHK (PSG) CONSOLIDATED CLASS ACTION

ECF

17 IN RE WELLS FARGO MORTGAGE- 18 BACKED CERTIFICATES LITIGATION 19

20 21 22 23 24 25 26 27 28 DECLARATION OF SERVICE Case No. 09-ev-0 I 376-LHK (PSG)

DECLARATION OF SERVICE

Case5:09-cv-01376-LHK Document436-3 Filed06/14/11 Page2 of 3

1 2 3 I, the undersigned, declare: 1.

DECLARATION OF SERVICE

That I am and was, at all times herein mentioned, a citizen of the United States and a

4 resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the 5 within action; that my business address is 12481 High Bluff Drive, Suite 300, San Diego, CA 92130. 6 7 8 9 2. That on June 14, 2011, the following documents: · Lead Plaintiffs' Opposition to the Wells Fargo Defendants' and Individual Defendants' Motion for Judgment on the Pleadings and Partial Summary Judgment (Redacted per Court Order);

· Declaration of Timothy A. DeLange in Support of Lead Plaintiffs' Opposition to

the Wells Fargo Defendants' and Individual Defendants' Motion for Judgment on the Pleadings and Partial Summary Judgment, with Exhibits 1-4 [Exhibit 3 Redacted per Court Order]; and Declaration of Service

10 11

12

13 were filed with the Court electronically. Those attorneys who are registered with the Electronic Case 14 Filing ("ECF") System may access this filing through the Court's ECF System. Attorneys not 15 registered with the Court's ECF System will be duly and properly served in accordance with the 16 Federal Rules of Civil Procedure and the Court's Local Rules. Unredacted copies of the documents 17 that are being filed above as "redacted" have been previously served on the Court and on all parties 18 listed on the attached service list. 19 3. I further declare that, pursuant to Civil L.R. 23-2, on this date I served copies of the =

20 documents on the Securities Class Action Clearinghouse by electronic mail through the following 21 electronic mail address provided by the Securities Class Action Clearinghouse: 22 scac(iOaw.stanford.edu 23 I declare under penalty of perjury, under the laws of the State of California, that the foregoing

24 is true and correct. Dated this 14th day of June 2011.

25 26 27 28 DECLARATION OF SERVICE Case No. 09-cv-01376-LHK (PSG)

KAG MARTIN

Q

*0-^

Case5:09-cv-01376-LHK Document436-3 Filed06/14/11 Page3 of 3

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1

2 SERVICE LIST

Counsel for Defendants Wells Fargo Asset Securities Corporation, Wells Fargo Bank, N.A., David Moskowitz, Franklin Codel, Thomas Neary and Douglas K. Johnson

Kathleen Marie McDowell Marc T. Dworsky Munger, Tolles & Olson LLP 355 S. Grand Avenue, Suite 3500 Los Angeles, CA 90071 213-683-9134 [email protected] [email protected]

3 David H. Fry 4 Jenny Huang Hong Munger Tolles & Olson LLP 5 560 Mission Street, 27th Floor San Francisco, CA 94105 6 415-512-4082 [email protected] 7 jenny.hong(&mto.com

8 9 10

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Counsel for Defendants Goldman Sachs & Co., J.P. Morgan Chase Inc., as successor-ininterest to Bear Stearns & Co., Inc., Morgan Stanley & Co., Inc., HSBC Securities (USA), Inc., Deutsche Bank Securities, Inc., UBS Securities, LLC, Citigroup Global Markets, Inc., Greenwich Capital Markets, Inc., Barclays Capital, Inc., Bank of America Securities, LLC, Credit Suisse Securities (USA), LLC, Morgan Stanley & Co., Inc., Countrywide Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Inc. and Bank of America Corporation as successor-in-interest to Countrywide Financial Corporation

12 Bruce A. Ericson 13 Andrew D. Lanphere

PILLSBURY WINTHROP SHAW 14 PITTMAN LLP

15 16 17 18 50 Fremont Street San Francisco, CA 94105-2228 Tel: (415) 983-1000 [email protected] [email protected]

Co-Counsel for Defendants Goldman Sachs & Co., JPMorgan Chase, Inc., as successor-in-interest to Bear, Stearns & Co. Inc., Deutsche Bank Securities, Inc., RBS Securities, Inc., UBS Securities, LLC, Citigroup Global Markets, Inc., 19 Banc Of America Securities, LLC, and Bank Of America Corporation as successor-in-interest to Merrill Lynch, Pierce, Fenner & Smith, Inc. 20

21 22 William G. McGuinness Stephanie J. Goldstein Shahzeb Lari

*FRIED FRANK HARRIS SHRIVER & 23 JACOBSON LLP One New York Plaza 24 New York, NY 10004-1980 Tel: (212) 859-8000 25 [email protected] [email protected] 26 shahzeb.lari @friedfrank. corn 27

6/14/2011

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DECLARATION OF SERVICE Case No. 09-cv-01376-LHK (PSG)

Information

In Re: Wells Fargo Mortgage Backed Certificates Litigation 09-CV-01376-Lead Plaintiffs' Opposition To The Wells Fargo Defendants' And Individual Defendants' Motion For Judgment On The Pleadings And Partial Summary Judgment

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